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
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 associated with navigating program applications, compared with 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 enable users to 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, enable users to search for federal incentives and rebate Local resources, such as those provided by the NYC Accelerator, will provide owners with more comprehensive support. These resources should serve as a starting point for owners, with more in-depth technical assistance supplementing this preliminary support. This assistance can include:
- streamlining the application process by creating one application that will collect all information needed for various incentive applications
- supporting landlords completing required paperwork
- providing information on the technical aspects that incentives for energy conservation measures provide (such as heat pumps or energy audits)
- conducting outreach to potential applicants so they are aware of the ability to stack incentives
- 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 enable users to 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, enable users to search for federal incentives and rebate Local resources, such as those provided by the NYC Accelerator, will provide owners with more comprehensive support. These resources should serve as a starting point for owners, with more in-depth technical assistance supplementing this preliminary support. This assistance can include:
- Strengthen Collaboration Between Agencies and Affordable Housing Stakeholders: Housing and climate agencies need to be highly coordinated to support transparency, better understand the sector’s needs, and develop effective programs and policies. Establishing feedback channels that ensure iterative improvements can help align efforts and improve program efficacy, ultimately increasing program utilization. Collaboration is most beneficial if user-centric design is prioritized in program and policy development to ultimately facilitate policy compliance and program adoption.
- Educate the Workforce on Policies and Programs: To maximize program and policy impact, it is critical to educate the workforce (including contractors, engineers, and property management staff involved in installations, audits, and maintenance) about the policies and programs that connect to their work. Since these workforce members engage most directly with owners and often have trusted relationships, educational programs can use these existing relationships to increase awareness of policies and programs and reduce the need for owners to outsource additional expertise.
- 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 but 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 complicates 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.
- 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.
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. Local housing authorities should 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. 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 the 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 uses 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
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