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Funding for Green Upgrades and Preservation

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By Ravi Malhotra, Founder and President, ICAST

NH&RA, March 2023

Engaging Multifamily Owners

The Inflation Reduction Act (IRA) provided the Environmental Protection Agency (EPA) with approximately $35 billion that is relevant to multifamily affordable housing. These funds are for emissions reduction projects, and multifamily housing can access them to facilitate green upgrades for affordable housing preservation.

Through two separate programs, $8 billion will be available to community-based nonprofit organizations (CBOs), states, local governments, and others. To access these funds, multifamily property owners will need to start engaging with eligible applicants.

1) First, $3 billion will be available through the Environmental and Climate Justice (ECJ) program. The funds may be used for energy efficiency, Solar Photovoltaic (PV), etc. ECJ Funds are divided into subprograms and eligible applicants vary per subprogram, but will typically include CBOs, states, local governments, and nonprofits. EPA recently issued its first two ECJ requests for proposals (RFPs) totaling $100 million; applications are due April 10, 2023. Additional RFPs are expected in the coming months and years.

2) Another $5 billion will be available through the Climate Pollution Reduction Grant (CPRG) program. Eligible applicants include states, territories, municipalities, air pollution control agencies, and groups thereof. Funds can be used to plan and implement local greenhouse gas (GHG) reduction strategies, and only recipients whose plans were funded through this program are eligible for implementation grants. EPA is expected to issue RFPs for planning funds in early 2023.

EPA also received $27 billion for a new Greenhouse Gas Reduction Fund (GGRF). By statute, at least $15 billion must help low-income and disadvantaged communities. Multifamily housing fits right into that definition. It is possible that eligible recipients of these funds will include nonprofits, such as housing finance agencies, Community Development Financial Institutions (CDFI), Credit Unions, and Green Banks, who may create Loan Funds with their EPA money. Loans from this pool could be low-cost and with few restrictions. EPA has until Sept. 30, 2024, to award the funds. It anticipates opening applications in Summer 2023 via two programs: a $20 billion fund that will make between two to 15 awards and a $7 billion fund that will make approximately 60 awards. Multifamily owners need to start convincing eligible applicants to apply. Besides traditional debt, it is possible that the GGRF will allow for innovative energy financing options through structures, such as property-assessed clean energy (PACE), energy-as-a-service (EaaS), Power Purchase Agreements (PPAs) and Energy Performance Contracts (EPC). These options can be customized to overcome historic barriers, including the inability to take on debt by offering off-balance sheet financing options.

Multifamily housing is in a unique position to benefit from the EPA’s approximately $35 billion, due to its low-income tenant population and eligibility as a disadvantaged community, which fits the Biden administration’s Justice40 goals to serve low-income and disadvantaged communities.

There is no argument on the nationwide shortage of affordable rental housing, and preservation is essential to protecting the existing stock and slowing the ever-worsening loss of affordable housing.

Learn more about green financing for multifamily housing, the IRA and EPA funds:

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