The vast majority of America’s housing stock is in need of improvements for performance, health, and safety. Over the next decade, shifts in utility models, energy and climate policy, weather events, and recognition of health and resilience priorities will greatly expand this need. This is especially true for low- to moderate-income households and communities of color. Even though better housing infrastructure offers societal benefits, there is little access to low-cost financing. Therefore, the cost burden for these kinds of improvements largely falls on homeowners.

Among capital markets investors, there is growing interest and demand for environmental, social, and governance (ESG) investment options and “green” securities. However, there is a lack of sufficient market-ready green investments. The mortgage industry is well positioned to help fill this gap. Mortgages can become a primary investment vehicle for deploying billions of dollars to meet this investor demand while also fulfilling consumer demand for green home improvements.

A robust single-family green mortgage market can deliver significant benefits and investor-ready ESG impacts. Fannie Mae and Freddie Mac could generate more than $2 trillion of new green mortgage-backed securities within a decade by streamlining and scaling up their existing green mortgage products.

This report proposes practical solutions to reduce friction in originating and securitizing single-family green mortgage products already offered by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac to create a new $2+ trillion market within a decade.