Multifamily Affordable Housing Decarbonization Toolkit
Effective Policy and Program Design
Program and Funding Deployment and Tracking
Ancillary Funding and Resources
NYC Policies and Incentive Program
MSP Policies and Incentive Programs
ATL Policies and Incentive Programs (forthcoming)
Current funding opportunities, including the influx of funding through the IRA, lay a robust foundation for a substantial transformation of the nation’s housing stock, vital for driving decarbonization. However, the journey to decarbonize the affordable housing stock does not come without its challenges. As more state, federal, and local programs become available, tensions can arise between housing and climate objectives, stemming from the lack of integration among pertinent policies and incentives. Knowledge gaps due to the constant evolution of programs, restrictions, and opportunities can also make it difficult for industry stakeholders to stay informed about and up to date on the intricacies of relevant programs.
Challenges and Recommendations
Technical Assistance Programs
Decarbonizing existing affordable housing is currently a fragmented and inaccessible process within a complex landscape of available incentives and program resources necessary to successfully fund and implement upgrades. For owners, property managers, contractors, and developers seeking clear guidance on how to navigate these complexities, adequate support remains insufficient. The ever-evolving nature of these programs compounds the difficulty, as stakeholders struggle to stay up to date on the latest opportunities and resources. The absence of supplementary education and centralized technical support only further complicate the matter, requiring owners and their teams to take on additional administrative responsibilities or seek external consultants or engineers to determine program eligibility. To reduce these challenges, workshop participants identified the following solutions:
- Leverage the Expertise of Local Community-Driven Organizations:CBOs play an important role in raising awareness about available incentives and can offer valuable perspectives on strategic financing and funding models relevant to projects. Community support can especially benefit owners and managers of smaller buildings and portfolios that often struggle with the costs and capacity needed to navigate program applications, when compared to their larger counterparts.
- Develop One-Stop Shop Hubs:Localized resources and guidance are critical to facilitating owners’ ability to define project scopes and apply for funding without having to rely on external consultants. User-friendly, algorithm-based online tools and resources that help users easily identify financing, funding, and incentive opportunities; find service providers; and better understand local programs and policies will be essential. Many existing tools, such as the Federal Funding Opportunities and Resources for Decarbonization tool, allow users to search for federal incentives and rebates. These resource hubs should serve as a starting point for owners, supplemented by community-based resource hubs, such as the NYC Accelerator, which provides projects with more in-depth expertise and support. This assistance can include:
- conducting outreach to raise awareness about available incentives or guidance regarding how multiple incentives can be stacked and braided;
- supporting and guiding landlords through administrative requirements such as permitting, bidding, or other necessary processes;
- technical advising on energy audits, value engineering, and information on how to optimize and align interventions based on incentive requirements; and
- streamlining the application process by creating one form that collects all information needed for various incentive applications.
- Develop One-Stop Shop Hubs:Localized resources and guidance are critical to facilitating owners’ ability to define project scopes and apply for funding without having to rely on external consultants. User-friendly, algorithm-based online tools and resources that help users easily identify financing, funding, and incentive opportunities; find service providers; and better understand local programs and policies will be essential. Many existing tools, such as the Federal Funding Opportunities and Resources for Decarbonization tool, allow users to search for federal incentives and rebates. These resource hubs should serve as a starting point for owners, supplemented by community-based resource hubs, such as the NYC Accelerator, which provides projects with more in-depth expertise and support. This assistance can include:
- Strengthen Collaboration Between Agencies and Affordable Housing Stakeholders: State and federal agencies working on climate and housing solutions can strengthen feedback channels with the affordable housing sector to help align efforts, improve efficacy of initiatives, and ultimately increase program utilization. For example, offering awardees and others engaged in recent funding programs through the IRA or GRRP the opportunity to provide feedback (through virtual suggestions boxes or open RFIs) could facilitate iterative program improvements across state and federal agencies. Prioritizing user-centric design in program and policy development can optimally facilitate policy compliance and program adoption.
- Address Language Barriers: Policymakers must consider the practical implementation of policies and their application in linguistically diverse communities and among those with various levels of technical expertise. Currently, communication is predominantly in English. Policies should not be made accessible only to non-English speakers and should also use terminology that is easily understood to improve policy compliance.
Effective Policy and Program Design
The landscape of building codes, policies, and funding programs for decarbonization efforts lacks a coordinated approach across administering agencies and entities, leading to confusion and hindering engagement among building owners. In some cases, participation in one program may disqualify users from accessing others. Introducing new programs that are not aligned with existing ones further complicate matters. For example, the new IRA rebate program for affordable housing demonstrates the redundancy created by these silos. Affordable housing often relies on Low-Income Housing Tax Credits (LIHTC) financing; however, the IRA’s new programs for LIHTC users, such as the High-Efficiency Electric Rebate Act and HUD’s Green and Resilient Retrofit Program, operate independently, with different application processes and eligibility criteria, leading to more administrative work for affordable housing owners looking to access the funds. To reduce these challenges and simplify program deployment, workshop participants identified the following solutions:
- Integrate Existing Policies and Programs: Streamlining existing duplicative or contradictory policies and programs instead of introducing new siloed programs and policies would be an effective approach. Consolidating duplicative laws and creating more unified compliance guidelines would allow owners to appropriately audit buildings and plan upgrades around one compliance timeline instead of several. An example of duplicative policies that could be facilitated by consolidation is in NYC. Local Law 97 sets emissions limits for buildings over 25,000 square feet, requiring that energy efficiency upgrades meet certain targets. In parallel, Local Law 87 requires energy audits and retro-commissioning of existing buildings over 50,000 square feet every 10 years. As decarbonization policies and emissions laws continue to increase and evolve, it is essential that their design promotes synergy and adaptability.
- Streamline Program Applications and Requirements: Although consolidating all application processes and eligibility criteria would be ideal, it is not feasible due to the variety of federal, state, and local agencies administering programs. However, there are multiple opportunities to simplify and accelerate the process of navigating program applications and requirements, such as enhancing consolidation efforts through a universal application process. One example, in Los Angeles, is the proposed Affordable Housing Streamlining Ordinance, which will expedite applications and internal review processes for affordable housing programs and permits. Another streamlining solution could be establishing and pooling funds in anchor programs that serve as a central point for multiple programs. Through these approaches, improved communication among agencies will continue to be vital, especially in recognizing when programs are ineffective or duplicative.
- Bridge Housing and Energy Programs: Strategically aligning energy and housing program objectives can enhance the integration of decarbonization opportunities with conventional operations of affordable housing. Affordable housing owners typically have a strong understanding of and familiarity with housing funds and financing options. However, integrating a decarbonization scope into housing financing cycles is usually an extra effort that owners must proactively learn and commit to on their own. An example of how the two could integrate would be utilizing decarbonization funds and aligning them with LIHTC syndication and refinancing processes. The capital structure of energy-related funds is most preferable since it can translate into utility savings on a balance sheet. In some instances, structuring grants as zero-interest loans could help utilize these funds better. Bridging these objectives will help building owners more easily identify and access a variety of available funding sources.
- Intra- and Interagency Coordination: Federal agencies in some cases have various ongoing initiatives and programs relevant to housing and energy but run by separate, little-coordinated teams within the same agency. Likewise, different agencies have programs with similar objectives but divergent specifics and protocols (and a dearth of cross collaboration). More systematic intra- and interagency coordination could promote alignment across these initiatives, making them more accessible and facilitating knowledge sharing to improve the program efficacy. Agencies including EPA, HUD, and DOE, can better synchronize goals, outcomes, and processes. Workshop participants highlighted that some federal multifamily initiatives need longer timelines than single-family or commercial initiatives and could benefit from coordinated multiyear action plans that also involve state leaders, such as the National Governors Association and the National Association of State Energy Officials. Improving coordination could be achieved by engaging federal agency staff in more informal conversations with broader stakeholder groups, as demonstrated during the DC workshop, helping to ensure that federal actions effectively address the needs of stakeholders who most closely interact with their initiatives. This should be a continuous and iterative process as federal agency priorities and market conditions evolve.
- Aggregate Multi-sector Resources: While reducing silos and building collaboration among energy and housing agencies is critical to streamlining programs and policies, there are additional opportunities to maximize impact by collaborating with other sectors as well. The effects of decarbonization can be multifaceted and could potentially improve the healthcare industry, through increased health benefits to tenants, or enhance the transportation sector through EV integration or transit-oriented development. Connections to long-term lenders such as reinsurance companies, life insurance companies, or other secondary and tertiary lenders could also be valuable. Creating connective tissue between building decarbonization and outside industry funding can open new pathways to further holistic decision-making, identify opportunities for categorical eligibility across programs, and enhance the potential for resource aggregation across sectors.
- Provide Phased Incentive Payouts: Deploying incentives with phased payouts can help contribute to the up-front capital needed by many small affordable housing owners and contractors to take on decarbonization projects. For example, NYSERDA’s Multifamily Performance Program used a phased progress payout model, issuing payments to owners when the scope of work was finalized, when 50% of the construction was complete, and after the project’s completion.
Program and Funding Deployment and Tracking
Once projects are awarded funding, many programs fail to capitalize on opportunities to enhance knowledge sharing and promote transparency regarding project data. To enhance the effectiveness of affordable housing programs, it is imperative to establish systematic approaches for deploying and tracking funds. Agencies should prioritize sharing insights from successfully funded projects to maximize the effect of funds, encourage diverse investments across different projects and communities, and allow owners to gain more insight into and guidance about the funding and project implementation process. Such steps include:
- Develop Criteria for Monitoring Funding: Comprehensive monitoring mechanisms and evaluation criteria for fund allocation and utilization are essential for optimizing distribution strategies and enabling knowledge sharing across stakeholder groups. Collecting this data can also enable agencies to effectively diversify community investments and distill market insights.
- Set Baseline Targets for Social Investment: Integrating social investment into building decarbonization is essential to promoting holistic community development benefits. Defining measurable objectives and setting clear targets for social investments are crucial, given that these investments may not always translate into monetary value. The Justice40 Initiative, for example, aims to allocate at least 40% of grant and program benefits to disadvantaged communities. This demonstrates how programs can prioritize consistent community investments as a foundational component of project funding.
Aggregate and Share Project Data: Across the market, increased data collection and transparency could help stakeholders pinpoint costs and allocate support more effectively. There is potential for projects participating in certain funding programs to collect and disclose data on up-front costs, operations and maintenance, new technologies, financing terms, energy consumption, performance metrics, and utility costs. This data can help stakeholders make more informed decisions on efficient, cost-effective solutions.
Program administrators, such as utilities or federal, state, and local agencies, can establish standards and protocols for collecting this data and ensure data transparency to inform better program design, financing solutions, training programs, benchmarking laws, and building performance standards. Increased data accessibility and analysis by research organizations (such as the Terner Center for Housing Innovation at University of California at Berkeley), can be useful to landlords, utilities, financiers, municipalities, and other stakeholders to appropriately assess the costs and risks tied to these investments. For example, data transparency on GRRP program funding can level-set expectations for owners and financiers and can help inform model designs for both hard and soft project costs.
Sustainable New Development
As the dire need for housing drives adaptive reuse and new development in cities across the United States, building density will be a key indicator of sustainable development and smart growth. In some cities, such as Atlanta, regulations and pushback from communities, often rooted in NIMBYism (resistance to developments within one’s local community that are considered undesirable), can prevent upzoning than enables high-density, mixed-use, and more holistic development opportunities. High-density developments, thoughtfully planned around public transportation and essential infrastructure, can increase access and prevent urban sprawl. As land uses change, especially with the addition of green space or other attractive developments, it is critical to consider how thoughtfully planned new developments can curb the effects of gentrification to avoid pricing out and displacing existing residents.
- Involve Community Lenders in Policymaking: Even with strong concepts and momentum supporting high-density developments like mixed-use or multifamily housing, these projects cannot move forward if financing is not available or accessible. Actively engaging local lending institutions in the development of policies that affect urban development and housing can help foster a supportive financial environment for high-density developments. Community lenders can offer perspectives on reaching policy alignment and identifying ways to make these projects financially sustainable and attractive to potential investors.
- Inclusionary Housing: Incentivizing mixed-income neighborhoods that integrate affordable housing within market-rate developments can foster social cohesion. The approach can also address gentrification concerns by ensuring low-income tenants are not priced out of communities experiencing rising costs due to new developments attracting more affluent residents. Mixed-income developments may be given density bonuses in exchange for developers allocating a percentage of units as affordable. These kinds of developments may be permitted through exceptions via the local zoning process or enabled by other actions (e.g., state zoning-enabling laws) to allow for these developments, independent of local zoning restrictions. The Inclusionary Housing Map & Program Database is a comprehensive resource that maps out regional programs and policies that enable or prohibit inclusionary housing programs across states.
- Upzoning: Upzoning refers to policies that change zoning codes in certain areas to allow for more housing density and diversification, such as multiple dwellings or taller buildings. These zoning modifications can help municipalities reach housing supply goals more sustainably by maximizing space, diversifying housing options, and decreasing per capita carbon footprint. Since 2015, Minneapolis has led by example in comprehensive zoning policy, enabling high-density housing and eliminating single-family zoning and parking requirements for developments. While the effects of these zoning policies are still emerging, successful examples of similar policies have increased housing supply and enhanced urban interconnectivity.
- Smart Growth: Smart growth is an urban planning concept focused on building urban areas that control urban sprawl and employ design strategies that address accessibility, affordability, and environmental concerns. The concept holistically encompasses transit-oriented, high-density developments that prioritize spatial efficiency while integrating green spaces and access to other environmental amenities. Ensuring that developers consider green areas alongside housing development can mitigate the heat island effect and improve resident health and wellbeing. In some cases, smart growth requires shifting priorities of planning and developments. In Atlanta, for example, nearly 25% of the downtown land is devoted to parking. To create greener, more accessible cities, priorities might shift toward transit-oriented developments that, by improving access to public transit, reduce the need for personal vehicles and potentially ease financial burdens on low-income residents.
- Garner Community Support: Hesitation or pushback from communities or neighborhoods can occur with zoning changes or new developments. There are various options for how to garner community support:
- Community Education: Citizen advisory boards or councils may take various forms across municipalities, but broadly serve as an avenue for residents to express concern and provide input to planning and developments. Through their existing networks, these public engagement groups can increase awareness of community benefits by strengthening educational services to residents. In Atlanta, where this pushback is a more significant barrier to multifamily housing or increased density developments, Neighborhood Planning Units can use their platform to educate communities to reach compromise.
- Community Benefit Agreements (CBAs): CBAs can play an important role in aligning community voices and priorities to ensure equitable development practices that benefit local residents and neighborhoods. These legally binding contracts occur between community-based coalitions and developers, and may include local hiring requirements, land use requirements, or funding contributions. CBAs can be an especially influential tool when used to ensure public funding effectively meets requirements to serve disadvantaged communities.
Energy Resources
Renewable energy can pave a pathway to affordable clean electricity. The installation costs and price of solar energy have dropped significantly in recent years, but there are still barriers in some states that inhibit affordable housing owners from making these investments financially feasible. Enacting policies and incentives that encourage building owners to leverage on-site renewable energy and other operational efficiencies can bring buildings closer to decarbonization and can also promote energy independence for low-income housing.
- Renewable Energy Standards: States can incentivize renewable energy through renewable portfolio standards (RPS) which set requirements for utilities to procure a certain amount of renewable electricity (and rules for how that portion must be sourced). As of 2021, 31 states and D.C. have RPS or clean energy standards (CES). These standards can help set clear targets for renewable energy adoption, providing a framework for utilities and property owners to access more affordable clean energy.
- Virtual Power Plants (VPPs): VPPs are aggregated systems of distributed energy resources that help maximize energy efficiency and mitigate grid impacts by balancing electricity supply and demand through energy storage and reduced peak electricity consumption. VPPs have various structures involving owners, utilities, and even third-party operators. They have the potential to optimize energy usage and reduce electricity bills, while also contributing to a more stable and resilient grid. For states such as Georgia, where the Public Utility Commission has not set statewide incentives or standards for renewable energy, VPPs can serve as alternatives for incentivizing renewable energy. While VPPs still face various policy barriers, momentum has been growing as states begin to incentivize VPPs through state legislation and utility programs.
Utility Structure Design
Decarbonizing existing buildings often requires phasing out or replacing gas-powered systems with electric mechanical systems. Building electrification can often shift the metering or payment structure for utilities between tenants and owners, prompting tensions regarding who covers the initial cost of electrification and who reaps the benefits of potentially lower utility payments. This issue is pivotal to address because it raises questions about the fair distribution of financial responsibilities and benefits between owners and tenants. Proposed solutions include:
- Metering Regulations: Whereas submetering empowers tenants to control their energy usage and expenses, master metering enables owners of affordable housing to maintain greater control over building operations. The implementation of submetering is effective in influencing tenant behavior, with the added benefit of potential cost savings on utility bills as more energy efficient technologies are integrated into the building. Irrespective of metering choice, maintaining customer protections and transparent billing practices is paramount. For instance, in New York State, compliance with consumer rights and protections in the Home Energy Fair Practices Act is mandated when a property is sub-metered.
- Utility Allowances: Within subsidized housing, utility allowance adjustments can be used for retrofit projects to benefit both tenants and property owners. For example, owners that pay utilities and invest in energy-efficient technologies to reduce their energy load can recoup up-front costs through higher rents without increasing tenants’ overall housing costs. However, most housing authorities across the country have outdated utility allowance schedules that do not accommodate for newer technologies like heat pumps or other efficiency upgrades. Utility data is key to updating utility allowances that accurately reflect the changes in utility consumption and costs. Utility data collection could come from regulations set at the public utility commission level or by federal agencies establishing single-request forms for utility data access, for example. Local housing authorities could work with program implementers, owners, and tenants to ensure that utility allowance adjustments are optimal and fair to help recover monthly costs for owners while ensuring that tenants are not burdened with increased costs.
Ancillary Funding and Resources
Although available incentives often target specific decarbonization or electrification measures, there are critical funding gaps that fail to address integral prerequisites to implementing decarbonization, such as general building maintenance and health and safety measures. For example, mechanical upgrades tend to receive ample funding support, yet other critical upgrades tied to improving energy efficiency and lowering mechanical loads, particularly those concerning envelope upgrades, are currently under resourced. Solar installations similarly provide a suite of incentives, although they are not often coupled with funding for the structural roof work needed to install rooftop solar, for instance. Expanding the scope of retrofits can enhance long-term benefits, which, when appropriately captured in the underwriting process, can also improve the financial outlook for projects. Identified solutions to enable the full scope of retrofits include:
- Enhance Funding for Pre-weatherization: Expanding funding and resources available for pre-weatherization improvements, including the remediation of lead, mold, and asbestos, is vital for addressing unforeseen or neglected health hazards that may surface during renovation projects. Funding and resources for health-related upgrades, especially in older buildings, will give owners another starting point for tapping into electrification and efficiency programs, because addressing health hazards is often a requirement before those programs can be accessed.
- Expand Cost-Effectiveness Criteria: The set parameters of cost-effectiveness criteria for utility-funded programs are critical to determining the accessibility of funding for energy-related retrofit upgrades. Currently, cost-effectiveness tests (CETs) are primarily tied to a building’s energy savings but could provide a more holistic assessment of cost-effectiveness by incorporating non-energy benefits (NEBs), such as improved tenant health and thermal comfort and decreased operational and maintenance costs. Formally and consistently integrating NEBs across CETs can capture benefits more comprehensively, expanding access to utility-funded programs. Utilities are also likely to benefit from capturing NEBs, especially in low-income communities, where NEBs have been shown to reduce bill complaints and shutoff notices.
- Enable Building Decarbonization Assessments: Building decarbonization assessments offer owners and project managers an opportunity to understand the full project scope and budgetary expectations inclusive of ancillary measures. Assessments also help owners understand and address funding gaps earlier and can be used to strength applications for decarbonization funding. Fortunately, in many states, programs exist to provide free or low-cost energy audits, which assess a building’s baseline energy consumption, a prerequisite to building decarbonization assessments. In Minnesota, for example, the Multifamily Building Efficiency program leverages partnerships with regional utility providers to conduct whole-building energy audits and offer tiered incentives for projects that incorporate energy efficiency measures. These programs provide a foundation that could be enhanced by further funding a broader range of predevelopment work, such as decarbonization assessments or integrated health-related evaluations during energy audits that assess lead exposure, thermal comfort, and other health hazards. The Association for Energy Affordability, for example, has already deployed this framework in parts of New York State and California, paving the way for more holistic and standardized project scoping.
Federal Incentive Programs
The IRA is investing nearly $50 billion in building decarbonization and resilience. Initiatives that provide an opportunity to holistically upgrade low-income homes include the US Department of Energy’s Home Energy Rebates program, HUD’s Green and Resilient Retrofit Program, the US Environmental Protection Agency’s (EPA) Greenhouse Gas Reduction Fund, and the US Department of the Treasury’s several tax credit provisions. Furthermore, other existing federal incentives are also available to improve energy efficiency, reduce energy burdens, and introduce solar to multifamily affordable housing properties.
However, navigating, accessing, and stacking federal and state incentives can be time-consuming, challenging, and cumbersome due to administrative burdens. While some resources already exist for understanding and stacking these incentives, it is vital that program administrators and implementers provide comprehensive technical assistance for users seeking to access federal funding streams. Resources such as HUD’s Funding Navigator could supplement such assistance. The Funding Navigator is a comprehensive tool that enables industry stakeholders to identify and learn more about funding opportunities under the IRA, the Bipartisan Infrastructure Law, and other relevant federal programs supporting decarbonization efforts. The tool can be used to determine availability and eligibility for programmatic funding to support energy efficiency upgrades, resiliency, and environmental justice work across various projects and building types. Additionally, the navigator tool can be utilized to identify solar credits available to LIHTC properties.
Other online resources, such as the Better Buildings Funding and Incentives Hub, can filter and identify relevant funding sources and incentives by sector. In addition to online resource hubs, networks including the Advanced Building Construction Collaborative, and Stewards for Affordable Housing for the Future (SAHF) frequently host assistance to practitioners as they explore available federal funding programs.
NYC Policies and Incentive Programs
MSP Policies and Incentive Programs
Disclaimer: To the best of our knowledge and based on readily available information, the policy and program summaries listed here were accurate at the time of initial publication.
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