State housing finance agencies (HFAs) are increasingly turning to water and energy efficiency strategies to ensure the long-term financial stability of their housing investments. Water and energy costs are the largest controllable variable operating expense in affordable multifamily housing. Improving the efficiency of Low-Income Housing Tax Credit (Housing Credit) properties stabilizes or increases property cash flow, freeing up capital for maintenance, repairs and other improvements, and reducing loan default risk.
NHT reviewed hundreds of HFA documents, including Qualified Allocation Plans (QAPs), Housing Credit applications, Design and Construction Guidelines, and other documents, to identify the most prominent strategies HFAs were using in 2016 to advance energy and water efficiency in Housing Credit properties. Strategies include:
- Green Capital or Physical Needs Assessment
- Energy and Water Audits or Modeling
- Performance-based Requirements or Incentives
- Third-party Building Standards
- Required Energy Professionals
- Energy and Water Benchmarking
- Water Conservation
- Coordination with Utility Energy Efficiency Programs
- Project-specific Utility Allowances
- Renewable Energy Incentives
Some of these strategies are more widely used than others. For example, 33 HFAs require or incentivize properties to meet the criteria of a third-party building standard, like LEED, Enterprise Green Communities or EarthCraft. In contrast, only six HFAs require or incentivize owners to benchmark energy and water usage.
In a time of constrained housing resources, some HFAs are looking for pioneering ways to blend energy efficiency and housing dollars. Connecticut, Minnesota and Pennsylvania all require applicants to submit an Energy Rebate Analysis encouraging developers and owners to pursue utility, local, state or federal energy incentives to incorporate into the financing plan of the development.
The report should serve as a resource for HFAs as they explore options for maximizing the efficiency of the properties they finance, and affordable housing and energy efficiency advocates as they contemplate which policies to pursue to achieve the goal of making housing healthy and affordable through energy efficiency.
Each strategy identified in the report represents an important step toward more energy and water efficient affordable housing. As states continue to innovate, NHT is committed to tracking strategies HFAs adopt in future QAPs and making the information available on PrezCat, NHT’s online catalog of state and local affordable housing preservation policies and tools.