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Affordable Housing FinanceSPECIAL FOCUSThe Greening of Affordable Housing QAPs Get GreenerAFFORDABLE HOUSING FINANCE • June 2010 BY DONNA KIMURA Every state made a clear effort to include and support green building measures into their low-income housing tax credit (LIHTC) programs in 2009. The states are incorporating an increasing number of green requirements into their qualified allocation plans (QAPs), which guide the allocation of credits to developers, according to Global Green USA. The nonprofit has been analyzing QAPs for the past five years. Thirty-four states improved their scores in 2009, with the average score increasing from 25 to 30. Funding Opportunities EmergeSeveral new green building funds are providing critical dollars toward improving affordable housing. Retrofit funds are under way in several key markets, including San Francisco, Los Angeles, Ohio, and Washington, says Dana Bourland, vice president of green initiatives at Enterprise Community Partners, a partner in the funds. “Affordable housing is more difficult to finance today, but green isn’t the reason why,” she says. Bourland argues that green building strategies and products make a project more competitive for financing, sometimes even lowering costs. In California, officials recently awarded $3 million in funding from the State Energy Program to a partnership of the San Francisco Mayor’s Office of Housing, Enterprise, and the Low Income Investment Fund. The money will go toward the green retrofit of 26 affordable housing buildings. Loans will finance energy and water-efficiency improvements to older multifamily housing developments and be repaid through savings on utility expenses. In addition to the retrofit funds, which are in various stages of implementation, Enterprise has a number of other tools, including charrette grants for up to $5,000 to assist developers in integrating green building systems in their projects. Enterprise Green Communities also has sustainability training grants to cover the design and distribution of an operations and maintenance manual and the implementation of a training curriculum that supports long-term operations and maintenance. The Local Initiatives Support Corp. (LISC) also offers a variety of loans and grants. LISC’s Green Development Center has a green loan fund that provides predevelopment grants and construction loans for various community development projects, including affordable housing. About two years ago, the national organization began providing planning grants of up to $10,000 to help developers advance their green efforts, says Madeline Fraser Cook, center director. She has also been working with LISC’s affordable housing team on preservation efforts. LISC works through its regional offices and Rural LISC, so developers should be in contact with their area offices to stay informed about funding opportunities. “The affordable housing community has become more sophisticated about how they do green,” says Fraser Cook. “They are taking advantage of some of the additional funding sources out there for energy efficiency and greening.” NeighborWorks America has about $2 million in green-related funding opportunities for its network members this year, including predevelopment grants. However, the funds will primarily go toward rehab work because that’s where the organization feels it can have the biggest impact and leverage dollars. NeighborWorks has about 235 nonprofits in its network, including 120 builders. Nationally, the Department of Housing and Urban Development (HUD) also has a new Green Retrofit Program for multifamily housing that was created through the American Recovery and Reinvestment Act of 2009. Grants and loans provided through the $250 million program will help owners cut heating and air-conditioning costs by installing more efficient heating and cooling systems and to reduce water by replacing old faucets and toilets. Under the competitive program, funds are awarded to owners of HUD-assisted housing projects and can be used for various retrofit activities. Awards are being made on a rolling basis. More significantly, the lowest score given was 10 points higher than the prior year. Scores in 2008 ranged from 3 to 48 (F to A), and this year, scores ranged from 13 to 50 (D to A). Exactly half of the states received higher than a C. “The floor is not as low as it was,” says Walker Wells, director of the Green Urbanism Program at Global Green. For developers, this means having to include a number of green features into their projects if they want to receive tax credits. At a time when deals have been so difficult to finance, some developers have suggested that QAPs relax some of their green or income-targeting requirements. Wells disagrees, saying that after 10 years of green building being included in QAPs, it’s clear that green is adding significant value. “Thousands of green dwelling units are completed, with increased costs of less than 3 percent and demonstrable benefits in utility savings and health improvements,” he says. “Suggesting that green building should be removed due to the drop in the tax credit market is a shortsighted reaction that will result in a loss of long-term value. The truth is that green remains a good long-term investment, and that ultimately we can’t afford not to build green.” For the first time since Global Green began its analysis in 2005, every QAP received points in at least three of the four green building categories. “As green building has become more commonplace and less exotic, there has effectively been peer pressure among the states,” says Wells. “What was seen as leadership five or six years ago is now seen as an expectation. This is the first year we’ve seen all 50 states with some green measures. Without some green criteria, they may have felt they were remiss from a public policy standpoint.” Energy efficiency was the most fully addressed category, which is attributed in part to requirements set in the Housing and Economic Recovery Act of 2008. Greenest QAPs Connecticut tops the list for the second year, achieving 50 out of 55 points, along with Georgia. They were followed by Maryland, New Jersey, Washington, and Massachusetts, which also received A grades. Several states were close behind with an A-minus. “The Connecticut Housing Finance Authority’s (CHFA) QAP is unique in that it is tied directly to our Standards of Design and Construction, meaning LIHTC recipients are bound by the same design standards as developments receiving CHFA financing,” says Timothy F. Bannon, CHFA president and executive director. “These design and construction standards incorporate elements of national and regional ‘green’ rating systems, including Energy Star, Leadership in Energy and Environmental Design, Model Green Building Guidelines, and Green Communities Criteria, among others. We are careful to balance these green elements so that they’re required but not to the extent that they add additional cost.” One key feature has been to include Energy Star Home requirements, which have evolved beyond certified appliances to an overall strategy for energy-efficient building envelopes and heating and cooling systems. “We find this provides the most bang for the buck, so to speak, in terms of keeping costs down, both at the front end for the developer during construction, and at the back end for the residents paying rent and utility bills,” Bannon says. Washington made the biggest improvement with 41 points after introducing its new Evergreen Sustainable Development Standard into its QAP. States receiving a D in the report are Nebraska, South Carolina, Virginia, Oklahoma, Colorado, Mississippi, Oregon, Utah, Alaska, and Tennessee. Now that the states have demonstrated that green is possible, the next step may be to explore the possibility of a federal policy that would establish minimum standards for all QAPs, says Wells. |
