Incentives and implementation: How to finance and fulfill high-performance multifamily objectives


Our industry is engaged in an important dialogue to improve sustainability through ESG transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.

In the dynamic landscape of financing high-performance multifamily projects, developers and real estate holders grapple with numerous options to achieve sustainability goals. Whether pursuing LEED v4+, WELL for Residential, GreenPoint Rated (GPR), PHIUS, ENERGY STAR compliance, or aiming for heightened performance beyond certifications, the challenge lies not just in achieving sustainability and decarbonization, but also in financing it effectively.

A multifaceted approach is key to shedding light on federal incentives, state-level rebates, and innovative sustainable design techniques, providing actionable insights into decarbonization and low-interest loans to navigate the sustainable landscape effectively. Choosing the right financing program might seem overwhelming, but proper guidance aligns your sustainability objectives, budget constraints, and project timeline with a suitable solution. Once you have identified the appropriate financing mechanism, prioritizing a few key tactics from the onset can put you on the path to achieving essential sustainability requirements.

Incentives: Key multifamily financing programs

PACE financing

Property Assessed Clean Energy, or PACE, is an innovative model for financing energy efficiency and renewable energy improvements on private, commercial, and residential properties. PACE is a legislated public-private partnership that creates a financing option for your capital stack. Your construction budget can use PACE funding for costs that impact energy and water spending, renewable improvements, or seismic strengthening (in select states). Capital repayment is made through a long-term special tax assessment on the property.

Advantages of PACE financing

  • No down payment or upfront cost for the property owner
  • Long-term financing with reduced annual payments
  • Increased cash flow by reducing energy costs and increasing the value of the property
  • Interest payments are tax-deductible
  • The loan is tied to the property, not the borrower
  • Replaces expensive mezzanine equity or debt funds
  • Non-recourse that reduces personal risk
  • Amortization of up to 30 years

Speaking with a PACE financing and decarbonization expert like Stok can help identify suitable options for your multifamily project.

Inflation Reduction Act (IRA)

At the federal level, the Inflation Reduction Act (IRA) has expanded the Section 45L and Section 179D tax credits to provide incentives for new and existing multifamily projects until December 31, 2032. The Act also includes credit on a sliding scale from USD 500 to USD 5,000 per unit or between USD 2.50 and USD 5.00 per square foot, depending on the level of energy efficiency performance reached.

Advantages of the IRA

  • Sec. 179D: New and existing large* multifamily buildings can gain deductions of between USD 2.50 and USD 5.00 per square foot (*four stories or higher)
  • Sec. 45L: New multifamily buildings can gain deductions of between USD 500 and USD 5,000 per unit

The performance requirements for these incentives are complex and require sustainability and financing experts to help you design and maximize the fruits of these programs.

Sustainability-linked loans

Sustainability-linked loans are gaining momentum, with corporations looking to obtain capital tied to their performance in specific sustainability metrics, often through GRESB scores, certifications, and benchmark standings. In residential development, they offer an opportunity to look at long-term strategies to meet net zero with demonstrated performance over time.

Advantages of sustainability-linked loans

  • Borrowers increase access to capital and reduce costs
  • Better risk management for lenders
  • More straightforward to demonstrate sustainability commitments to regulators and investors
  • Incentivizes the achievement of long-term sustainability goals

Implementation: Priorities to meet program requirements

Financing sustainability efforts is one thing, but implementing them for performance outcomes is another. With clear performance objectives in mind to achieve financing requirements, we recommend the following priorities for multifamily projects:

Optimize design and savings through energy modeling: In addition to confirming code compliance, an energy model is a key tool to inform the design of any residential building. When done early in the design process, energy modeling can help project teams work through various MEP systems and designs that both reasonably fit well for the project and achieve the best value for sustainability and cost.

Invest in performance verification: By advocating on behalf of owners, commissioning gives project teams confidence that assets will operate as intended from day one. When engaged early in the design process, a commissioning agent can seamlessly integrate commissioning requirements – including everything from building codes to LEED certification to best practices – into the project delivery process. This results in verified and enhanced building performance.

Do not forget about existing buildings: Remember, financing does not just exist for new construction. ASHRAE Level I and II audits assess and optimize existing buildings for energy efficiency, net-zero performance, and resilience by pinpointing inefficiencies and identifying targeted upgrades.

Be strategic: While focusing on specific strategies to meet financing program requirements is easy, try to maintain sight of the bigger picture. With much available financing tied directly to energy efficiency and performance, mapping efforts to a larger decarbonization strategy helps approach emissions reductions through a strategic lens and may uncover efficiencies in implementation.

Do not go it alone: As you are likely aware, financing is complicated. Third-party providers and consultants can offer strategic guidance and frameworks to help you identify the financing solution that best aligns with the sustainability objectives of your project or portfolio. They can also support the design and implementation of strategies that enable you to bring it home.

Disclaimer: Stok is not a financial institution and does not provide financial advice.

This article was written by Stok’s Phin Stubbs, Senior Program Manager, and Anat Revai, Sustainability and ESG Project Manager.


Property Assessed Clean Energy Programs.” Office of State and Community Energy Programs. Accessed February 12, 2024.

Segal, Troy, Ebony Howard, and Suzanne Kvilhaug. “Property Assessed Clean Energy (PACE) Loan: Overview.” Investopedia. Last modified July 19, 2022.

Shaw, Jessica. “Energy Efficient Commercial Building Tax Deduction 179D: What Owners Need to Know.” Stok Insights (blog), May 23, 2023.