CASE STUDY California Developer Adapts Green Single-Family Innovations to LIHTC Units
By Caitlin Jones & A. J. Johnson
7 min read
Tax Credit Advisor June, 2006: Tax credit apartment projects are increasingly going “green.” A key part of this trend is the selective adaptation to multifamily housing of building features and techniques used in developing environmentally-friendly single-family homes.
A good example is the Vista Montana development in Watsonville, Calif., which Palo Alto-based Clarum Homes completed in December 2005. Vista Montana applied green standards to a mixed-use development combining 257 for-sale single-family houses and townhomes with a 132-unit apartment complex. All 132 apartments in the complex are tax-credit units, with 40 families at 50 percent of Area Median Income (AMI), and 82 at 60 percent of AMI.
For the single-family portion of the project, Clarum Homes pushed the green building approach to the limit, setting a goal of building California’s largest “Zero Energy Housing” (ZEH) community. ZEH is a standard created by the U.S. Department of Energy that pairs the use of an on-site solar energy source with cutting-edge energy-efficiency measures so that a residence consumes no more electric power than it generates.
Vista Montana’s houses and townhomes also employed the latest innovations in water conservation, environmentally-sensitive building materials, and debris recycling.
Adapting Green Features to Affordable Apartments
As much as possible, the developer strove to include in Vista Montana’s apartments the same green features used in the houses and townhomes, said John Suppes, Clarum’s president. These included:
- Radiant roof barriers: Aluminum foil bonded to the roof sheathing that reflects up to 97 percent of the sun’s heat and radiant energy, sharply lowering heat absorption.
- Low-E windows: Glazed windows that block most ultraviolet rays, while allowing visible light to enter the home.
- Tight Ducting: Sealed ducts that ensure optimum heating efficiency and reduce heating costs.
- High Energy Furnaces: Furnace systems that use 90 percent fuel utilization compared with 75 percent in most traditional systems.
- High Efficiency Lighting: Fluorescent light bulbs that use less energy and last 10 times longer than standard light bulbs.
- High-Density Exterior Insulation: Rigid foam beneath the stucco that reduces heat gain and loss.
Selective Adaptation
Given the tight financing parameters of tax credit properties, Clarum had to be selective in applying to Vista Montana’s apartments the green building features incorporated in the single-family homes, Suppes said. He estimated these energy-saving features added about 5 percent to the development cost of the apartment complex, which totaled $22.1 million.
“We tried to be as innovative as possible in going green with the rentals,” he said. “At the same time, we also had to be realistic.”
For example, building a solar power system large enough to supply all the electricity needs of each apartment unit would have added too much in upfront costs, Suppes said. Instead, a solar energy system installed on the roofs of the five-building complex was limited to providing lighting and energy to common areas: the leasing office, community center, fitness center, computer labs, 15 laundry rooms, and breezeways. Even so, he said, the 60-kilowatt photovoltaic system – which produces 90 megawatts of electricity annually – is the largest building-integrated solar electric system ever installed in an apartment complex in the United States.
Suppes said that although the actual cost of the solar energy system was about $350,000, a tax credit rebate of $2.80 per watt from the California Energy Commission reduced the purchase price to $180,000. He estimates that the system generates an annual savings of $12,500 compared to a similar community without a solar electric power system – translating to a 14-year payback period.
The developer said these savings are likely to rise given the near-certainty of future increases in energy costs. “The key to this is that it’s a hedge against rising energy costs coming down the line,” he added.
Suppes hopes to eventually build a multifamily complex with a photovoltaic system for each rental unit. “At this point, it just doesn’t pencil out,” he said.
Saving on Green Costs
The decision to hold off on supplying individual apartments with solar power was not the only example of Clarum’s scaling back of a full-scale green approach to the rental properties. Structured plumbing systems, which supply on-demand water to Vista Montana’s single-family homes, were not used in the apartments. Also, satellite-controlled landscape irrigation, used for the houses and town homes, was not employed for the apartment complex. In addition, Suppes said that, because of cost, special non-volatile paints were not used for the apartments.
Recycling Debris
Recycling of construction site materials was also a crucial part of the green approach to both the single-family and multifamily residences within Vista Montana. In construction site recycling, builders grind up and redistribute building debris on the site itself.
This creates savings in several ways, Suppes says. First, it virtually eliminates the cost of hauling away debris and dumping it into a landfill. In addition, debris recycling reduces the expense of adding mulch or soil amendments to the site during the landscaping process. Ground lumber can be used for mulch and erosion control, drywall for a gypsum-based soil amendment, ground composite roof shingles for pathways, and ground brick and block as a base for driveways and sidewalks. Ground block and cinder are also a good cost-saving alternative to gravel.
Suppes noted some materials can’t be recycled at the building site, including plastics, pressure-treated wood, and radiant barriers. These must be separated and hauled away.
Because of the importance of debris recycling, Clarum has set up a separately capitalized subsidiary, Construction Debris Recyclers, to handle this task. The subsidiary acts as a subcontractor for other developers and contractors in addition to recycling construction debris from Clarum’s own building projects, Suppes said. By 2010, every county in California will be required to recycle at least 50 percent of construction debris on-site, he said.
Suppes said that at present, with the savings on reused materials factored in, the cost of debris recycling roughly equals the cost of hauling debris away. But as the technique is developed, contractors may eventually be able to realize a net savings, he said.
Financing Affordable Green Apartments
Financing for the apartment complex included: equity generated from the sale of 4 percent federal low-income housing tax credits and from California housing tax credits (the tax credits were syndicated by CharterMac Capital); tax-exempt financing; and federal HOME funds, provided through the city of Watsonville in the form of a loan. Watsonville also contributed a zero-interest rate soft loan, and Clarum Homes deferred development fees. (See Box)
John Doughty, Watsonville’s Director of Redevelopment and Housing, said the city’s no-interest loan will be repaid from a 1 percent real estate transfer tax assessed on subsequent re-sales of Vista Montana’s single-family homes. Watsonville also used the local housing trust fund to provide a guarantee of repayment of the HOME loan.
“We were very pleased with the way this project turned out,” he said. “Developing affordable properties on this land has been an important project for Watsonville for 20 years.”
Doughty said that Watsonville and surrounding Santa Cruz County have pushed to make more rentals available to working-class families and farmworkers squeezed by skyrocketing housing costs. Vista Montana’s 132 apartments are divided into 60 two-bedroom units, 51 three-bedroom units, and 21 four-bedroom units. Rents range from $823 per month for a two-bedroom apartment offered to a household at 50 percent of AMI to $1274 for a four-bedroom apartment rented to a household at 60 percent of AMI.
The Future of Multifamily Green Development
Suppes says that most innovation in residential green building will continue to come from single-family home developers. This is because homebuyers are expressing a growing preference for environmentally advanced features – and are willing to pay for them. But use of green features in affordable rental apartments is also coming on strong, he said, and is destined to become standard as developers realize the cost savings involved.
By Don Yacoe
