Bills Would Establish New Incentives for Utility Savings in Assisted Projects

By Caitlin Jones
February 2, 2010 4 min read

Tax Credit Advisor, January 2010: Two recent bills introduced in the U.S. House of Representatives would authorize new financial incentives to owners for making improvements that cut utility bills or utilize renewable energy in federally assisted multifamily rental housing projects.

One measure (H.R. 4099), introduced by Rep. Mary Jo Kilroy (D-Ohio), reflects proposals developed by the Council for Energy Friendly Affordable Housing (CEFAH), an arm of the National Housing & Rehabilitation Association. The second bill (H.R. 4106) was introduced by Rep. Jim Himes (D-Conn.). Both bills were referred to the House Financial Services Committee.

Existing Rules an Issue

In a statement, Rep. Kilroy said, “Existing rules and regulations make it difficult for owners of federally assisted housing to maximize efforts to increase energy efficiency and decrease our nation’s energy bill. The Energy Efficiency Modernization Act of 2009 would provide significant long-term cost savings for taxpayers and provide stimulus to the economy by generating capital projects and creating “˜green collar’ jobs.”

A federal study estimated that the U.S. Department of Housing and Urban Development (HUD) spends about $6 billion per year on energy costs for six million HUD-assisted housing units Ã nearly 17% of all apartments nationally. Increasing the energy efficiency of federally assisted housing by 25 to 40 percent would save HUD an estimated $1-1.5 billion annually and substantial savings long-term.

H.R. 4099 would establish a new “green dividend” program at HUD, liberalize the rules regarding the use of project residual receipt and reserve for replacement funds, and establish new reporting requirements for HUD and project owners.

HUD could pay a green dividend to owners of covered federally assisted housing projects for improvements that reduce annual utility costs (energy, water) by half, and for related expenses (e.g., financing). This dividend would be an extra annual distribution paid to the owner from surplus cash flow. HUD would issue guidelines and requirements for the program, including standards for measuring utility cost savings.

The bill would also authorize a second new program that would allow owners of covered assisted housing projects, with HUD’s approval, to use a portion of their project’s residual receipts or reserve replacement funds to help fund “green retrofit” measures. These would be improvements that reduce utility consumption, increase energy efficiency, utilize renewable energy, or improve indoor air quality. Residual receipt funds would be provided as loans.

Covered assisted housing projects would include any multifamily rental project that receives rental assistance, mortgage insurance, subsidy, or other assistance from HUD and is subject to a limitation on distributions of project funds to the owner.

The bill would require HUD to issue regulations for both new programs within 180 days of legislative enactment.

H.R. 4099 would also direct HUD to require all owners of certain kinds of projects assisted, insured, or financed by the Department or by a state agency to report regularly on their project’s consumption of electricity, water, gas, and other utilities. Covered developments would include project-based Section 8 projects and Section 202, 811, 221(d)(3), and 236 properties.

Himes Bill

H.R. 4106 would authorize HUD to make grants and loans to owners of eligible federally assisted rental housing projects to help finance eligible “green retrofit” improvements. These would be improvements that reflect one or more specific attributes, such as materially lower electric, heating fuel, or water consumption; healthier air quality; sustainability; and the like.

The definition of covered assisted housing projects would be broader than that in the Kilroy bill and also extend to projects assisted by federal low-income housing tax credit projects and financed by Rural Development Section 515 loans.

Owners would apply to HUD for a loan or grant and have to submit a written plan outlining the proposed retrofit improvements. Proposed improvements would need to have a payback period of at least 10 years and reduce the project’s utility or operating costs by 20% or more.

In return for a grant, owners would have to agree to an extension of their project’s affordability period.

(Bills: http://thomas.loc.gov)

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