A working paper from UC Berkeley's Haas School of Business and Lawrence Berkeley National Laboratory quantifies how energy inefficiency translates into elevated default risk on Fannie Mae multifamily loans. Using 26,500 securitized DUS loans originated between 2002 and 2020, the researchers show that utility costs move net operating income enough to shift measurable default probabilities across the portfolio.
Specifically, the UC Berkeley and LBNL research found that:
- Utility costs average 17.5 percent of operating expenses across the sample, making them a material driver of net cash flow.
- A 10 percent increase in utility costs raises the probability of default by 12 basis points against a portfolio baseline of 62 basis points.
- Properties in higher electricity price regions carry measurably greater default risk, all else equal.
Methodology and Context
The authors merged loan-level Fannie Mae DUS securitization data with regional utility price indices and property operating statements. The sample covers 26,500 loans originated between 2002 and 2020.
