Leaking Energy and Money From Affordable Housing

Originally posted by GreenBiz.

America spends approximately $1.6 billion on public housing energy payments every year. To put that into perspective, that’s equal to:

  • 15.7 percent of the annual budget of the U.S. Environmental Protection Agency
  • 95.7 percent of U.S. investment in energy-efficiency programs and renewable energy research
  • 110 percent of the operating expenses of the U.S. Agency for International Development
  • 60 times as much as we spend on National Public Radio.

Yet multi-family public housing projects, on average,use 38 percent more energy than the typical U.S. home. To put it simply, our public housing buildings are leaking our money.

If we made affordable housing 30 percent more efficient, we could use the dividends to double the current federal budget for building energy-efficiency research and generate greater future energy savings. But we can go even further.

There are case studies showing that some of our oldest buildings can be 50 percent more efficient. This energy efficiency comes none too soon, because energy conservation codes are demanding more energy efficiency more quickly than ever before in American history.

The Department of Housing and Urban Development (HUD) and the 3,300 public housing authorities (PHAs) that develop and operate public housing are on the hook for (at least a part of) the utility bills of all 1.2 million public housing units. In traditional apartment rentals, energy efficiency is hampered by the curse of split incentives – the landlord builds and owns the apartments, but the tenant pays the energy bills.

However, in the case of public housing, the landlord (the PHA, with support from HUD) is responsible for putting up the building and for paying the utility bills, removing the split-incentives barrier. So, why is there still inefficiency within our portfolio of public affordable housing units? This is one of the questions RMI seeks to answer with the Residential Energy Efficiency Leaders (REEL) working group.

This group is composed of 10 PHAs dedicated to bringing superefficiency to public housing. Members have signed a commitment to identify impediments and solutions to increased energy-efficiency, meet regularly to discuss relevant topics, and share resources and ideas freely. REEL Working Group members include: Albany Housing Authority, British Columbia Housing, Boston Housing Authority, Denver Housing Authority, Home Forward (Portland Housing Authority), Housing Authority of the City of El Paso, Minneapolis Public Housing Authority, San Antonio Housing Authority, Seattle Housing Authority, and Tacoma Housing Authority.

Through the leadership of these PHAs, RMI is identifying roadblocks to efficiency and investigating innovative solutions from our working group members and other PHAs. Together, the group will identify an aggressive, yet achievable energy-efficiency goal that can show the public housing sector that efficient design is not only possible, but also profitable.

In fact, several REEL members are already leading the way toward increased energy efficiency with case studies that show solutions are already available. These projects exhibit exceptional creativity and prescience in their development of public housing that is affordable, not just for the tenant, but also for the landlord:

  • Boston Housing Authority (BHA) – Energy Performance Contracting: By combining private investment, utility incentives, and internal capital funds, the BHA expects to decrease energy usage by 31.5 percent across 13 of its existing buildings, saving approximately $5 million per year before debt service, and $750,000 after. This energy savings was made possible by changes to HUD policies that allow PHAs to recapture the savings from energy-efficiency measures. By investing their internal funds on top of an Energy Performance Contract, BHA was able to make deeper cuts that will allow them to save even more energy (and money) over the life of the performance contract.
  • BC Housing Authority – Life-cycle Cost Assessment: The British Columbia Housing Authority realized the importance of investment in energy efficiency early on. In developing new housing, it accounts for a certain level of funding for energy-efficiency improvements that will pay back over time. It uses net present value and life-cycle costs (instead of simple payback or return on investment) to determine a design feature’s economic efficiency. While BCHA leaders still constantly fight the battle of “building more versus building better,” they know the money saved through these investments will allow the group to better serve the needs of residents in the future.

These are just a two examples of what can happen when the correct incentives are in place for energy efficiency to prosper. By correcting systemic problems that penalize the implementation of energy efficiency in our existing building stock and making sure that the adequate capital is available to fund measures that pay back over their lifetime, we can drive efficiency into our affordable housing units. These gains will not come through any act of charity or fiat, but from a sound long-term strategy for our public housing that accounts for all costs, not just the upfront ones.

Once we capture the cash that is slowly leaking from the walls and windows of our public housing, we can reinvest that money in the innovative ideas and people that will drive us toward a more sustainable and equitable society.