Co-ops Go Solar: Bringing Renewable Energy to Low-Income Cooperatives

By Clara Weinstein

As politicians across the country scramble to put together a “Green New Deal” to deal with the deleterious effects of climate change, the Co-ops Go Solar campaign in New York is asking: what would happen if the cooperative principle of self-determination was applied to a transition to renewable energy?

The Co-ops Go Solar campaign is a collaboration between two nonprofits: the Urban Homesteading Assistance Board (UHAB) and Solar One. UHAB is dedicated to serving low-income housing cooperatives while Solar One provides education to create a more sustainable and resilient urban environment. Together, the organizations provide free technical assistance to cooperatives considering solar adaptation.

Both groups believe cooperatives are uniquely positioned to lead New York’s transition to renewable energy. Cooperatives will be heavily impacted by climate change. Many are located in flood zones, and erratic weather will wreak havoc on New York’s aging building stock. Furthermore, limited-equity shareholders don’t have the luxury of picking up and moving somewhere else if the climate becomes inhospitable. Unlike renters, however, they have self-determination over their housing, and incentives on the state and federal level make it possible to transition to renewable energy sooner.

Furthermore, cooperatives have a long history of energy justice. In 1976, Heartstone Co-op installed solar panels and a windmill on its roof, becoming the first cooperative in New York City to do so. Con Edi-son promptly sued the cooperative in a case that led to the birth of net metering. This decision mandated that Con Edison buy the excess energy the cooperative generated and put it into the grid. This precedent of net metering makes solar financially feasible today. Renewable energy fits in perfectly with the inventive, practical, DIY spirit of cooperatives.

The Co-ops Go Solar team works around the barriers low-income housing cooperatives face in pursuing solar. For boards too busy juggling full-time jobs with building management to dedicate time and research to solar, the team makes it easy by explaining solar in simple language and working with cooperatives’ schedules. Go Solar combats misinformation with free educational workshops at the cooperatives and conducts tours of functioning solar installations. Go Solar works with co-operatives whose residents primarily speak Spanish by providing bilingual materials and training. Go Solar helps cooperatives budget and give them different options for financing to make solar accessible to buildings with varying financial situations. Everything the campaign does, from estimates to board presentations to site assessments, is free. By working with low-income housing cooperatives in a way that’s accessible regardless of language, finances or technical expertise, Co-ops Go Solar is slowly breaking down the barriers these co-operatives face in solar implementation.

More cooperatives are going solar every month, including a cluster of buildings in Northern Manhattan, throughout downtown Manhattan and Brooklyn, and the first ever Bronx cooperatives signed up to install panels (for details see the spring/summer issue of the CHQ). The Co-ops Go Solar campaign forms purchasing groups of low-income cooperatives to select installers, driving down the price through the power of bulk purchasing. This arrangement can make a huge difference in affordability, especially for smaller buildings. So far Go Solar has created two purchasing groups through the campaign and are forming another.

Low-income cooperatives are already leading the way in transitioning to renewable energy. Because of the special challenges these cooperatives face, however, from language barriers to a lack of technical expertise, a mediating party that can work with them to create estimates, organize buildings into purchasing groups and guide them in selecting an installer can make all the difference. The campaign has only been around for a year, and Go Solar has already helped almost 20 buildings sign up for solar.

UHAB is a New York City-based nonprofit that provides support and services to low-income cooperatives and renters across the city. Founded in 1973, UHAB is instrumental in guiding distressed rental buildings to become thriving cooperatives under the ownership and maintenance of their residents. They empower low- to moderate-income residents to take control of their housing and enhance communities by creating strong tenant associations and lasting affordable cooperatives. Solar One is a nonprofit organization whose mission is to empower learning and innovation that results in a more sustainable and resilient urban environment. Through the Here Comes Solar program, staff facilitates solar adoption in traditionally hard-to-serve markets by providing comprehensive technical assistance to building owners and community groups.

Clara Weinstein works on energy services and building resiliency at UHAB. If you’re interested in Co-ops Go Solar, please contact her at weinstein@uhab.org.

Green Rewards Could Save Your Cooperative Money

By David Wilkins

Many stories have been written about the value of employing energy savings devices throughout cooperatives. These stories explore the virtue of cost savings and the benefits of living green. But, did you know that going green can also reduce the cost of mortgage interest for your community’s loan?

What are Green Rewards?

The Department of House and Urban Development (HUD), Fannie Mae and Freddie Mac, collectively the government sponsored entities (GSEs), previously rolled out incentives including lower interest rates or reduced mortgage insurance cost for cooperative community loans that have adopted green or intend to adopt green energy programs. These green incentives have been extremely successful with borrowers.

What are the benefits?

The GSEs offer two avenues of achieving Green Rewards: a) those properties that were previously designed or renovated to be Green Certified under one of the several Green Energy Certifications or b) those properties that will do Green Energy retrofits as part of a refinancing of the property. Each of the GSEs has differences in their respective programs. It is important to consider each program individually and not confuse their attributes. As a loan underwriter recently said to me; “On the surface each program looks similar; however, in actual practice, the Fannie and Freddie programs are quite simple while the HUD program is cumbersome.”

How does my cooperative tell whether this program is a benefit?

Before considering the program differences, a broader approach is in order. Each of these programs have cost associated with them. These costs must be balanced against the potential savings. The savings come in two varieties: a) the actual utility cost savings and b) the interest rate or in the case of HUD, the reduction of mortgage insurance premium (MIP) that can be saved as a result of refinancing. Professional contractors will evaluate the property to determine potential utility savings and cost; however, paybacks from utility savings alone can be quite lengthy. On the other hand, the “loan savings” being either a lower interest rate or a reduction of the MIP are generally +/- .25 percent reduction in rate. Obviously saving a .25 percent point of interest is far more meaningful to a larger mortgage versus a smaller mortgage. To further illustrate, a $2.5 million mortgage at a rate of 4.50 percent versus a rate of 4.25 percent creates a savings of approximately $4,400 annually. Some Green HUD reports can have an up-front cost of as much as $10,000 to $15,000. Therefore, it would take nearly three years to repay the cost of the HUD report alone. On the other hand, a .25 percent point reduction in rate on a $20 million loan can create savings of over $35,000 annually. Therefore, it is essential to understand upfront what the potential loan and utility savings are versus the cost of reporting.

To have an existing property be Green Certified means something very different to each of the GSEs. Under the HUD programs, the MIP can be reduced to ¼ of 1 percent if the property is Green Certified. However, if the property is already deemed “affordable” by HUD (90 percent subsidized), then the property already qualifies for a reduction in MIP. The cooperative cannot stack the Green MIP reduction upon the affordable MIP reduction. As well, HUD requires more initial due diligence and ongoing monitoring than Fannie Mae or Freddie Mac under the certification program.

How do the programs compare?

Both Fannie Mae and Freddie Mac offer a Green Certification program. We recently had a client develop a new building (opened in 2016) that included significant energy conservation design and construction elements. There was little doubt that the client could obtain the Green Certification Program for either Fannie Mae or Freddie Mac. The cost of the certification of approximately $20,000 was significantly larger than the annual Green interest rate savings the $7.5 million loan would have generated. This is not to say Green Certification reward programs don’t work, but rather that they should be evaluated closely at the onset to insure cost and rewards are properly aligned.

The Green Certification programs continue to evolve and grow. A board should work closely with its lender at the outset to insure that the Green Certification rewards exceed the cost and commitment. The second broad class of Green loans comes from properties that would benefit from retrofitting to achieve Green energy savings. In each of the programs the onset is similar. An independent third-party company inspects the property and its records. A detailed report is prepared wherein building components are evaluated and charted such that retrofits and anticipated savings are readily identifiable. In a Green retrofit, your HUD lender should work with you through the report to identify what aspects of the property can be modified to reduce energy consumption.

HUD requires a significantly high level of savings with annual monitoring. If initial repairs do not meet the required goals, then additional retrofitting may be required. Your Freddie Mac or Fannie Mae lender will work with the board to understand the reports and focus to find energy savings in either energy (gas and electric usage) or water savings.

The required benchmark is currently 25 percent of utility savings for either water OR energy (gas/electric) cost. You cannot combine water savings and energy savings to meet the benchmark. In the Midwest, properties that have gone through the experience find energy savings are too cost prohibitive to meet the required benchmarks. Generally, the best savings come from water conservation directly related to efficient toilets and low-flow outlets. Freddie Mac and Fannie Mae do not require a minimum cost outlay to achieve the savings benchmarks.

Fannie Mae will pay for the report if the Green program is used. Freddie Mac will pay for the report regardless of the outcome. Both agencies require some annual reporting; however, there are not further retrofitting requirements if the savings are not achieved as anticipated. HUD as well doesn’t require a minimum retrofitting expense, but its benchmark guidelines are challenging. HUD also requires an assurance that if the energy goals are not met after one year that additional retrofitting requirements will be added until the goal is met. Therefore, cooperatives should consider having “comfortable room” in their initial estimates and costs to achieve the savings within the first year. Energy conservation has been and will continue to be a hot topic for the managers and owners of properties. The GSEs have all created programs to address and incentivize properties to get certified or retrofitted. As with any incentives, these programs have changed and likely will continue to evolve. It is important to compare and contrast each of the GSEs programs before selecting a single course of action. Go green and save green but be wise.