McCormack Baron Salazar just promised to make its entire affordable housing portfolio more energy efficient—including more than 6,000 apartments that are 10 to 35 years old.
“It can be very hard to retrofit apartments with people living in them,” says William Carson, president of Sunwheel Energy Partners, the energy and green building arm of McCormack Baron Salazar, a national developer headquartered in St. Louis.
The firm is one of 50 multifamily owners and managers that signed the federal Better Buildings Challenge as of Dec.3. Together, the developers promise to make roughly 200,000 units of housing totaling more than 190 million square feet at least 20 percent more energy efficient over the next 10 years. The commitments are part of the expansion of the Better Buildings Challenge to include multifamily housing by the Department of Energy and the Department of Housing and Urban Development (HUD).
Many of the apartment companies taking part have already committed to build new housing that meets tough standards for energy efficiency. But it can be difficult to make existing affordable housing more energy efficient, particularly if the apartments are part way though their affordable housing compliance periods—with years to go before they can reasonably apply for a new round of capital funds.
In some ways, Building Buildings is a classic Obama administration solution to this kind of problem. The program doesn’t provide new federal cash to help old buildings meet the Better Buildings Challenge. “There isn’t really any more major grant money, and there isn’t going to be in the foreseeable future,” says Bill Kelly, president of Stewards of Affordable Housing for the Future.
Instead, Better Buildings brings together public-sector officials and private-sector companies that have a stake in the performance of these buildings to hopefully overcome barriers to improve their energy performance.
For example, if a property financed by low-income housing tax credits is sub-metered for its energy costs, it can sometimes be difficult to convince the limited partner to invest capital to pay for energy improvements because in many states the cost savings are likely to lower the energy bills of residents, not the operating costs of the property. “Sometimes there are disincentives to saving energy in the partnership structure,” says Sunwheel’s Carson.
Thanks to Better Buildings, officials are becoming more likely to recognize the value of energy improvements in a property’s utility allowances, which could make for-profit limited partners in some properties much more likely to let their properties take on new loans to pay for the improvements. HUD officials may also allow similar utility allowance adjustments at Sec. 202 at Sec. 811 properties, in addition to other measures that can help incentivize new energy improvements.
“It’s something of a game changer,” says David R. Schmidt, energy and sustainability analyst for Boston-based The Community Builders, another leading affordable developer that has taken the Challenge.
The program also brings utility companies to the table to talk about best practices for their grant programs and perhaps even negotiate how they handle renewable energy produced at housing properties.