Accessing Federal and Utility Incentives for Green Projects
By Ravi Malhotra / NH&RA Issue: April 2023
The Bipartisan Infrastructure Law (BIL) provided the U.S. Department of Energy (DOE) $3.2 billion for the Weatherization Assistance Program (WAP). This is on top of the ongoing ~$1.6 billion allocation (the standard WAP allocation independent of the BIL money for WAP) over the next five years.
The BIL funds allow for some noteworthy enhancements, such as electrification and solar deployment.
The DOE and U.S. Department of Housing and Urban Development (HUD) are encouraging states to include multifamily affordable housing to quickly scale weatherization efforts and expend the additional funds. The DOE has engaged with HUD and other federal agencies to leverage “categorical eligibility,” to develop a list of subsidized multifamily housing that can automatically qualify for WAP services.
Some states have begun seeing multifamily housing as the solution to their burden of abundance. However, within this group, most are leaning on their experience with single-family housing and therefore are not developing appropriate internal processes for their multifamily programs. For example, their systems require entering project details (e.g., enrollment, energy audit, inspections, invoicing…) one apartment at a time, which is unnecessarily burdensome and prevents offering common-area upgrades. The multifamily affordable housing industry should urge these states to develop effective processes and push holdout states to recognize the opportunity in the segment.
Multifamily properties can leverage WAP dollars with other incentives, such as:
- Local utility rebates;
- The Low-Income Housing Tax Credit (LIHTC);
- The Investment Tax Credit for Solar;
- The 45L tax credit for new construction; and
- The 179D tax deduction for existing properties.
WAP typically offers a budget of $8,000 to $10,000 per home, and utility rebates can add another $2,000 to $5,000 per unit. The 45L can provide up to $5,000 per unit; and 179D can offer up to $5/square foot. Leveraging the LIHTC funds on top of these other incentives creates a substantial funding stream that can help bridge some of the funding gaps the industry is currently facing while creating very high-performing properties.
The Inflation Reduction Act (IRA) has added more incentives to the mix. The full range of opportunities for combining IRA dollars with other funds is currently unknown. More incentives can create more opportunities for greener upgrades that, in turn, drive significant energy and cost savings, which allow for leveraging additional debt to bridge funding gaps. All this while also improving health, comfort and safety for the tenants.
While we wait for details on how to braid these funding sources, multifamily affordable housing owners and managers, utilities, local governments and service providers, should begin coordinating their resources and expertise. If not, the resulting chaos will lead to wasted money and effort. And what could have been complementary programs, could end up in direct competition. We need to advocate for collaboration and recommend that program administrators insist on a one-stop-shop approach that covers project design, implementation and the braiding of funds and project reporting. A well-designed and implemented approach will make a huge difference in preserving and creating multifamily affordable housing.
These incentives can be used to preserve existing affordable housing without LIHTC funds, or the LIHTC funds can be leveraged to preserve even more projects. And the time to do so is now, unless you are willing to bet that additional and better incentives will come in the near future.