Assisted living communities that meet green building certifications and achieve “meaningful, measurable” energy and water efficiency improvements could be eligible for “significant” insurance premium reductions under a new federal Climate Action Plan.
The Federal Housing Administration announced last week its intent to reduce the upfront and annual mortgage insurance premiums — Section 232 Green MIP — charged to residential care facilities. The move is designed to encourage owners of assisted living communities, skilled nursing facilities, and board and care homes to adopt higher standards for construction, rehabilitation, repairs, maintenance and property operations.
The energy efficiency and sustainability goals support the Department of Housing and Urban Development’s Climate Action Plan.
“This action brings together two forms of resilience — long-term care and energy efficiency,” Deputy Secretary Adrianne Todman said Wednesday in a statement. “With today’s actions, we are lowering costs for achieving modern, energy efficient facilities that will combat climate change while enhancing the safety and well-being of Americans requiring ongoing care.”
The Section 232 green reductions apply to new mortgage insurance applications. Owners will have to provide evidence that a property will achieve a specified industry-recognized standard for green building certification and will achieve “meaningful, measurable” energy and water efficiency improvements.
For properties that already have achieved green building certification and are being refinanced with a lower mortgage insurance premium, owners must use proceeds to complete additional efficiency upgrades to achieve the next-level green certification standards.
Owners must certify that the property has achieved, or will pursue or maintain, a score of 75 or better on the Energy Star score on the Environmental Protection Agency’s portfolio manager for the senior care community building type.
The FHA will finalize and publish its implementation requirements for lenders soon. Applications will be accepted later this year.
According to the notice published in the Federal Register on Thursday, the plan will reduce capitalized upfront mortgage insurance payments to 25 basis points — a 75-basis-point reduction — for most Section 232 mortgage insurance categories. In addition, the FHA will reduce annual mortgage insurance premiums to 25 basis points — down from the traditional 45 to 77 basis points — for properties that meet the new green requirements.
The FHA estimates that a borrower will save $93,000, on average, in upfront mortgage insurance premiums on many loan types, and tens of thousands of dollars in annual mortgage insurance premiums, depending on the loan type. HUD indicated that the reduction in premiums will “ultimately lower both upfront and ongoing mortgage debt service costs so that owners committed to maintaining energy efficient facilities can invest capital in their operations.”