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Sustainable Affordable Housing Management Snippet

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Section 5.1 of the Sustainable Affordable Housing Management Print/eBook combo from Vendome Real Estate Media, Taking Advantage of HUD Energy-Efficiency Incentives.

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Sustainable Affordable Housing Management Snippet

  1. 1. 266 SECTION 5.1 Taking Advantage of HUD Energy-Efficiency Incentives The president’s Better Buildings Challenge began in 2013 with $2 billion in financing commitments from the private sector for energy-efficiency updates to commercial buildings. Since then, the U.S. Department of Energy (DOE) and HUD have expanded the challenge to multifamily housing to cut energy waste and eliminate market and technical barriers to greater site efficiency in housing. The Better Buildings Challenge is a voluntary leadership initiative that asks building owners and managers to make a public commit- ment to energy efficiency. This expansion recognizes the role that creating healthy housing and increasing energy efficiency can play in reducing air and carbon pollution, fostering healthy com- munities, and improving the financial condition and stability of the country’s housing stock, while creating jobs and building a stron- ger economy. Over 87 multifamily housing part- ners so far, representing roughly 200,000 units, have committed to the challenge. HUD and DOE are
  2. 2. 267 5.1: HUD Energy-Efficiency Incentives partnering with owners of market-rate multifamily housing, public housing authorities, low-income housing tax credit property owners, and HUD-assisted multifamily property owners. The multifamily housing partners commit to creating strategies to increase energy efficiency in a variety of ways, including through lighting improve- ments, heating and cooling system upgrades, rooftop solar instal- lations, new financing for energy retrofits, and green construction. Their goal is to reduce energy consumption by at least 20 percent during the next 10 years. Requirements to Participate BBC multifamily partners can be owners and managers of market- rate (unsubsidized) multifamily housing, public housing, Low-Income Housing Tax Credit properties, and/or HUD-assisted multifamily properties. Those participating in the challenge commit to: • Sign a Partnership Agreement with both DOE and HUD (if you are interested in joining, email to betterbuildingschal- lenge@ee.doe.gov) • Conduct an energy use assessment of your site and pledge an organization-wide energy savings goal of 20 percent over 10 years • Develop an energy reduction plan within six months of joining the program • Showcase an energy-efficiency project and launch that project within 12 months • Share information about the data and approaches for your energy-saving efforts BBC partners must give HUD data for each building as a whole, using a tracking software tool like, EPA’s ENERGY STAR Portfolio Manager or another similar format that tracks energy and water usage data and share data. For more information on how to collect and track energy use data, see • Section 1.2: Charting Progress with Data Collection, Benchmarking & Energy Audits
  3. 3. 268 5.1: HUD Energy-Efficiency Incentives HUD Energy-Efficiency Incentives for BBC Multifamily Partners HUD’s Office of Multifamily Housing Programs offers a number of incentives to help make it easier for sites to participate and pay for some of the necessary energy- and water-efficiency improvements. Management fee incentive. HUD expands the add-on fees sites can claim under Management Agent Handbook 4381.5 to include eligible energy- and water-efficiency activities to pay for the additional cost of best practices in energy management. Given BBC’s requirement for data reporting, this incentive will alleviate some of the cost bar- riers associated with entering the competition. The eligible activities will include the cost of data collection, input, benchmarking, and potentially green operations and maintenance activities. Specifically, applicable costs include: • Development of a green operations and maintenance plan, such as staff or consulting costs to develop the plan, train- ing and certifications, and technical assistance • Resident engagement and education to encourage energy and water efficiency • Utility data information, including technical support, utility bill paying and auditing services, costs of staff or third party to collect and input site and resident utility data, and fees to utility companies up to $100 per building per year • Installation and use of energy data benchmarking and reporting software, including cost of software and training, benchmarking services and subscriptions, and technical support The fee submitted for each is limited to a total of $1 per unit per month or a total annual per site fee of $5,000 per year. In two memoranda to staff, dated April 24, 2014, and Sept. 19, 2014, HUD details the eligible fees, and spells out the application process for submitting the Management Certification Form—use either the “Project Owner’s Certification for Owner-Managed Multifamily Housing Projects” (HUD Form 9839-A), or the “Project Owner’s and Management Agent’s Certification for Multifamily Housing
  4. 4. 269 5.1: HUD Energy-Efficiency Incentives Projects for Identity-of-Interest or Independent Management Agents” (HUD Form 9839-B), depending on which one applies to you. See the memoranda, HUD Memorandum, Multifamily Better Buildings Challenge Incentive: Allowable Management Add-On Fees, April 24, 2014 and HUD Memorandum, Multifamily Better Buildings Challenge Incentive: Allowable Management Add-On Fees Revised, Sept. 19, 2014, for more information. Project Rental Assistance Contract (PRAC) shared savings incen- tive. HUD allows BBC Section 202 and Section 811 PRAC partners to invoice energy savings payments associated with property and resident utility allowance reductions as an eligible expense to the property’s budget. PRAC properties typically have a more difficult time recapitalizing, and their budget rent-setting process allows HUD to include reasonable eligible expenses. Many PRAC sites are older and in need of energy-efficiency updates to bring them up to date, but these sites are often not in a position to take on new debt to make these energy- and water-saving improvements. Also, there is little financial incentive for improving the financial performance on these sites, because generally, the operating cost savings that PRAC properties would realize from making such efficiency improvements get absorbed into a residual receipts account and applied toward future rent increases, instead of eliminating the financial incentive for improved financial performance (a.k.a. the split incentive between the site owner and HUD). To help BBC PRAC partners meet their energy-reduction commit- ments HUD established the PRAC Shared Savings Incentive (SSI). This incentive targets a segment with great need by allowing owners to recoup 100 percent of their energy savings in their budget to service debt or access surplus cash associated with energy savings installed to reach the Better Buildings Challenge of 20 percent consumption savings. This incentive addresses the split incentive between HUD and PRAC owners who pay all, or a portion of, a site’s utility costs by allowing owners to capture savings from energy and water improvements over a 12-year payback period. PRAC sites where residents pay 100 percent of the utilities are not eligible.
  5. 5. 270 5.1: HUD Energy-Efficiency Incentives HUD Memorandum to staff, dated Sept. 26, 2014, spells out the eligibility and submission requirements and supporting documen- tation of energy savings you must provide to take advantage of this incentive, and includes several sample budget narratives. HUD will not provide sites using this incentive any additional funding for the retrofits, but it may approve reserve for replacement or sponsor capital releases to be paid back over the 12-year period. Expedited reserve for replacement incentive. HUD requires most assisted housing sites to maintain a reserve for replacements account so funds are readily available to pay for repair and replacements of major systems and capital items. Most sites that are required to maintain reserves must get HUD’s prior approval before using the reserves. These rules are set out in the site’s regulatory agreement and/or housing assistance payments (HAP) contract, and HUD Handbooks 4350.1, par. 4-2 and Handbook 4370.2, par. 2-7. HUD’s Office of Multi-Family Housing will approve requests for certain stand-alone green measures (that are not part of a larger rehab) with a clear set of parameters and schedule for BBC partic- ipants in order to enable streamlined green rehab. These pre-ap- proved measures would not require a full review and approval in the field, which can be time consuming. In a memorandum to staff, dated June 12, 2014, the HUD Office of Multifamily Housing Programs spells out the eligibility and application process for BBC partners to get expedited access to their reserve for replacement account funds needed to fund energy- and water-efficiency improvements. Requests must be submitted by one of two paths for approval: 1. Energy- and water-efficiency improvements are already identified as part of a site’s Green Capital Needs Assess- ment (CNA), which HUD defines as a traditional site CNA that includes an energy audit and utility consumption baseline; or the improvements are identified and on sched- ule as part of a site CNA, exceed code requirements and will contribute to the water and energy savings goals at the site (for example, your CNA already includes a new boiler replacement this year and you opt to replace it with one that exceeds code requirements and will contribute to the
  6. 6. 271 5.1: HUD Energy-Efficiency Incentives site’s water and energy savings). HUD will approve path one requests within seven business days of receipt. 2. The improvement is outside of the site’s green or other CNA but, subject to HUD’s approval, is intended to create water and energy savings. See the memorandum for the documentation requirements, which include a reserve anal- ysis to ensure that there are enough funds to meet the site’s capital needs; modeling, software, or third-party analysis or measure of expected savings; and a printout of the site’s BBC profile page at http://www4.eere.energy.gov/challenge/. HUD will approve path two requests within 15 business days of receipt. For both types of requests, follow other HUD Handbook 4350.1 rules and use Form 9250. If you expect that the energy and water savings associated with the improvements you intend to fund fully or partially with replacement reserves to exceed 20 percent, submit your site as a “Showcase Project” through DOE’s Better Buildings Challenge. On-bill financing and repayment incentive. HUD invites BBC participants to send proposals if they want to use on-bill financing or repayment to finance energy retrofits. Currently, HUD neither expressly permits nor prohibits owners from on-bill financing, repayment, or utility tariff programs, but because HUD regulations might be interpreted to require HUD’s approval, HUD wants owners and lenders to seek clarification before moving forward with on-bill options. This incentive invites BBC participants to propose ways to use on-bill financing and repayment for energy and water improvements at their sites, when applicable and available. For more information about on-bill financing, see • Section 5.2: Exploring 12 Categories of Financing for Renewable Energy & Efficiency Improvements Mark-to-market (M2M) incentive. HUD provides an incentive performance fee increase for meeting specific energy- and water- efficiency requirements. Several owners have expressed a concern
  7. 7. 272 5.1: HUD Energy-Efficiency Incentives that older M2M properties undergoing rehab do not get proper incentives to green their properties. Generally, only existing M2M properties that achieve a green certification via rehab (such as LEED and Enterprise Green Communities) are eligible for the Incentive Performance Fee (IPF) that increases owner distribution. This policy is inconsistent with the policy for properties entering the M2M Green Initiative for the first time. This incentive allows existing M2M properties that adopt 75 percent of the green energy measures and all the water conservation measures recommended in the Green PCNA access to the IPF, consistent with the policy for first-time M2M Green Initiative properties. Increased distributions. HUD will temporarily offer additional distributions for the 10 years of the BBC to for-profit and nonprofit owners of Section 8 properties that participate in the challenge and meet their targets: Up to 100 percent for nonprofit Section 8 owners. This helps owners of Section 8 properties to capture excess cash associated with energy savings to which they otherwise would not be able to get access. There are accountability checkpoints created to ensure owners are reaching their energy-savings targets, and the distribution will be on a site-by-site basis. Other Ways HUD Helps BBC Multifamily Partners HUD also offers BBC partners other resources to help them plan and meet their energy and water efficiency targets: Ongoing collaboration and technical assistance. The program has $1.5 million in technical assistance funds available and each partner is assigned to a BBC Account Manager that conducts quarterly check-in calls and is available to assist as needed on topics such as: • Energy and site assessments • Design specifications, construction review • Green operations and maintenance, resident engagement • Financing (e.g., power purchase agreements, leveraging capital sources, energy performance contracts) • Portfolio planning
  8. 8. 273 5.1: HUD Energy-Efficiency Incentives • Benchmarking and energy management HUD also offers webinars and an annual conference for participants. Referral to government and industry resources. BBC Account Managers share the latest available information from other gov- ernment and industry organizations. They connect “Partners” with energy-efficiency stakeholders such as government, industry, service providers, financial institutions, and utilities, as well as “Allies” that dedicate resources to help Partners achieve their goal. Public recognition. HUD and DOE will nationally recognize the success of BBC partners and offer preference in certain HUD competitive funding processes. Owners may contact HUD at MFBBC@hud.gov for more details and with any questions. Or email betterbuildingschallenge@ee.doe.gov. Use Free Tool to Find Out Which Energy-Saving Targets Can Help You Meet the BBC For an easy and free way to find out which energy and water improvements can help you and are most cost effective to reach or exceed the 20 percent target for the Better Buildings Challenge, try the EZ Retrofit Tool. Developed by the Stewards of Affordable Housing for the Future (SAHF) and Bright Power, Inc., through a HUD and DOE grant, the Benchmarking and Audit tool is free for owners and managers of multifamily housing sites. Using building data input by the owner or manager, the tool gives you: • An assessment of the energy and water savings potential for a building based on comparison with similar buildings in the same geographic area, using two metrics: site energy use intensity and site water use intensity • Detailed information on proposed retrofit improvements including consumption and cost savings, installation cost estimates, expected useful life, and payback period • Summary information for a package of measures selected
  9. 9. 274 5.1: HUD Energy-Efficiency Incentives • Graphs of utility costs and consumption for proposed retrofit improvements The tool is a Microsoft Excel-based file and has all user instructions and reference materials embedded within it. They can be accessed by clicking on the “How Do I Do It?” button after opening the Excel file. SAHF created a webinar that gives you an overview of the EZ Retrofit tool, a demonstration, and a discussion by an owner and an energy engineer about their experiences using the tool. SAHF can also help you learn about opportunities for financing any major improvements the tool may recommend. Email ezretrofit@ sahfnet.org. RESOURCES Department of Energy (DOE), Better Buildings Challenge, Multifamily Partners EPA ENERGY STAR Portfolio Manager EZ Retrofit Tool HUD Memorandum, Better Buildings Challenge Multifamily Partner Incentive: Expedited Reserve for Replacement Account Releases to Support Energy and Water Savings, June 12, 2014 HUD Memorandum, Better Buildings Challenge Multifamily Partner Incentive: PRAC Shared Savings, Sept. 26, 2014 HUD Memorandum, Multifamily Better Buildings Challenge Incentive: Allowable Management Add-On Fees, April 24, 2014 HUD Memorandum, Multifamily Better Buildings Challenge Incentive: Allowable Management Add-On Fees Revised, Sept. 19, 2014 HUD, Technical Assistance (TA) Request for Better Buildings Challenge Partners

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