1

Green Preservation of Affordable Multifamily Housing

Michelle McDonough Winters New Partners for Smart Growth

February 6, 2010

2

What is LISC?

  LISC is dedicated to helping nonprofit community development organizations transform distressed communities into healthy and sustainable communities of choice - good places to work, do business, and raise children.   LISC local offices serve 29 urban areas and Rural LISC works with

74 partner CDCs in 36 states nationwide

  LISC’s Affordable Housing Preservation Initiative:   Provided $80 million in financing since 2002 to preserve 15,000

homes   Capacity building, financing, project-specific TA, creation of

preservation strategies and partnerships, and policy analysis   Information products such as Recapitalizing Affordable Rental

Housing, and Practitioners’ Guide to the Section 515 Program, Getting Started with Green Preservation

3

LISC’s Green Track Record   LISC supports a wide range of green projects, including:

  training for green jobs   construction of new affordable housing and retrofit of existing homes   urban farms and farmers markets   green schools and environmental education program   parks and city street clean-up efforts.

  Since 2004, LISC and its affiliate, National Equity Fund, have supported:   over 20,000 units of green affordable housing   over $650 million in grants, loans and equity

  LISC’s Green Development Center formalized in 2007   LISC’s Preservation Initiative collaborates with GDC on Green

Preservation activities

4

LISC’s Green Preservation Activities   Policy

  Legislative and regulatory analysis and advocacy   Capacity Building Events

  Symposia in Boston (July 2009) and SF Bay Area (January 2010)   Additional events and webinars planned for 2010

  Peer Networking   Green Retrofit Program Peer Group   LinkedIn Green Affordable Housing Preservation Group

  Publications   Getting Started with Green Preservation   Green Rehabilitation of Multifamily Rental Properties

  Lending   Green Loan Fund launched in 2009

  Technical Assistance   Project-specific assistance   Targeted local initiatives

5

LISC Green Preservation Resources

www.lisc.org/greenpreservation

6

Building Industry Capacity for Green Preservation   Definition and Scope:

  What can be done to “green” an existing property?   Finance:

  How do we pay for it?   Process:

  How do we assess and prioritize green retrofits?   Measurement:

  How do we know what we did matters?   Sustainability:

  How do we keep the properties “green”?

7

Preservation Context   2 million units of subsidized mortgages and Section

8 housing nationwide built in 1960s to early 1980s   1.5 million units of Low-Income Housing Tax Credit

housing   Utilities make up 30% of HUD-assisted housing

operating costs   HUD spends $5 billion on utilities annually   Increases in energy costs threaten physical and

economic viability of properties   Outdated building systems negatively impact

resident health and the environment

8

What Do We Mean By Affordable Housing?   Federally Subsidized

  Privately owned but publicly subsidized housing through HUD, RHS, IRS

  Public Housing   Federally subsidized

  State and local public housing

  Private Housing   “Market Rate” Affordable

Approximate Distribution of Affordable Housing by Type

* Total is Joint Center estimate of rents affordable to lowest income families

9

Timeline of Federal Housing Programs

Public Housing Housing Act of 1937

§202 Elderly Housing Housing Act of 1959

§221(d)(3) BMIR Housing Act of 1961

§236 (IRP) Housing and Urban Dev’t Act of 1968

Section 8 Housing and Community Dev’t Act of 1974

1930 1940 1950 1960 1970 1980 1990 2000

LIHTC Tax Reform Act of 1986

Dee

p S

ubsi

dy

Sha

llow

Sub

sidy

ELIHPA & LIHPRHA Low-Income Housing Preservation Acts of 1987 & 1990

MAHRA Multifamily Assisted Housing Reform and Affordability Act of 1997

10

Assisted Housing Stock

  Section 8 Rental Assistance   Tenants pay 30% of income

toward housing

  Subsidized FHA Mortgages   Rents are budget-based

  Low-Income Housing Tax Credits   Rents set affordable to

targeted incomes between 40% and 60% of AMI

* Includes only 9% LIHTC Units

11

ENERGY

& WATER

HEALTH ENVIRONMENT

What is Green?

The Green Triangle

Source: Kim Vermeer

Location Efficiency

12

Viability: Utilities Costs Much Greater than Anticipated

Water Cost per Unit Electric/Gas Cost per Unit

NY Equity Fund Properties

13

Resident Health: Indoor Air and Environmental Quality   Indoor air is more polluted than outside air

  People spend approximately 90% of their time indoors

  80% of most people’s exposure to pesticides occurs indoors

  Poor indoor air quality has detrimental effects

  Substantially higher rates of respiratory illness (e.g., 50% - 370%) in high density buildings have been associated with very low ventilation rates

  Asthma disproportionately affects children from lower-income families and from specific racial and ethnic groups   In 2005, 13 percent of black children were reported to have asthma as

compared with 9 percent of both Hispanic and white children

Centers for Disease Control; EPA; Lawrence Berkeley National Labs; HUD Office of Healthy Homes

14

Impact on the Environment

  Buildings in the United States contribute 38.9 percent of the nation’s total carbon dioxide emissions, including 20.8 percent from the residential sector.

  Building-related construction and demolition (C&D) debris totals approximately 160 million tons per year, accounting for nearly 26 percent of total non-industrial waste generation in the U.S.

  Sources of the building-related C&D debris wastestream include demolition (accounting for approximately 48 percent of the waste stream per year), renovation (44 percent), and new construction (8 percent).

EPA Green Building Stats

15

Environmental Impact

Recycled materialsResident recycling

Local materials sourcesDivert demolition and

construction waste from landfills

Minimize water run-off

Healthy Housing

VentilationMoisture management

Integrated pest management

Reduce exposure to volatile organic

compounds (VOCs)Implement smoke-free

policies

Energy and Water Conservation

Reduce energy consumption

Renewable energy sources

Reduce water consumption

Green Rehab Goals: More Than Just Energy

16

Ways to Build In Green to Existing Housing   Targeted Green Retrofit

  Addresses replacement of outdated items

  May work best on newer or better condition properties

  Achievable cost/unit

  Limited ability to add debt

  Operations & Replacements   Barriers and disincentives

  Limited ability to add debt

  Preservation Transaction   Transfer of the property to a new owner

  Refinance/recapitalization

  Substantial cost/unit

  Opportunity for deeper green

Weatherization

EECBG/SEP

Green Retrofit Program

LIHTC & Other

Traditional Financing Sources

17

Financing Green Preservation   Traditional Financing Tools

  LIHTC, Section 8, Bonds, etc.   HOME Program – upcoming rule changes

  New/Targeted Federal Sources   HUD – Green Mark to Market, Green Retrofit Program   HUD – Neighborhood Stabilization Program 1 & Particularly NSP 2   DOE – WAP, SEP, EECBG   Tax Credits – Renewable Energy   HUD Energy Task Force recommendations

  Utility and State Programs   Rebates, grants, etc. see www.dsireusa.org

  Innovative Financing   Energy Service Companies (ESCO) / Energy Performance Contracting   Power Purchase Agreements   Property Assessed Clean Energy (PACE)   Leveraged Savings

18

HUD Green Retrofit Program   Program Basics

  A pilot initiative to encourage owners of affordable, multifamily properties to rehabilitate and operate their properties using sustainable Green Building principles

  Up to $15,000 per unit in loans or grants – total $250 million   Eligible projects are Section 8, Section 202 (elderly) and 811 (disabled)   Incentives paid to owners to participate: 4% of retrofit upfront; 3% of operating

costs annually from surplus cash; optional job creation incentive   Extends affordability for 15 years

  What is a Green Retrofit?   Materially lower electric/heating/water consumption   Materially lower emissions of harmful chemicals   Materially longer useful life   Materially more bidegradable or easily recycled   Materially lower use of raw materials/more recycle content   Materially lower transportation costs

19

HUD Green Retrofit Alternatives

Required   Products and Appliances   Heating and Cooling   Water Heaters   Building Envelope   Lighting   Ventilation and Indoor Air Quality   Landscaping   Integrated Pest Management   Recycling   Hazardous Waste Disposal   Green management of construction

debris

Optional   Combined Heat and Power (Co-

generation)   Green/renewable Energy   Fuel Cells   Green Roofs   Reflective Roofs/Shingles   Flooring   Siding   CFL or LED fixtures   Porous Pavers   Retention Ponds   Greywater Recycling

20

GRP Required Owner Commitments   Owners must accept 75% of green recommendations by cost   Owner must develop a “Green Operations and Maintenance

Plan”, including:   Use of Green Components for operations and replacements

  Materially lower use of chemicals for cleaning and maintenance

  Adherence to Integrated Pest Management principles   Preventing entry of pests and early detection to minimize pesticides

(eliminating Access, Water, Shelter, and Food)

  Pesticides only allowed if an infestation is found

  Maintain green property management qualifications

  Ongoing resident and staff training

  Collection and reporting of data

21

GRP Lessons to Date   Program Status as of January 6, 2010

  20,000 properties / 1.2 million units eligible   750 applications received (530 unique apps)   Over 200 properties / 20,000 units accepted for processing (as of Dec 31)   First loans/grants closed in January

  Key Lessons to Date   “Green” is a viable approach to housing preservation, energy conservation, and

healthier living environments   Utility and other benchmarking, measurement, and data analysis are critical to

confirm savings opportunity   Owner incentives are key   Energy and water savers are low-hanging fruit   Indoor Air Quality (IAQ) and other environmental benefit features must be

requirements   Green O&M plan is critical to ongoing success   Industry is growing and evolving very quickly

22

Major DOE ARRA Programs   Weatherization Assistance

Program   Began in 1976, with recent typical

funding less than $250 million, now $5 bil under ARRA

  State Energy Program   In current form since 1996,

typically less than $50 million per year, now $3.1 bil

  All State Energy Offices required to develop an annual plan

  Energy Efficiency and Conservation Block Grant   Authorized in 2007 Energy

Independence and Security Act   Funded first time in ARRA with

$3.2 bil   Modeled after CDBG

State Agency

WAP Providers

State Agency State Agency

Sub-grantees Cities/Counties/Tribes

$5 billion

Weatherization EECBG* SEP

$770 million $3.1 billion $2 billion

•  Low-Income Residents and Projects

•  Subgrants to Nonprofits and Govts. for Building Retrofits

•  Transportation/Infrastructure

•  Educational Programs •  Building Codes/Services

60% 40%

•  Building Retrofits

•  Public Education

•  Professional Training

•  Energy Audits

* Remainder of $3.2 billion is direct competitive program

23

New York State WAP   New York establishing temporary subgrantees to focus on

multifamily buildings specifically with ARRA WAP $   Set aside $50 million / $395 million ARRA total   LISC/Enterprise awarded $15 million to weatherize 2,100 HUD/

LIHTC units in New York City   Focus on Year 15 LIHTC, City funded, Section 202, Section 8

  Portfolios targeted by other ARRA temporary awards:   Project-based Section 8   Supportive Housing   RD Section 515   Public Housing

24

Chicago’s Multifamily Energy Retrofit Program - EECBG

  Leverages EECBG funds   Applies the Energy Service Company (ESCO) model

to private housing   ESCOs conduct assessments of building energy performance,

identify and oversee implementation of cost-effective retrofit measures

  ESCOs guarantee energy savings to use as a source of loan repayment

  Frequently used in public housing and usually feasible for larger properties

25

Building Industry Capacity   Finance: How to pay for it?

  Accessing stimulus funds, break down silos   Prioritizing, redirecting and targeting existing resources, eg. LIHTC   Leverage cost savings   Dealing with split incentives

  Process: How do we assess and prioritize green retrofits?   Need for green rehabilitation standards   Green Capital Needs Assessments & Energy Audits

  Measurement: How do we know what we did matters?   Data collection is key   Data sharing is even more important

  Sustainability: How do we keep the properties “green”?   Green operations & maintenance, Integrated Pest Management   Resident and management staff training

26

Policy Approaches to Green Preservation   Choice Neighborhoods   GREEN Act (Perlmutter)

  Section 8 rent increases; Split incentives problem

  Energy Efficiency and Modernization Act (Kilroy)   Focuses on utility savers   Green Dividends – incentives for owners   Allows use of residual receipts and reserves   HUD data collection on utility consumption

  Green Affordable Housing Act (Himes)   Meant to be broader “Green” approach   Grants and loans for assisted housing

  Expanding Building Efficiency Incentives   Tax incentives for LIHTC properties

  Climate Bill/Residential Energy and Environmental Performance   Retrofit grants through states

27

HUD’s Choice Neighborhoods Initiative   $65 million in 2010   Requested $250 million in 2011   Based on HOPE VI program, but goes beyond   Focuses on neighborhoods with concentrations of

poverty resulting from both public and assisted housing

  Comprehensive approach to community revitalization

28

2011 Budget Priorities   One of 4 High Priority Performance Goals for 2011

  Foreclosure Prevention

  Rental Assistance   Homeless Veterans

  Energy and Green Retrofits

  DOE and HUD will work together to support the achievement of the President’s goal of weatherizing one million homes per year by enabling the cost effective energy retrofits of a total of 1,226,000 homes in fiscal year 2010 and fiscal year 2011.

  HUD will complete cost effective energy retrofits of an estimated 126,000 HUD-assisted and public housing units.

  HUD will complete green and healthy retrofits of 33,000 housing units.

29

LISC’s Green Preservation Resources

Affordable Housing Preservation www.lisc.org/greenpreservation

Green Development Center www.lisc.org/green

Bay Area LISC www.bayarealisc.org