Green Affordable Housing
HUD Has Made Progress in Promoting Green Building, but Expanding Efforts Could Help Reduce Energy Costs and Benefit Tenants Gao ID: GAO-09-46 October 7, 2008Rising energy prices and concerns about the environment have fueled interest in "green building"--resource-efficient construction and maintenance practices that reduce adverse impacts on the natural environment. The Department of Housing and Urban Development (HUD), spends an estimated $5 billion on energy costs annually in its affordable housing programs and has recently taken steps to reduce its energy costs. GAO was asked to review (1) HUD's efforts to promote energy efficiency in its programs and the use of performance measures, (2) potential costs and long-term benefits of green building in HUD's affordable housing programs, and (3) lessons learned elsewhere that HUD could use to promote green building. GAO reviewed HUD program documents and studies on green building, interviewed HUD officials and industry representatives, and made site visits to locations that use green building practices.
HUD has taken steps to promote energy efficiency by providing information, training, and technical assistance, but its efforts have limitations. HUD has also provided some financial incentives to promote green building, including energy efficiency, for public housing and for a small segment of the multifamily properties HUD supports. Additionally, HUD has developed some performance measures to track the progress of its energy efficiency efforts. However, HUD has not begun requiring energy-efficient products and appliances in its public housing properties, as required by statute. HUD has also not implemented major energy efficiency updates to the building code for manufactured housing in more than a decade. Without such requirements and updates, public housing authorities may be spending more on utility expenses than is necessary and manufacturers may lack an incentive to build energy- efficient manufactured homes. Green building practices can increase up-front costs but may also provide long-term benefits, including financial, environmental, and health benefits. But the benefits in rental housing may not go to the party incurring the up-front costs, potentially discouraging the use of green building practices in a significant segment of affordable housing. HUD has partnered with others to develop a utility benchmarking tool for identifying savings in public housing, but only for the public housing portfolio. Utility benchmarking is often used to assess energy consumption and to help identify properties that could improve their energy efficiency. HUD does not collect the data needed to understand its current utility costs or future savings possibilities in some parts of its multifamily housing portfolio. HUD officials told GAO that developing a utility benchmarking tool for this portfolio would be helpful but could be costly to HUD and property owners. However, a 2003 study by Harvard University--and funded by HUD--found that collecting consumption data in insured privately owned multifamily housing would not be unreasonably burdensome. Without such a tool, HUD cannot fully understand the utility costs for over 1.6 million units in its portfolio and may be missing opportunities to reduce utility expenses for some properties. HUD has focused its attention on incentives that encourage energy efficiency but has few financial incentives, such as those used by states, to encourage other green building practices such as water conservation. Many state and local governments have used financial incentives to promote the development of green affordable housing. For example, in the scoring systems for some competitive funding, applicants are awarded additional incentive points for energy and nonenergy green building practices. Without financial incentives for nonenergy green building, HUD is likely missing opportunities to make its affordable housing more resource efficient and environmentally friendly.
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Director: Team: Phone:GAO-09-46, Green Affordable Housing: HUD Has Made Progress in Promoting Green Building, but Expanding Efforts Could Help Reduce Energy Costs and Benefit Tenants
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Report to the Chairman, Subcommittee on Transportation, Housing and
Urban Development, and Related Agencies, Committee on Appropriations,
House of Representatives:
United States Government Accountability Office:
GAO:
October 2008:
Green Affordable Housing:
HUD Has Made Progress in Promoting Green Building, but Expanding
Efforts Could Help Reduce Energy Costs and Benefit Tenants:
GAO-09-46:
GAO Highlights:
Highlights of GAO-09-46, a report to the Chairman, Subcommittee on
Transportation, Housing and Urban Development, and Related Agencies,
Committee on Appropriations, House of Representatives.
Why GAO Did This Study:
Rising energy prices and concerns about the environment have fueled
interest in ’green building“”resource-efficient construction and
maintenance practices that reduce adverse impacts on the natural
environment. The Department of Housing and Urban Development (HUD),
spends an estimated $5 billion on energy costs annually in its
affordable housing programs and has recently taken steps to reduce its
energy costs. GAO was asked to review (1) HUD‘s efforts to promote
energy efficiency in its programs and the use of performance measures,
(2) potential costs and long-term benefits of green building in HUD‘s
affordable housing programs, and (3) lessons learned elsewhere that HUD
could use to promote green building. GAO reviewed HUD program documents
and studies on green building, interviewed HUD officials and industry
representatives, and made site visits to locations that use green
building practices.
What GAO Found:
HUD has taken steps to promote energy efficiency by providing
information, training, and technical assistance, but its efforts have
limitations. HUD has also provided some financial incentives to promote
green building, including energy efficiency, for public housing and for
a small segment of the multifamily properties HUD supports.
Additionally, HUD has developed some performance measures to track the
progress of its energy efficiency efforts. However, HUD has not begun
requiring energy-efficient products and appliances in its public
housing properties, as required by statute. HUD has also not
implemented major energy efficiency updates to the building code for
manufactured housing in more than a decade. Without such requirements
and updates, public housing authorities may be spending more on utility
expenses than is necessary and manufacturers may lack an incentive to
build energy- efficient manufactured homes.
Green building practices can increase up-front costs but may also
provide long-term benefits, including financial, environmental, and
health benefits. But the benefits in rental housing may not go to the
party incurring the up-front costs, potentially discouraging the use of
green building practices in a significant segment of affordable
housing. HUD has partnered with others to develop a utility
benchmarking tool for identifying savings in public housing, but only
for the public housing portfolio. Utility benchmarking is often used to
assess energy consumption and to help identify properties that could
improve their energy efficiency. HUD does not collect the data needed
to understand its current utility costs or future savings possibilities
in some parts of its multifamily housing portfolio. HUD officials told
GAO that developing a utility benchmarking tool for this portfolio
would be helpful but could be costly to HUD and property owners.
However, a 2003 study by Harvard University”and funded by HUD”found
that collecting consumption data in insured privately owned multifamily
housing would not be unreasonably burdensome. Without such a tool, HUD
cannot fully understand the utility costs for over 1.6 million units in
its portfolio and may be missing opportunities to reduce utility
expenses for some properties.
HUD has focused its attention on incentives that encourage energy
efficiency but has few financial incentives, such as those used by
states, to encourage other green building practices such as water
conservation. Many state and local governments have used financial
incentives to promote the development of green affordable housing. For
example, in the scoring systems for some competitive funding,
applicants are awarded additional incentive points for energy and
nonenergy green building practices. Without financial incentives for
nonenergy green building, HUD is likely missing opportunities to make
its affordable housing more resource efficient and environmentally
friendly.
What GAO Recommends:
GAO recommends, among other things, that HUD ensure the completion of a
regulation to require energy-efficient products and appliances in
public housing, work to implement updates to the building code for
manufactured housing, consider developing a utility benchmarking tool
for multifamily properties, and consider providing nonenergy green
building incentive points in some grant programs. In written comments,
HUD welcomed GAO‘s recommendations but had concerns with certain
aspects of the report.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-46]. For more
information, contact William B. Shear at (202) 512-8678 or
shearw@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
HUD Has Taken Positive Steps to Promote Energy Efficiency, but Efforts
to Encourage Voluntary Actions Have Limitations:
Green Building Can Raise Up-front Costs and Provide Long-term Benefits,
but HUD Lacks the Data to Identify Current Costs and Future Savings:
Standards and Financial Incentives Used Elsewhere for Green Building
Could Provide Lessons for HUD:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: HUD's Legal Authority to Incorporate Green Building
Requirements into Its Affordable Housing Programs:
Appendix III: Overview of Planned HUD Actions in Energy Strategy and
HUD Reported Status:
Appendix IV: Multifamily Task Force Energy Conservation
Recommendations:
Appendix V: Examples of State, Local, and Nonprofit Green Building
Affordable Housing Programs:
Appendix VI: Comments from the Department of Housing and Urban
Development:
Appendix VII: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Examples of Green Building Standards:
Table 2: Objectives in HUD's Energy Strategy:
Table 3: HUD Fiscal Year 2008 Annual Management Plan Goals:
Table 4: Payback Period for Energy Star-labeled Products and
Appliances:
Table 5: HUD Utility Expenses for 2007:
Figure:
Figure 1: Example of Possible Distribution of Costs and Benefits for
Green Building Practices:
Abbreviations:
CDBG: Community Development Block Grant:
DOE: Department of Energy:
ECM: energy conservation measure:
EEM: Energy Efficient Mortgage:
EPA: Environmental Protection Agency:
ESCO: energy services company:
FHA: Federal Housing Administration:
GSA: General Services Administration:
HUD: Department of Housing and Urban Development:
LEED: Leadership in Energy Efficiency and Design:
LIHTC: Low-Income Housing Tax Credit:
LISC: Local Initiative Support Corporation:
NOFA: Notice of Funding Availability:
OAHP: Office of Affordable Housing Preservation:
OGC: Office of General Counsel:
PATH: Partnership for Advancing Technology in Housing:
PHA: public housing authority:
PIH: Office of Public and Indian Housing:
VOC: volatile organic compound:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
October 7, 2008:
The Honorable John W. Olver:
Chairman:
Subcommittee on Transportation, Housing and Urban Development, and
Related Agencies:
Committee on Appropriations:
House of Representatives:
Dear Mr. Chairman:
Rising energy costs and concerns about health and the environment have
fueled interest in "green building"--resource-efficient construction
and maintenance practices that reduce adverse impacts on the natural
environment--in both the private and the public sectors. Residential
buildings in the United States accounted for an estimated 22 percent of
the nation's total energy consumption and an estimated 18 percent of
the country's total carbon emissions in 2005, a fact that could
contribute to long-term global climate change. The costs associated
with this energy usage are particularly significant for low-income
individuals. According to HUD officials, the Department of Housing and
Urban Development (HUD) spends an estimated $5 billion--more than 10
percent of its budget--on energy costs, either directly in the form of
public housing operating subsidies or indirectly through utility
allowances and contracts for assisted multifamily housing. Many of
these expenditures are for older properties, which often have higher
energy-related operating costs than newer ones. Residents of some HUD-
assisted housing who are responsible for their own utilities are also
affected by high energy prices.
Energy efficiency and other forms of resource conservation are relevant
to most HUD housing programs, which incur energy costs as well as other
resource expenses (such as water expenses and building materials for
new or existing housing units). For example, HUD administers federal
aid to local public housing authorities (PHA) that manage public
housing developments for about 1.2 million low-income households. In
addition, HUD assists privately owned and operated properties to help
provide affordable housing for over 3 million households. This housing
includes properties that get some form of rental assistance from HUD,
properties whose mortgages are insured by HUD, and properties that are
financed by HUD. HUD also administers billions of dollars in grant
programs to local jurisdictions that support a range of activities,
including the development of housing and rental assistance, and
federally regulates all new manufactured homes under a national
building code.
In 2001, HUD established an Energy Task Force, which adopted an Energy
Action Plan aimed at promoting energy efficiency in public and assisted
housing and in housing financed through its competitive and formula
grant programs. As part of this plan, HUD has disseminated information
and provided training on energy efficiency, offered incentives for
green building practices in some programs, and tracked energy
performance measures for some of its programs. In 2006, HUD outlined
its Energy Strategy, which updated the Energy Action Plan in compliance
with a provision in the Energy Policy Act of 2005 that directed the
agency to develop a department wide strategy for reducing energy costs
in assisted and public housing.[Footnote 1]
In light of the opportunities associated with green building for HUD
and residents of HUD-sponsored housing and interest in HUD's efforts to
promote green building practices, you asked us to review the actions
that HUD has taken to promote green building and issues related to
those efforts. Specifically, we examined (1) the status of HUD's
current efforts to promote energy efficiency and the performance
measures the agency uses to assess these efforts; (2) the potential
costs and long-term benefits of incorporating green building practices
into HUD's affordable housing programs; and (3) lessons learned
elsewhere that HUD could apply to promoting green building practices in
its programs. We also examined HUD's legal authority to incorporate
mandatory green building requirements into its affordable housing
programs (see app. II).
To address these objectives, we reviewed relevant program documentation
and interviewed officials from a number of HUD program offices,
including three HUD field offices (Boston, San Francisco, and Seattle).
We also reviewed studies on green building and interviewed
knowledgeable individuals from building industry associations,
affordable housing organizations, and environmental organizations. We
reviewed legal documents and interviewed officials from HUD's Office of
General Counsel. Finally we conducted site visits (Austin, Boston,
Oakland, San Francisco, and Seattle), and interviewed five state
housing finance agencies (California, Massachusetts, Vermont, Virginia,
and Washington).[Footnote 2] We selected the five site visit locations
based on several factors, including (1) discussions with knowledgeable
individuals in the field of green building, (2) a review of literature
on local and state efforts to promote green building, (3) active green
building efforts at the state or local level, and (4) proximity to HUD
regional offices.
We conducted this performance audit from October 2007 to September 2008
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives. More details about our scope
and methodology appear in appendix I.
Results in Brief:
HUD and its program offices have taken steps to implement most of the
actions in the agency's Energy Strategy, but this strategy includes few
requirements that promote energy efficiency and relies to a large
extent on voluntary actions taken by program participants. HUD has also
provided information, training, and technical assistance; formed
partnerships to leverage resources; and offered incentives to promote
green building in some of its programs. For example, about 100 HUD
assisted privately owned multifamily properties are eligible for
financial incentives each year to promote green building. Additionally,
HUD has developed some performance measures to track the progress of
its energy efficiency efforts. But some of HUD's efforts have
limitations. HUD has yet to implement a regulation requiring PHAs,
which manage about 1.2 million housing units, to purchase energy-
efficient products and appliances. HUD's Office of Manufactured
Housing, which regulates the construction of all new manufactured homes
in the United States, has not implemented major energy efficiency
updates to its code for more than a decade. Without such requirements
and updates, public housing authorities and manufactured housing
residents may be spending more on utility expenses than is necessary.
Also, HUD has not updated information about energy efficiency in public
housing and multifamily handbooks, which include important guidance on
administering these programs.
Green building practices tend to increase up-front construction costs
but often provide long-term benefits that may offset these increases.
However, HUD does not collect the data necessary for many of its
programs to understand how much these practices could save the
department or its stakeholders over time. The up-front costs of green
building practices can add to a project's total costs, although these
costs differ by project. Some green building practices--such as hiring
building contractors with experience in green building--can minimize
some of the up-front costs. When used in affordable housing projects,
green building practices can result in long-term financial and health
benefits for residents and could save money for HUD. For example,
energy efficiency improvements can provide significant long-term
savings on utility costs. According to the Environmental Protection
Agency (EPA) and the Department of Energy (DOE), Energy Star Qualified
Homes, which HUD has actively promoted building in a number of its
affordable housing programs, use approximately 30 percent less energy
than standard homes and can save homeowners approximately $200 to $400
per year. However, in rental housing the party that makes the initial
investment in green building may not see the immediate benefits, a fact
that could discourage the use of green building practices in affordable
housing. For example, a building owner that pays a higher cost for an
energy-efficient boiler may not see the savings, which instead accrue
to the tenant (if the tenant pays the utility bills). As a result, the
building owner may not want to invest in higher cost green building
practices. HUD paid an estimated $5 billion in utility costs in 2007
but does not have the data necessary to understand the breakdown of
these costs or the potential savings opportunities of green building
for many of its programs. HUD has partnered with EPA and DOE to develop
a utility benchmarking system that identifies savings opportunities in
public housing. However, HUD does not collect the data on utility
consumption that would be necessary to establish or use a benchmarking
system in its privately managed assisted housing portfolio. HUD
officials told us that developing a utility benchmarking tool for its
privately owned assisted multifamily portfolio would be helpful, but
could be costly to HUD and the property owners. However, a 2003 study
by Harvard University--and funded by HUD--found that collecting
consumption data in privately owned multifamily housing would not be
unreasonably burdensome. Without such a tool, HUD cannot fully
understand the utility costs for over 1.6 million units in its
portfolio, and may be missing opportunities to reduce utility expenses.
Standards and financial incentives used elsewhere to encourage green
building could provide lessons for HUD. National and regional green
building standards are often used to provide a framework for how to
build green. Developers we spoke with expressed the need for
flexibility when choosing a green building standard, because some
national standards may not be appropriate for all affordable housing
projects. Regional standards provide guidance that takes into account
local characteristics such as climate and regional regulatory
conditions. Some state and local jurisdictions have developed their own
regional standards because the existing green building standards did
not meet their needs. In addition, HUD has few nonenergy incentives to
encourage green building. States, cities, and nonprofit organizations
currently use a mix of financial incentives to encourage the use of
green building practices in their affordable housing programs. For
example, many states use programs, such as the Low-Income Housing Tax
Credit (LIHTC), to provide incentives for or to require the use of
green building practices.[Footnote 3] The LIHTC is a prominent source
of federal funding for building and rehabilitating affordable housing.
It is administered at the state level, where developers compete for
limited funds based on a review of their applications, in which a point
scoring system is used to determine those that will be funded. HUD has
focused its attention on creating incentives to encourage energy
efficiency, but it provides few financial incentives to encourage
broader and more comprehensive green building practices--such as water
conservation and indoor air quality. For example, HUD assigns in its
scoring systems one incentive point (out of a total of 100 or 120
points) for energy efficiency in its competitive housing grant
programs, and offers few incentives for incorporating nonenergy green
building practices. HUD cannot demonstrate that 1 incentive point is
sufficient to promote energy efficiency. While HUD's competitive grant
programs are occasionally used to build green affordable housing, the
decision to do so is typically made at the local level.
This report contains recommendations to HUD designed to improve and
expand its efforts to promote green building in HUD-assisted
properties. We recommend that HUD ensure the completion of a regulation
to require the use of energy-efficient products and appliances in
public housing, reach out to DOE about energy efficiency updates to
manufactured housing, and update handbooks to include current
information on energy efficiency and green building. We also recommend
that HUD consider developing a utility benchmarking tool for
multifamily properties, assess the impact of the point awarded for
energy efficiency in competitive grant programs, and consider providing
nonenergy green building incentive points for these programs.
We provided a draft of this report to HUD for review and comment. We
received written comments from HUD, which are discussed later in this
report and are reprinted in appendix VI. We also received general and
technical comments from HUD, which have been incorporated as
appropriate. In its response, HUD welcomed our recommendations and said
that the agency would give serious consideration to their
implementation with the resources it has available. However, the agency
made comments suggesting that we did not provide enough information
describing HUD's progress in implementing green building practices or
provide enough direction in how HUD should manage its programs. For
example, HUD stated that activities of some offices were not
sufficiently highlighted and that we had not fully addressed the work
that HUD has initiated on transit-oriented development. We were not
intending to provide a complete listing of all of HUD's efforts and we
have made that clear in our scope and methodology section. Further, we
have ongoing separate work on transit-oriented development. HUD also
stated that we did not fully address staffing or resource issues, but
that is an internal management issue which we leave to HUD's
discretion. Additional HUD comments and our response are discussed
later in this report.
Background:
HUD's Energy Task Force, which is tasked with developing and monitoring
the implementation of the department's Energy Action Plan, is made up
of representatives from several HUD program offices. The Energy Task
Force is cochaired by representatives from HUD's Office of Policy
Development and Research and Office of Community Development and
Planning. Also, an energy coordinator representing each HUD regional
office on the task force is responsible for a range of energy-related
activities, including hosting trainings and identifying local
opportunities to promote energy efficiency. All members of the task
force participate on a part-time basis and have other full-time
responsibilities in HUD.
Several HUD program offices play a role in the implementation of the
Energy Action Plan, including the following:
* The Office of Public and Indian Housing (PIH) oversees about 3,300
PHAs. PHAs are typically local housing agencies that manage public
housing units. HUD supports over 1 million public housing units, which
represent about 25 percent of HUD's total rental assistance units. HUD
provides PHAs with operating subsidies to assist in funding the
operating expenses of their dwellings, including utilities, and capital
funds to modernize existing public housing developments. PIH also
administers the Urban Revitalization Demonstration Program, commonly
known as HOPE VI. HOPE VI seeks to improve the living environment of
residents in severely distressed public housing by redeveloping
obsolete public housing, revitalizing public housing sites and their
surrounding neighborhoods, and providing housing that avoids or
decreases the concentration of poverty. The HOPE VI program has awarded
239 grants totaling approximately $5.7 billion dollars, between fiscal
years 1993 and 2006. PIH also administers the Housing Choice Vouchers
Program, which supports over 2 million housing units. This program
provides rental vouchers to low-income tenants for use in the private
rental market through the local PHA. Tenants are responsible for
finding a suitable housing unit that the owner agrees to rent under the
program. Rental units must meet minimum health and safety standards set
by the PHA. The PHA pays a housing subsidy to the landlord, and the
tenant pays the difference between it and the actual market rent. PIH
also seeks to provide decent, safe, and affordable housing for Native
American, Alaska Native, and Native Hawaiian families.
* The Office of Multifamily Housing administers a number of rental
assistance programs that deal with new construction, preservation,
property assistance, and finance programs. These programs support over
1.6 million housing units. The Office of Multifamily Housing manages
competitive grant programs that include the Section 202 and 811
programs. These programs provide capital advance grants for the
development of elderly housing under Section 202, and persons with
disabilities under Section 811. Both 202 and 811 projects receive
operating assistance through Project Rental Assistance Contracts. In
addition, HUD also administers mortgage insurance to multifamily
properties under a multitude of programs through the Federal Housing
Administration (FHA). These programs seek to enhance the credit for
rental housing developments through the provision of federal loan
guarantees that provide a financing option in addition to those
available in the private conventional market. Through these programs,
FHA supports the construction of new apartment projects and the
refinancing of the rehabilitation of older ones.
* The Office of Community Planning and Development administers the
Community Development Block Grant (CDBG) and the HOME Investment
Partnerships (HOME) programs. These are formula grant programs that
divide billions of dollars across local jurisdictions and numerous
activities on an annual basis using funding formulas established
through statute and by HUD. Activities funded by CDBG can include
housing, economic development, neighborhood revitalization, and
community development. CDBG funds can be used by local jurisdictions to
support a range of eligible activities, including energy conservation
and renewable energy resources. The HOME program provides federal
assistance to participating jurisdictions for housing rehabilitation,
rental assistance, homebuyer assistance, and new housing construction.
Recipients of CDBG and HOME funding have a great deal of flexibility in
how they use these grants, and must submit an annual action plan to
HUD.
Other HUD program offices play a role in the implementation of the
energy action plan. The Office of Single Family Housing administers a
program to insure private lenders against losses from borrower defaults
on mortgages that meet certain criteria for properties. HUD's Office of
Healthy Homes and Lead Hazard Control provides funding for the
development of programs to address and study the effects of lead-based
paint and other home health hazards on children and families. The
office is also responsible for enforcing HUD's lead-based paint
regulations. The Office of Policy Development and Research conducts
housing research for HUD and coordinates the Partnership for Advancing
Technology in Housing (PATH). PATH focuses on accelerating the
development and use of technologies to improve the quality, durability,
energy efficiency, environmental performance, and affordability of
housing nationwide. HUD's Office of Manufactured Housing regulates the
production of manufactured housing in the United States. The National
Manufactured Housing Construction and Safety Standards Act of 1974
directed HUD to establish a national building code, known as the HUD
Code, for manufactured housing. HUD monitors industry compliance to
ensure that every manufactured home is built to this code.
Energy Star® is a joint program of EPA and DOE that aims to protect the
environment by promoting the use of energy-efficient products and
practices. The Energy Star labeling program was created to identify
energy efficiency standards for several categories of household
products and appliances without sacrificing performance. Manufacturers
are permitted to apply the Energy Star label to qualified products that
meet EPA or DOE criteria. The Energy Star for Qualified Homes program
provides an Energy Star label for newly built homes that meet strict
guidelines of energy efficiency set by EPA. Energy Star homes certified
under this program are at least 15 percent more energy efficient than
homes built to the 2004 International Residential Code.[Footnote 4]
Green building is the practice of creating structures and using
practices that are environmentally friendly and resource efficient.
There are a number of green building standards that builders and
developers can use to certify whether a particular structure is a green
building. These standards include the Leadership in Energy Efficiency
and Design (LEED) rating system, which is a nationally accepted
standard developed and administered by the U.S. Green Building Council.
Many of these standards use a system that assigns points for a variety
of practices and certify a building at various levels of "green"
depending on the number of points acquired (see table 1). While energy
conservation is an integral part of green building, these standards
also include several other categories of green building measures such
as water conservation, sustainable site selection, building material
conservation, and enhanced occupant health. Since 2003 the U.S. General
Services Administration (GSA) has required that all new federal
buildings under its authority be constructed using green building
practices.
Table 1: Examples of Green Building Standards:
Green building standards: National standards: Energy Star for Qualified
Homes; Administering organization: EPA;
Locations covered: Nationwide;
Levels of green: 1;
Third party verification required: Yes;
Type of building: Single-family new construction;
Existing retrofitted homes;
Multifamily (under 3 stories).
Green building standards: National standards: Green Communities
Criteria;
Administering organization: Enterprise Community Partners;
Locations covered: Nationwide;
Levels of green: 1[A];
Third party verification required: No;
Type of building: Single-family new construction and rehabilitation;
Multifamily new construction and rehabilitation;
Affordable housing.
Green building standards: National standards: Leadership in Energy and
Environmental Design ™ (LEED);
Administering organization: U.S. Green Building Council;
Locations covered: Nationwide;
Levels of green: 4;
Third party verification required: Yes;
Type of building: Commercial new construction;
Multifamily new construction;
Single-family new construction;
Schools.
Green building standards: National standards: Model Green Home Building
Guidelines;
Administering organization: National Association of Home Builders;
Locations covered: Nationwide;
Levels of green: 3;
Third party verification required: Yes;
Type of building: Single-family new construction and rehabilitation.
Green building standards: Regional: EarthCraft House™;
Administering organization: Greater Atlanta Home Builders Associations
& Southface Energy Institute;
Locations covered: Southeastern region of the United States;
Levels of green: 3;
Third party verification required: Yes;
Type of building: Single-family new construction and rehabilitation;
Multifamily new construction and rehabilitation;
Community development.
Green building standards: Regional: Evergreen Sustainable Development
Criteria;
Administering organization: Washington Department of Economic
Development and Trade;
Locations covered: Washington State;
Levels of green: 1[B];
Third party verification required: Yes;
Type of building: Single-family new construction and rehabilitation;
Multifamily new construction and rehabilitation;
Affordable housing.
Green building standards: Regional: SeaGreen Guidelines;
Administering organization: Seattle Office of Housing;
Locations covered: Seattle, Wash;
Levels of green: 1;
Third party verification required: No;
Type of building: Multifamily new construction and rehabilitation;
Affordable housing.
Source: GAO analysis.
[A] In meeting the Green Communities Criteria, a project must meet all
of the criteria's mandatory categories and obtain 35 points for new
construction and 30 points for moderate rehabilitation in the
nonmandatory categories.
[B] In meeting the Evergreen Sustainable Development Criteria, a
property must meet all of the mandatory categories and obtain 50 points
for new construction and 40 points for rehabilitation in the
nonmandatory categories.
[End of table]
HUD Has Taken Positive Steps to Promote Energy Efficiency, but Efforts
to Encourage Voluntary Actions Have Limitations:
HUD's energy efficiency efforts, which have focused primarily on the
voluntary adoption of various measures, have included positive steps
such as promoting the use of energy performance contracts in public
housing, developing a benchmarking model that allows for the
identification of public housing authority properties that consume
comparatively more energy, and piloting a green initiative. But some of
HUD's efforts have limitations. HUD has sought to promote energy
efficiency by providing information, training, and technical
assistance; offering program incentives; and leveraging resources
outside of HUD. However, HUD has not instituted certain requirements
that were set forth in its Energy Action Plan and Energy Strategy, and
some HUD program areas offer limited program incentives to promote
energy efficiency. For example, HUD has not implemented a regulation
requiring PHAs to purchase energy-efficient products and appliances,
and its Office of Manufactured Housing has not implemented major energy
efficiency updates to its code for more than a decade. The lack of
requirements and limited incentives could mean that program recipients
are not taking advantage of opportunities to reduce energy consumption
and expenses. Also, HUD's efforts to provide information about energy
efficiency opportunities are limited by outdated program guidance. For
a further review of the status of HUD's planned actions for
implementing its Energy Strategy, see appendix III.
HUD Has Made Progress in Implementing Its Energy Strategy and Offering
Some Incentives:
HUD has demonstrated progress in implementing elements of its Energy
Strategy. This strategy focuses primarily on encouraging the voluntary
adoption of energy efficiency measures, a significant component of
green building. The Energy Action Plan and Energy Strategy included
specific actions in support of objectives and HUD has taken steps to
implement many of these actions. Table 2 illustrates the objectives
included in HUD's Energy Strategy. HUD's efforts to promote energy
efficiency have focused on areas including providing information and
technical assistance, offering program incentives, and leveraging
outside resources.
Table 2: Objectives in HUD's Energy Strategy:
Objective 1: Strengthen partnerships with federal agencies and local
communities to promote Energy Star and energy efficiency in the
residential sector: Objective 2: Strengthen incentives and implement
new statutory requirements for energy efficiency through HUD programs.
Objective 1: Strengthen partnerships with federal agencies and local
communities to promote Energy Star and energy efficiency in the
residential sector: Objective 3: Provide training and technical
assistance on energy efficiency to homeowners, renters, and property
owners.
Objective 1: Strengthen partnerships with federal agencies and local
communities to promote Energy Star and energy efficiency in the
residential sector: Objective 4: Establish measures to track progress
in reducing energy consumption and ensure accountability.
Objective 1: Strengthen partnerships with federal agencies and local
communities to promote Energy Star and energy efficiency in the
residential sector: Objective 5: Support further research and
technology development.
Source: HUD Energy Strategy.
[End of table]
HUD provides information, training, and technical assistance on energy
efficiency to HUD staff and program participants to promote greater
awareness and voluntary adoption of energy-efficient practices. In
partnership with DOE and EPA, HUD committed to expand the use of Energy
Star products in public and assisted housing. HUD publishes information
on its Web site, and some HUD program offices provide information
specific to the needs of their program participants through newsletters
and brochures. For example, on its Public Housing Environmental and
Conservation Clearinghouse Web site, PIH posts information on promoting
energy conservation in public housing properties and information about
HUD policies related to energy efficiency. PIH also has a monthly
newsletter, "EcoWise," covering utility conservation issues for PHAs.
According to HUD officials, PATH's Roadmap for Energy Efficiency in
Existing Homes identified a variety of strategies for increasing energy
efficiency in the existing housing sector, including the development of
uniform protocols for energy-efficient remodeling. To increase
awareness about energy efficiency and available HUD informational
resources, regional energy coordinators and other HUD staff have
incorporated energy efficiency into presentations to and discussions
with program participants. For example, in presentations to HOME and
CDBG grantees, HUD has encouraged construction to the Energy Star
standard for new homes. HUD provides training and technical assistance
resources that can also increase awareness and in some cases help to
build greater expertise with certain energy-efficient practices.
Examples of this training have included the development of an Internet-
based training curriculum on energy efficiency for its staff and HOME
grantees, and HUD has launched a Web tool, the Energy Efficiency Rehab
Advisor, that provides homeowners and HUD program participants with
guidelines on incorporating energy efficiency into rehabilitation
projects. HUD's Office of Native American Programs has also sponsored
training opportunities targeting Native American tribes and related to
green building that have included a focus on energy efficiency. HUD
officials told us that Regional Energy Coordinators have also assisted
with hosting training workshops and identifying local opportunities and
informational needs in their respective regions.
Some HUD programs offer incentives for energy conservation measures.
PHAs receive funds from HUD's capital fund that may be spent on energy
conservation measures, but HUD officials told us that these funds are
generally insufficient to cover both the up-front cost of many energy
improvements and ongoing repair needs.[Footnote 5] HUD's operating fund
standard rules provide a disincentive to implementing high-cost energy
improvements. According to HUD officials, a PHA's annual operating
subsidy is based in part on the prior 3 years of utility consumption,
which would be expected to fall in the years following such
improvements. This "3-year rolling base" policy allows PHAs to retain
75 percent of savings from reducing utility consumption over a 3-year
period, but according to HUD officials, PHAs cannot retain enough
savings over this short time to recoup the up-front cost of many large
energy efficiency improvements such as high-energy-efficiency
boilers.[Footnote 6] Two HUD incentives can enable PHAs to overcome
these challenges by allowing them to capture energy savings over a
longer period and use these savings in lieu of capital fund dollars to
finance energy efficiency improvements. First, under certain
conditions, HUD will freeze the 3-year rolling base utility consumption
for up to 20 years at the level that existed before the energy
improvements were made, enabling the PHA to finance expensive energy
improvements with the longer stream of energy savings it can retain.
Second, HUD can approve an incentive by increasing a PHA's operating
subsidy for up to 20 years. The additional operating subsidy is then
used to pay off the loan that financed the energy conservation
improvements. When actual energy savings exceed debt payments under
both incentives, PHAs can retain a portion of these savings for
eligible operating expenses. HUD officials told us that a PHA may
employ both incentives, but no single energy conservation measure may
double dip, using both incentives for the same measure.
PHAs using either of these two incentives can identify and finance
improvements through energy performance contracting. An energy
performance contract is an agreement with an energy services company
(ESCO) that in exchange for a fee, the ESCO could identify, finance,
and oversee the installation of energy conservation measures.[Footnote
7] To reduce the burdens on PHAs seeking to engage in energy
performance contracts, HUD officials told us that PIH has made progress
toward streamlining its review approval process for energy performance
contracts through field office and PHA workshops and technical
assistance contractor support to field offices and PHAs. [Footnote 8]
HUD has published guidelines instructing field offices to complete the
review of energy performance contracts within 45 days and has begun
training field office staff to develop the expertise needed to oversee
and support these contracts.[Footnote 9] To speed up and standardize
the process for selecting a contractor for a performance contract, HUD
plans to pilot a program similar to the Federal Emergency Management
Program, which provides a preapproved contractor list and a document
that standardizes the aspects of contracting with each of the included
contractors. HUD officials acknowledged that energy performance
contracting has limitations, but said that contracting with ESCOs had
helped to effect energy efficiency improvements and also water
conservation measures that might not have been implemented otherwise.
HUD officials said that water conservation savings were significant and
among the biggest potential opportunities for financial savings. As of
2007, 195 energy performance contracts were in progress, achieving
gross savings of about $50 million annually.
The transition to asset management in PHAs may provide stronger market-
based incentives for energy efficiency.[Footnote 10] Under asset
management, HUD has discontinued the practice of collecting utility
consumption and expenditure data at the PHA level (which might have
numerous properties), and has begun collecting these data for
individual public housing properties. According to HUD officials, to
the extent that this information facilitates the identification of
particularly energy-inefficient properties, the switch to asset
management will result in greater opportunities to improve energy
efficiency. HUD has contracted with a third party to pilot using energy
and water consumption data collected from PHAs to develop a
benchmarking model that may help HUD and PHAs to identify properties
that are not energy efficient. Benchmarking compares utility
consumption data among comparable properties to determine potential
utility savings opportunities.
In addition, the Mark-to-Market program of the Office of Affordable
Housing Preservation (OAHP) has created unique incentives for green
building. The Mark-to-Market program reduces rents on multifamily
properties participating in the Section 8 program. The Section 8
program subsidizes the rent of low-income individuals and multifamily
property owners that have contracts with HUD through which HUD is
committed to continue to subsidize rents in their properties or units
until the contract expires. The Mark-to-Market program restructures the
mortgages on properties to a level that can be supported by lower
rents. According to HUD officials, restructurings under the Mark-to-
Market program generally take place when Section 8 contracts are
renewed.
In 2007, OAHP launched its Green Initiative, a pilot program designed
to incorporate green building principles, including energy efficiency,
into the rehabilitation and ongoing maintenance of project-based
Section 8 properties undergoing Mark-to-Market restructurings. Through
a Mark-to-Market restructuring, the owner is able to add to the debt on
his or her property the cost of any rehabilitation of the property. In
exchange for choosing a Mark-to-Market restructuring, owners virtually
always receive a new project-based Section 8 contract with HUD. OAHP
identified Mark-to-Market restructurings involving property
rehabilitation as an opportunity to offer incentives to encourage the
adoption of energy-efficient and other green building practices. For
property owners voluntarily participating in the pilot, HUD has offered
to reduce the amount that must be initially paid towards rehabilitation
costs from 20 percent to as little as 3 percent if the property owners
make certain green improvements. HUD created the Green Initiative pilot
program within existing statutory authority by determining that certain
green building improvements to a property are eligible "significant
additions," as was already allowed in the relevant statute for the Mark-
to-Market program. Property owners participating in a Mark-to- Market
restructuring are eligible to receive a payment from the program. Under
the new pilot program, property owners may also be eligible for an
increase in the amount they will be paid by the program if they take
advantage of all opportunities that HUD identifies during a special
assessment of green building characteristics of their properties, meet
certain threshold green principles, and provide evidence that a
professional with a LEED accreditation--or equivalent green building
accreditation--has been actively involved in the project.[Footnote 11]
HUD officials noted that while this initiative sets a positive example
in incentivizing energy efficiency and other green practices in Section
8 properties, the restructuring event is unique to the Mark-to-Market
program. Moreover, HUD officials estimated that only about 100 Section
8 contracts become eligible for these Mark- to-Market green incentives
each year, a small portion of the total project-based Section 8
portfolio of over 31,000 contracts.
Finally, HUD has leveraged existing energy efficiency resources outside
of the agency through partnerships and other efforts in an effort to
direct program participants toward such resources. Some state and local
governments, utility companies, nonprofit organizations, and other
groups have resources that can supplement HUD's efforts to promote
energy efficiency. HUD field offices have entered into partnerships
with several such groups to educate HUD program participants about ways
to reduce energy costs. For example, in September 2005, HUD's Fort
Worth Regional Office partnered with the University of North Texas to
cohost a regionwide conference that provided information and technical
training on green building practices. The 260 conference attendees
included officials from public housing authorities, community
development entities, city leaders, home builders, and many other
members of the housing industry. In addition to these partnership
efforts, some HUD regional energy coordinators and field office staff
have helped HUD program participants identify existing funding,
informational, and technical resources available within their states or
localities for green building. Staff in HUD's San Francisco Regional
Office developed comprehensive state directories of energy efficiency
resources to facilitate access to financial incentives, rebates,
services, and tools. HUD officials said that leveraging these outside
resources not only helped to expand the reach of HUD's energy programs
but also promoted more efficient use of HUD's resources by avoiding
unnecessary duplication of existing efforts.
HUD Is Beginning to Address Limitations in Program Incentives and
Management for Energy Efficiency in Certain Program Areas:
While program incentives for its public housing, multifamily housing,
and mortgage insurance programs have limitations, HUD officials told us
that they are working to address some of these limitations. HUD is also
working to improve its program management and monitoring related to
energy efficiency efforts.
Public Housing:
HUD is making efforts to streamline the energy performance contracting
process that may encourage broader use of the operating subsidy
incentives, but such contracting may remain a challenge for many small
PHAs (HUD categorizes PHAs with fewer than 250 units as small) that
lack the size necessary to attract interest from ESCOs.[Footnote 12]
The majority of public housing authorities are small. According to HUD
officials, as of June 2008, 53 small housing authorities out of a total
of about 3,200 PHAs have an energy performance contract agreement in
process. HUD has encouraged smaller PHAs to pursue aggregated energy
performance contracts or to use the additional operating subsidy
incentive for specific improvements. HUD officials told us that in two
instances, small PHAs have banded together with other nearby small PHAs
in aggregated contracts. These contracting arrangements can be
complicated to execute.[Footnote 13] According to HUD officials, the
agency is working on a pilot program that will support contracting for
small PHAs. For the pilot program, HUD is considering streamlining its
current energy performance contract process by using specific measures
and incentives to simplify energy performance contract procedures for
small PHAs.
Multifamily Housing:
HUD officials told us that the criteria for awarding the incentive
point for energy efficiency in some of their multifamily competitive
grant programs have not always been clear and they are clarifying the
criteria. In the Notice of Funding Availability (NOFA) for the Section
202 and Section 811 programs, HUD awards one rating point to projects
that describe their plans for promoting energy efficiency in the design
and operation of their proposed projects, but the NOFA does not define
specific energy efficiency measures that must be taken. As a result,
some grantees may have earned this point without implementing
significant energy efficiency improvements. According to HUD officials,
the Office of Multifamily Housing is currently developing more detailed
criteria based on a list of specific energy efficiency measures.
According to HUD officials, in 2007, the Office of Multifamily Housing
convened a task force composed of staff from its 11 field offices to
draft recommendations to implement new energy efficiency incentives for
its programs. Thirteen of the task force's 15 recommendations have been
approved, including proposed actions for the Office of Multifamily
Housing's rental assistance programs, mortgage insurance programs, and
Section 202 and Section 811 programs. To provide greater energy
efficiency incentives to multifamily property owners, the task force
recommended increasing owner distributions for energy efficiency for
some projects and creating new opportunities for management companies
to share in the cost savings from reductions in utility usage.[Footnote
14] The Office of Multifamily Housing is currently in the process of
revising regulations and guidelines to implement new energy efficiency
incentives, but these efforts will take time, and incentives requiring
revisions to regulations may encounter opposition in the rulemaking
process. Appendix IV provides an overview of the approved Office of
Multifamily Housing's task force recommendations.
Mortgage Insurance Programs:
HUD's tool to promote energy efficiency through its mortgage insurance
programs, the Energy Efficient Mortgage (EEM) product, has not been
widely used. To date, activity in this program has been very small
(just over 1,000 of these mortgages have been reported as of 2007).
EEMs are mortgage loans insured by FHA that borrowers can use to
finance energy efficiency improvements. Homebuyers, or homeowners when
refinancing, may use the EEM program to borrow a minimum of $4,000 and
a maximum of 5 percent (up to $8,000) of the home's appraised value to
finance these improvements. HUD officials we spoke with cited numerous
obstacles to this product, including the additional time associated
with the required home energy inspection--such as a Home Energy Ratings
System inspection--and loan limits.[Footnote 15] HUD officials said
that EEM loan limits on the amount that can be financed for energy
efficiency improvements may be set too low to attract many potential
users. According to HUD officials, FHA's 203(k) streamlined product,
which has a higher loan limit of $35,000 and does not require a home
inspection, overcomes some of the limitations of the EEM product.
However, in contrast to the EEM, borrowers must qualify for the loan
funds used for energy efficiency improvements. Moreover, the 203(k)
streamlined product faces some of the same obstacles to market
acceptance. EEM loan limits were recently raised by the Housing and
Economic Recovery Act of 2008. According to HUD officials, HUD will
implement the new loan limits based on this statute. HUD officials also
noted that FHA loan products have lost market share over the last
decade in regions where FHA mortgage limits are below most home prices
and said that adding additional steps to mortgage transactions could
give lenders an additional reason not to use FHA products.
HUD officials explained that they cannot provide incentives for energy
efficiency by offering lower mortgage interest rates in current FHA
programs, as these rates are established between FHA-approved lenders
and borrowers. But these same officials said that HUD does have some
flexibility to reduce mortgage insurance premiums, although using this
flexibility to provide incentives for energy efficiency would require
HUD to study the risk implications for FHA's portfolio. HUD officials
told us that they have not performed an analysis that addresses the
risk associated with energy costs, because too few of these loans have
been issued to provide an adequate sample to study.
Energy Performance Measures:
HUD has taken steps to improve its energy program management and
monitoring through the development of performance measures to track and
assess the progress of its energy efficiency efforts. According to HUD
officials, program office staff, in coordination with members of the
Energy Task Force, developed several energy performance measures to
track the progress of HUD's energy efficiency efforts. HUD promotes
accountability in its energy efficiency-related programs by including
some of these measures as goals in its Management Plan (see table
3).[Footnote 16] In addition to the measures included in the Management
Plan, a program office may collect other data to track progress in
promoting energy efficiency. For example, HUD officials told us that
the Office of Multifamily Housing tracks the number of replacement
reserve requests used for energy efficiency measures. Some properties
are required to maintain replacement reserves that are used throughout
the life of the mortgage for the replacement of major physical and
component parts. HUD officials told us that HUD continues to explore
how to strengthen its performance measures to track and assess HUD's
energy efficiency efforts.
Table 3: HUD Fiscal Year 2008 Annual Management Plan Goals:
Management plan goals: Reduce utility consumption by PHAs and residents
by increasing the overall investment in energy conservation measures
(ECM) by 5 percent over the fiscal year 2007 baseline, and by ensuring
that all energy contract investments are cost-effective during the
expected life of the equipment;
Fiscal year 2008 target: 5%.
Management plan goals: To implement the Secretary's Energy Task Force
Initiative and the Energy Star memorandums of understanding among HUD,
DOE, and EPA, HUD will increase the number of Energy Star
certifications in new construction and gut rehab in the CDBG and HOME
programs;
Fiscal year 2008 target: 10%.
Management plan goals: Provide training on how FHA single-family
programs can be effectively used to promote energy efficiency (9 per
Home Ownership Center);
Fiscal year 2008 target: 36.
Management plan goals: Feature the Energy Efficient Mortgage (and other
FHA products) that promote energy efficiency improvements in single-
family housing;
Fiscal year 2008 target: Not applicable[A].
Management plan goals: Continue improved tracking and evaluate
performance of Energy Efficient Mortgages;
Fiscal year 2008 target: Not applicable.
Management plan goals: Implement Phase II of HUD's plan for increasing
the energy performance and reducing utility costs in HUD-supported
housing;
Fiscal year 2008 target: Not applicable.
Management plan goals: Continue to process Manufactured Housing
Consensus Committee proposals that are not in rulemaking (including
appliance efficiency and improved duct insulation);
Fiscal year 2008 target: Not applicable.
Management plan goals: Promote energy efficiency in assisted
multifamily programs by promoting the HUD Energy Action Plan to
external partners;
Fiscal year 2008 target: Not applicable.
Management plan goals: Promote energy efficiency by encouraging housing
providers to utilize energy-saving devices and number of industry
presentations, including Energy Plan discussions;
Fiscal year 2008 target: To be decided[B].
Management plan goals: Increase and preserve Decent Affordable Housing
through promotion of HUD's Departmental Initiatives (i.e., Energy
Action Plan, America's Affordable Communities Initiative, Preserve
America, etc.);
Fiscal year 2008 target: To be decided.
Source: HUD fiscal year 2008 Annual Management Plan.
[A] A fiscal year 2008 target of Not Applicable indicates that there is
not a specific numeric goal associated with the performance goal.
[B] A fiscal year 2008 target of To Be Decided indicates that HUD has
not established specific targets for the goal.
[End of table]
Of the 10 performance measures HUD includes as performance goals in its
fiscal year 2008 Management Plan, 2 go beyond summarizing program
activities to identify desired outcomes (i.e., measurable energy
savings). The Office of Management and Budget has identified the
tracking of program outcomes, which describe the intended results of
carrying out a program activity--such as energy savings--as the most
informative measures about performance, because they are the ultimate
results of the program. For example, HUD's Office of Community Planning
and Development has set a goal to increase the number of Energy Star-
certified new homes by 10 percent in its HOME and CDBG programs, and
PIH has targeted a 5 percent increase in overall investment in energy
conservation measures in public housing. The other eight HUD
performance goals track outputs, such as whether certain activities
outlined in HUD's Energy Strategy are taking place. For example, Single-
Family Housing set goals to continue improved tracking and evaluation
of EEMs.
HUD Has Not Implemented the Statutory Requirement for Energy-Efficient
Products and Appliances in Public Housing:
PIH has not implemented Section 152 of EPAct 2005, which requires PHAs
to purchase Energy Star products and appliances when it is cost-
effective to do so. HUD has issued a notice encouraging PHAs to
purchase Energy Star products and appliances, but has not issued a
regulation making this a requirement.[Footnote 17] According to HUD
officials, HUD planned to draft a regulation that would have included
this requirement. In the interest of streamlining, HUD intended to
combine this draft regulation with updates to provisions governing
contracting terms for energy performance contracts. Before proposing
this draft regulation, in early 2007, concerns were expressed about a
potential change to energy performance contracts in a different but
related draft regulation. HUD officials said that this second draft
regulation governed operating fund subsidies available to PHAs for
energy performance contracts. Because of these concerns, HUD chose to
delay publishing either draft regulation for comment, including the new
proposed regulation that would have required energy-efficient products
and appliances for PHAs. While HUD could have separately issued a
proposed regulation to implement the statutory requirement for energy
efficient products and appliances for PHAs, it chose not to do so at
that time.
Subsequently, HUD officials told us that they have initiated a draft
regulation requiring energy-efficient products and appliances for PHAs.
HUD officials said that the controversy regarding the regulation
related to operating fund subsidies in energy performance contracts had
been resolved with the passage of the Consolidated Appropriations Act
of 2008. According to HUD officials, HUD is developing a draft
regulation that includes the energy-efficient products and appliances
requirement for PHAs as well as references to energy performance
contracts. The draft regulation is currently being reviewed by PIH
officials before it will be sent out for review throughout the agency.
While the controversy regarding energy performance contracts may have
been resolved, the statutory requirement for PHAs to use energy-
efficient products and appliances has been in place since 2005. Based
on the information provided to us by HUD officials, it is unclear how
long HUD's regulatory development process may take for the proposed
regulation. The delay in issuing what could have been a separate
regulation requiring energy-efficient products and appliances has
allowed PHAs to purchase less energy-efficient products and appliances
that could result in higher energy expenses than necessary.
The Office of Manufactured Housing Has Not Updated Its Code to
Incorporate Energy Efficiency Requirements:
The Energy Strategy includes an action for HUD's Office of Manufactured
Housing to update the code regulating the construction of manufactured
housing to incorporate the energy efficiency recommendations of the
Manufactured Housing Consensus Committee.[Footnote 18] HUD officials
said that some energy standards for manufactured housing remain
antiquated, with the last major set of updates occurring in 1994. HUD
officials also stated that the energy standards were so outdated that
the products meeting current manufactured housing code are no longer
available. A member of the Consensus Committee has outlined certain
energy efficiency requirements that could be incorporated into HUD's
manufactured housing code. For example, the proposed requirements
include changes to insulation standards and raising standards for the
use of energy-efficient light bulbs. But HUD has not established a
clear timeline for making a decision on incorporating the recommended
energy efficiency changes to the manufactured housing code.
HUD officials explained that recent legislation directed DOE to develop
new energy efficiency standards for manufactured housing by 2012. HUD's
Office of Manufactured Housing is the only HUD program office that has
a responsibility to regulate construction housing standards. According
to HUD officials, this new legislation has created uncertainty about
their role in setting energy efficiency-related codes for manufactured
housing as well as the process by which these codes will be implemented
and enforced. HUD officials told us that they are considering letting
DOE go forward with its implementation of this legislation before it
takes any further action related to updating energy efficiency
standards for manufactured housing. HUD officials said that they were
concerned that overlapping responsibilities between DOE and the Office
of Manufactured Housing could complicate how energy efficiency
standards are developed and monitored in manufactured housing in the
future. According to HUD officials, they have convened one meeting with
DOE to discuss the implementation of a new energy efficiency standard.
However, HUD officials stated that next steps were not established in
this meeting to ensure that new energy efficiency standards could be
considered and implemented. To the extent that the implementation of
stronger energy efficiency standards for manufactured housing are
delayed by not resolving uncertainty about overlapping agency
responsibilities and a process to move forward in considering new
energy efficiency standards, manufacturers may lack an incentive to
build manufactured homes that are energy efficient.[Footnote 19]
Some Updates to Guidance about Energy Efficiency Opportunities Are
Incomplete:
HUD has not completed updates of certain program handbooks and guides
to provide HUD staff and program participants with current information
on energy efficiency. HUD's Office of Public and Indian Housing has
issued interim energy efficiency guidance through Notices 2008-25, 2008-
22, and 2007-30 in order to provide HUD staff and program participants
assistance until updated handbooks are published. Handbooks for which
updates related to energy efficiency are needed and for which HUD staff
told us there are planned updates include the following:[Footnote 20]
* PIH Utility Allowance Guidebook: Last updated in 1998, this guidebook
describes how PHAs should establish utility allowances for residents.
According to HUD officials, 21 percent of PHAs that they interviewed
said that they did not like or utilize the guidebook due to difficulty
in following or understanding it. HUD officials told us that numerous
updates to the guidebook are in process, including adding PIH notices
regarding energy efficiency and information on gathering consumption
data.
* PIH Energy Performance Contracting Handbook: This handbook, which
provides information about PIH incentives for energy efficiency, energy
conservation opportunities, and guidance for engaging in an energy
performance contract, has not been updated since 1992. PIH officials we
spoke with said that they were revising the handbook to incorporate
guidance on a broader range of green building practices but noted that
completing the revisions required changing a program rule. They said
that they hoped to publish the revised rule and updated handbook by
January 2009.
* Multifamily Handbook: HUD's Energy Action Plan also includes an
action for the Office of Multifamily Housing to develop informational
guidelines for possible incorporation in a revised chapter on energy
conservation in the Multifamily Handbook. The Office of Multifamily
Housing has not updated this chapter since September 1992, when HUD had
fewer energy conservation efforts under way. HUD officials said that
the chapter had been revised and was making its way through internal
departmental clearance.
HUD officials in PIH and the Office of Multifamily Housing said that
they were revising these materials to reflect current information on
energy efficiency. Given the apparent lack of priority to complete
these updates previously, it will be important for HUD to finalize
these handbooks and keep them up to date in the future. Without updated
handbooks that reflect current guidance on green building, HUD staff
and program recipients may be unaware of opportunities to make
properties more energy efficient and sustainable.
Green Building Can Raise Up-front Costs and Provide Long-term Benefits,
but HUD Lacks the Data to Identify Current Costs and Future Savings:
Although green building practices can raise up-front costs, the results
could provide long-term financial and health benefits for residents and
HUD. However, the lack of immediate benefits for developers or owners,
coupled with the additional costs, creates a potential disincentive for
using green building practices in affordable housing. HUD pays an
estimated $5 billion in utility costs annually but has not collected
the data that would be necessary to understand its current utility
costs or the financial benefits that these practices could provide for
many of its programs. As a result, HUD is limited in its ability to
take advantage of the possible savings opportunities green building
affords. HUD has partnered with EPA and DOE to develop a system that
can identify savings opportunities in some of its programs, but this
system is not available to its entire assisted housing portfolio.
Green Building Can Add to the Up-front Costs of Developing Affordable
Housing:
The use of green building practices can add to the up-front costs of
green building, and these costs can vary from project to project. One
study on the costs of building multifamily green affordable housing
found that it added an average of 2.42 percent to the total development
costs of projects, while another study on the costs in commercial
buildings--such as office buildings and schools--found an average costs
increase of 1.84 percent.[Footnote 21] In 2004, GSA estimated
construction costs of building a new courthouse using green building
standards ranged from saving 0.4 percent to adding 8.1 percent,
depending on the level of green building certification. A number of
factors can increase the costs of green building. These include "hard"
costs for building supplies and labor, the "soft" costs of
nontraditional activities such as obtaining certification, and regional
differences such as climate. The contribution of each type of factor to
project costs varies, so the overall cost increases also vary. In order
to minimize the additional costs some green building professionals
recommend incorporating green building measure early in the design
process.
Hard Costs of Green Building:
Hard costs including building materials, equipment, and labor can add
slightly to overall construction costs, or they can be prohibitively
expensive, especially for affordable housing developments. For example,
Energy Star-labeled dishwashers do not cost any more than standard
dishwashers and can save both water and electricity costs. However,
some renewable energy technologies, such as solar photovoltaic panels
that convert the sun's energy to electricity, can be costly, presenting
significant challenges to their use in affordable housing developments.
For example, we visited a number of affordable housing developments
that utilize solar energy, and found that nearly all of these
properties were located in states that provided financial incentives
such as rebates and tax credits to offset up-front costs. Many
developers of these projects told us that they would not have been able
to use solar energy in their projects without the rebates and tax
credits.
Figure:
This figure is a photograph with text showing the use of soar panels in
affordable housing.
The Plaza Apartments are located in San Francisco, California, and have
been certified LEED Silver. The property provides studio apartment
housing and on-site supportive services for formerly homeless
individuals. The San Francisco Redevelopment Agency is the owner and
developer of the Plaza Apartments, and provided much of the project‘s
development funding. The solar photovoltaic panels on the roof of the
building were funded in part through the California‘s Rebate for
Renewable Energy Program, which provides financial support to
developers in California that use renewable energy.
[See PDF for image]
Source: GAO.
[End of figure]
Hiring contractors with little experience in using green building
practices can also result in adding to hard costs. In a recent report,
we identified similar challenges in incorporating energy efficiency
practices into the federal Gulf Coast rebuilding efforts following
Hurricanes Katrina and Rita.[Footnote 22] Building professionals we
spoke to stated that inexperienced contractors often increased their
prices in order to offset the cost of the learning curve associated
with using newer materials and unfamiliar building practices. By using
experienced professionals to build green affordable housing, developers
could minimize their up-front costs.
Soft Costs of Green Building:
Some up-front soft costs of green building, such as obtaining a green
building certification can also add to the overall costs. Some of the
green building organizations, such as the U.S. Green Building Council,
which administers LEED and Southface, which administers EarthCraft,
collect fees for certifying green buildings.[Footnote 23] The size of
these fees can vary depending on the level of green building
certification. For example, GSA found that the soft costs associated
with building either a federal courthouse or an office building to
various levels of LEED certification--from LEED Certified to LEED Gold-
-could add $0.35 to $0.80 per square foot. In addition to the fees,
administrative costs associated with documenting the completion of each
point category within an organization's green building standard can add
to the costs of certification. The affordable housing developers we
spoke to expressed mixed opinions on the cost-effectiveness of
obtaining green building certification. Some stated that achieving
green building certification was useful, but others stated that gaining
certification was an unnecessary expense or that it was not cost-
effective.
Using different green building standards or achieving various levels of
green can also affect costs. The GSA study estimated that the
additional construction costs of building a new federal office building
at the LEED-certified level would be 1.4 percent, but constructing the
same building to meet the LEED Gold standard would likely increase
construction costs by 8.2 percent.[Footnote 24] Similar variations in
green building costs were reported in a California study that found
that a sample of green buildings in the state had average cost premiums
of 0.66 percent at the LEED-certified level and 6.5 percent at the LEED
Platinum level.[Footnote 25] Another study comparing the costs of green
building and traditional buildings found no statistically significant
difference in the square footage cost between the LEED-rated and non-
LEED buildings, and observed a high level of cost variation among the
buildings studied.[Footnote 26] Additionally, the study found that when
comparing the costs of the LEED buildings--from LEED Certified to LEED
Platinum--the square footage costs were scattered among all buildings
studied in no discernable pattern of distribution.
Building commissioning, which is a third party verification process
that seeks to ensure that a building's systems are well designed, can
also add to the soft costs of green building. The added costs of
commissioning can vary and can depend on a particular building's
specific characteristics. For example, one study we reviewed found that
the costs of basic commissioning could range from $1.50 to $3.00 per
square foot in the buildings reviewed in the study.[Footnote 27] As
with green building certification, developers had mixed opinions about
the cost-effectiveness of building commissioning. For example, one
building professional we spoke to stated that while building
commissioning could add value, not all systems may need to be tested.
This developer added that testing only major systems--such as the
heating and cooling systems--could be more appropriate for an
affordable housing development with a tight budget. Those who use the
Green Communities criteria are not required to perform commissioning
Thus, green commissioning costs may not be accrued by entities that use
the Green Communities standard.
Regional Differences and Green Building:
Regional differences, such as climate variations and the level of
regional experience, can also affect the up-front costs. Climate
differences can influence how building systems are designed as well as
the costs of using those systems.[Footnote 28] For example, DOE
recommends the use of electric heat pumps for heating and cooling
equipment in some cold weather climate zones, but in very cold regions-
-that often fall below 30 degrees Fahrenheit--some heat pumps cannot
comfortably heat a home without using costly equipment not needed in
warmer climates. Limited regional experience using certain green
building technologies can also increase the costs of green building.
For example, in areas where there are more contractors with experience
building green, contractors may be more willing to take on the cost
associated with the risks of a project rather than passing those costs
on to the client, in order to remain competitive with other
contractors.
Green Building Practices Can Provide Long-term Financial Savings and
Health Benefits:
Some green building technologies that have higher up-front costs can
provide savings that cover those added costs over time. For example, a
2005 study on the costs and benefits of green affordable housing
estimated that 14 of 16 properties reviewed by the authors would
experience a net financial benefit that includes utility savings and
lower product replacement costs.[Footnote 29] There are several ways of
calculating potential savings from green building. One way involves
assessing the "life-cycle" costs of certain green building practices.
Life-cycle costing assesses not only the initial costs of materials and
equipment but also the operating costs associated with them. Using this
type of calculation, green building products with higher up-front costs
may provide financial benefits over time. For example, using highly
durable linoleum flooring may cost more than using sheet vinyl flooring
initially but can actually cost less over time because the flooring may
not have to be replaced as often. A second method of calculating the
savings opportunities from using green building materials is to assess
the amount of time required to "pay back" the added up-front costs
through the operational savings generated by a particular green
building practice. For example, compact fluorescent light bulbs pay
back their initial added costs in less than 1 year (see table 4 to view
the payback period for Energy Star-labeled products and appliances).
Acceptable payback periods can vary depending on the situation.
Table 4: Payback Period for Energy Star-labeled Products and
Appliances:
Energy Star-labeled products: Appliances: Dishwasher;
Green premium: 0;
Payback period (years): 0.
Energy Star-labeled products: Appliances: Refrigerator;
Green premium: 3%;
Payback period (years): 4.3.
Energy Star-labeled products: Appliances: Washer;
Green premium: 67%;
Payback period (years): 4.4.
Energy Star-labeled products: Heating and cooling: Programmable
thermostat;
Green premium: 26%;
Payback period (years): 0.1.
Energy Star-labeled products: Heating and cooling: Furnace;
Green premium: 41%;
Payback period (years): 1.1.
Energy Star-labeled products: Heating and cooling: Central air
conditioning;
Green premium: 8%;
Payback period (years): 1.6.
Energy Star-labeled products: Heating and cooling: Boiler;
Green premium: 20%;
Payback period (years): 3.0.
Energy Star-labeled products: Heating and cooling: Heat pump;
Green premium: 18%;
Payback period (years): 3.5.
Energy Star-labeled products: Lighting: Compact fluorescent light
bulbs;
Green premium: 600%;
Payback period (years): 0.3.
Energy Star-labeled products: Lighting: Fixtures;
Green premium: 63%;
Payback period (years): 1.3.
Source: Energy Star Cost Calculator.
[End of table]
Energy efficiency and water conservation measures can reduce utility
costs and provide relatively quick payback on their initial investment.
Measures such as properly installing insulation, using energy-efficient
heating and cooling equipment, and using efficient products and
appliances can reduce a building's overall energy use and lower its
utility bills. The Energy Star program estimates that a certified home
uses approximately 30 percent less energy than an uncertified home and
can save homeowners from $200 to $400 per year. Additionally, the
utility savings achieved from these practices can be used to pay the
additional costs associated with these products and lower a building's
ongoing operating costs over time. One green building cost and benefits
study estimated that energy cost savings alone accounted for an average
$5.79 per square foot financial benefit in LEED-certified buildings
studied in the report.[Footnote 30] Water conservation measures, such
as low-flow fixtures, front-loading Energy Star clothes washers, and
capturing rainwater for landscaping, can also lower a building's
utility use significantly. For example, high-efficiency toilets use
approximately 20 percent less water per flush than a standard toilet.
According to officials we spoke to from the Seattle Housing Authority,
the agency has saved approximately $800,000 per year by replacing the
toilets in its properties with higher-efficiency models. Attention to
building operations and maintenance is essential to ensure that the
benefits of green building are maximized for the long term. Green
building practices such as performing regularly scheduled (and
unscheduled) maintenance of equipment can sustain original energy
savings investments over the life span of the building's equipment. DOE
reports that a building operations and maintenance program that targets
energy efficiency can save 5 percent to 20 percent on energy bills with
little capital investment. Equally important is tenant education, so
that building occupants understand how to operate the equipment within
their units in the most efficient manner.
Green building practices can also improve health for residents and
benefit the environment, but these benefits are difficult to measure.
Health benefits can result from building practices that improve the
indoor air quality of a building and its units. For example, using
material--such as carpet and furniture--free of volatile organic
compounds (VOC) can decrease incidents of health problems such as
respiratory illnesses. Also, many green building standards place a high
priority on the design of ventilation systems that improve indoor air
quality by replacing contaminated indoor air with fresh outdoor air. It
has been acknowledged for some time that the condition of buildings can
have an effect on occupant health. According to the Centers for Disease
Control, an array of health ailments have been linked to substandard
housing nationwide. Also EPA cites indoor air pollutants such as mold,
radon, formaldehyde, and tobacco smoke as contaminants that can lead to
a variety of health ailments, such as asthma, respiratory illness, and
some forms of cancer. However, according to a representative from a
national health organization we spoke to, evidence documenting the
benefits of particular green building improvements is lacking due to
limited research funding. Currently, the National Center for Healthy
Homes is conducting a study of the health benefits of green building on
an affordable housing development in Minnesota, but the results are not
expected until 2009. One study we reviewed acknowledged that assessing
the health benefits of green buildings can be complicated.[Footnote 31]
Green building practices such as using lower carbon-emitting energy and
resource-efficient building materials, and managing rainwater in a way
that limits the contamination of local waterways, can improve the
overall environment. For example, capturing rainwater on site can
reduce the amount of contaminates that run off the property into local
waterways and limit a building's impact on a city's storm water and
sewer system. Other practices, such as using sustainably harvested wood
products, can reduce a building's global impact by limiting the
environmental effect of extracting natural resource--e.g., wood
products--for use in building construction. Also, lower carbon dioxide
emissions from energy use in buildings can improve human and
environmental health.
The financial benefits of green building improvements in a residential
building are typically directed to the party responsible for the long-
term costs. A 2005 study found that tenants living in the multifamily
green affordable housing properties reviewed would benefit the most
because they typically do not pay the up-front costs, but accrue most
of the benefits through lower energy and water bills.[Footnote 32] On
the other hand, the developers and owners of these buildings paid most
if not all of the initial costs, but receive little benefit from the
improvements. For example, in a property where rents are established
through contracts with HUD, if a building owner assumes the up-front
costs of installing a more expensive and energy-efficient boiler, the
direct utility savings that may result will be primarily experienced by
the tenant rather than the owner if the tenant is responsible for
paying the energy bills. Such challenges can occur when the party
responsible for the initial investment does not capture the benefits
associated with that investment. This dynamic is referred to as the
presence of "split incentives" in multifamily housing, which can create
disincentives for owners and tenants (see fig. 1 for an example of how
these costs and benefits can be distributed).
Figure 1: Example of Possible Distribution of Costs and Benefits for
Green Building Practices:
This figure is a chart with illustrations showing an example of
possible distribution of costs and benefits for green building
practices.
[See PDF for image]
Source: GAO (analysis); Art Explosion (images).
[End of figure]
Utility allowance policies--related to HUD supported properties--can
exacerbate these split incentives. For example, when assisted
multifamily housing building owners reduce their energy use by making
energy efficiency improvements to a property, HUD policy requires that
the utility allowance be adjusted to account for the energy savings. By
decreasing the utility allowance, HUD captures the utility savings, and
neither the tenant nor the owner receives the benefit. This leaves the
owners and tenants with little incentive to make energy efficiency
improvements or adjust their behavior, because they are not made better
off by the green building improvements.
HUD Invests Significant Resources in Utilities, but Only Benchmarks
Utility Use in a Portion of Its Assisted Housing Portfolio:
HUD invests significant financial resources in utilities, health, and
safety in assisted housing properties. Utility allowances and utility
subsidies are HUD's primary method of supporting the payment of utility
expenses in its private assisted multifamily and public housing
portfolios.[Footnote 33] In 2007, HUD reported almost $5 billion in
utility expenses in multifamily and public housing properties (see
table 5). HUD currently collects data on utility costs in its public
housing program and a portion of its assisted housing
programs.[Footnote 34] However, according to HUD officials, the agency
does not know exactly how much utility assistance it provides to
assisted multifamily properties where the building owners are
responsible for paying the utility expenses. In a 2006 report to
Congress, HUD reported that buildings in this category had
approximately $900 million in total utility expenses, part of which was
paid by HUD. The officials told us that they could not accurately
determine how much HUD contributed to the utility expenses in these
buildings because some of the data collected by HUD are not broken out
to show the share of utility expenses that may be paid for by
HUD.[Footnote 35] In addition, HUD does not currently collect either
utility costs or utility consumption data in a number of its assisted
multifamily properties.
Table 5: HUD Utility Expenses for 2007:
Utility allowance provided to tenant: Public housing;
Number of subsidized units: Utility allowance provided to tenant:
1,194,747;
Total annual expense (dollars in millions): $421.
Utility allowance provided to tenant: Tenant-based Section 8 (housing
choice vouchers);
Number of subsidized units: Utility allowance provided to tenant:
2,204,426;
Total annual expense (dollars in millions): $2,500.
Utility allowance provided to tenant: Project-based Section 8;
Number of subsidized units: Utility allowance provided to tenant:
1,625,210;
Total annual expense (dollars in millions): $663.
Utility allowance provided to tenant: Total;
Number of subsidized units: Utility allowance provided to tenant:
5,024,383;
Total annual expense (dollars in millions): $3,584.
Utility subsidy provided to PHA: Public housing[A];
Number of subsidized units: Utility allowance provided to tenant: -;
Total annual expense (dollars in millions): $1,321.
Total HUD utility expense (provided to tenant and PHA);
Number of subsidized units: Utility allowance provided to tenant:
[Empty];
Total annual expense (dollars in millions): $4,908.
Source: HUD.
[A] Public housing subsidy data covers a 9 month period from September
30, 2006, to June 30, 2007. This reflects utility costs associated with
the most recent reporting period in HUD's Financial Assessment
Subsystem data collection system.
[End of table]
Utility benchmarking has been used in commercial building management
for a number of years to assess energy use in properties and help to
identify properties that could improve their energy efficiency. Since
1999, the Energy Star program has rated commercial buildings--such as
office buildings, schools, hospitals, and hotels--by using a utility
benchmarking tool that compares energy and water consumption in a
particular building to that of similar buildings across the
country.[Footnote 36] High-performing buildings that use this tool can
earn recognition from EPA and be labeled as Energy Star buildings.
Commercial buildings that are Energy Star rated use on average 35
percent less energy than standard commercial buildings and generate one-
third of the carbon dioxide. HUD has recently worked with EPA and DOE's
Oak Ridge National Laboratory, through an existing interagency
agreement, to develop energy and water benchmarking systems that can be
used to identify savings opportunities in public housing across the
country.[Footnote 37] HUD believes that this tool will allow it to
establish a fair and measurable basis to accurately assess energy use
in public housing by comparing a given public housing property's
utility consumption with consumption at other public housing properties
with similar characteristics such as age, number of units, and
location. HUD has posted this tool on its Web site and in the future
plans to use it to set program policies related to utility consumption
in public housing.
While HUD has taken steps to benchmark utility use in public housing,
it has not done so in its privately owned assisted multifamily housing
programs. As a result, HUD is in a better position to understand its
utility use and identify future savings opportunities in its public
housing than it is in other multifamily buildings in its portfolio.
According to HUD officials, it does not have any plans to use
benchmarking in its privately owned multifamily housing programs--such
as Section 8. In 2005, privately owned multifamily housing constituted
approximately a quarter of the HUD-assisted housing units. HUD
officials told us that they cannot benchmark utilities in these
programs, because they do not collect or store utility consumption
data--which are needed to benchmark utilities--for privately owned
assisted multifamily housing properties. HUD officials told us that
collecting these data and developing a benchmarking system could be
useful to understand the energy use and savings opportunities in its
multifamily housing portfolio, but that it could be costly to HUD and
the property owners. A 2003 study by Harvard University--funded by HUD-
-found that collecting consumption data in FHA-insured privately owned
multifamily housing would not be unreasonably burdensome.[Footnote 38]
Additionally, benchmarking systems exist for other types of properties,
such as corporate real estate, hotels, schools, and dormitories. Also,
the HUD officials responsible for developing the benchmarking system
for public housing told us that this tool was developed through an
existing interagency agreement and at minimal cost to HUD.[Footnote 39]
By not benchmarking utility costs in its multifamily portfolio, HUD is
missing an opportunity to target less efficient multifamily properties
for green building improvements, an action that could reduce the
resource consumption and utility expenses for HUD and its funding
recipients.
Standards and Financial Incentives Used Elsewhere for Green Building
Could Provide Lessons for HUD:
Standards and financial incentives that are used by states, cities, and
nonprofit organizations to encourage green building could provide
lessons for HUD. National and regional green building standards are
often used to provide a framework for how to build green, and state and
local jurisdictions have even developed their own regional green
building standards. HUD has focused its attention on incentives that
encourage energy efficiency, but it provides few financial incentives
to encourage more comprehensive green building practices--such as water
conservation and indoor air quality. For example, HUD provides one
incentive point for energy efficiency in its competitive housing
development grant programs, such as Section 202, but according to HUD
officials, the strength of this incentive is unclear. According to HUD,
it has not assessed whether the single incentive point is sufficient to
stimulate higher levels of energy efficiency in HUD-funded projects.
This lack of understanding makes it difficult for HUD to know if this
incentive is strong enough to encourage energy efficiency in its
programs. In addition, while focusing on energy efficiency, HUD does
not currently have many incentives that focus on the nonenergy green
building practices. While HUD funding is used occasionally to promote
green building, the decision to do so is typically in response to state
and local requirements or incentives, not HUD's policies. Many state
and local governments have used financial incentives to encourage the
use of green building, including nonenergy green building practices, in
their affordable housing programs. The lack of nonenergy green building
incentives could make it less likely that HUD funding will be used to
build green affordable housing.
The Use of Green Building Standards by State and Local Governments, as
Criteria for Affordable Housing Programs, Could Provide Lessons for
HUD:
The use of national and regional green building standards by state and
local governments could provide lessons for HUD. State and local
governments use national and regional standards to provide the
framework for how to use green building practices, to provide minimum
criteria for green building incentives, and to establish eligibility
requirements for receiving affordable housing funding. The state and
local government officials we spoke to report that setting a green
building standard for funding programs is important to support green
affordable housing. Some officials we spoke to emphasize the importance
of flexibility in determining which green building standards or
practices should be used as criteria. For example, the City of Seattle,
through SeaGreen, provides a menu of 101 green building measures--such
as easy access to public transportation, water-conserving plumbing
fixtures, and using Energy Star windows--as options for developers to
choose from when applying for city affordable housing funding.
According to the Seattle officials, the flexibility is emphasized in
order to recognize the variation in costs associated with some green
building practices. Some states have worked with organizations with
experience in green building to promote green affordable housing in
their regions. For example, Southface--which administers the EarthCraft
Green building standard--has worked with Virginia and Georgia to
incorporate green building into each state's LIHTC program.
National standards are used to provide guidance on how to build green
affordable housing. LEED and Enterprise Green Communities are
identified as national green building standards.[Footnote 40] Many of
the developers we spoke to stated that the cost-effectiveness of using
some green building standards varies significantly. LEED was cited by
affordable housing developers and other professionals we spoke to as
difficult to incorporate into the constrained budget of an affordable
housing development. The LEED certification fees and administrative
costs of documenting the completion of LEED points were cited as
financial barriers for affordable housing developers. However, building
professionals we spoke to stated that they found value in using LEED,
because of the third party verification process that ensures that the
final product actually developed used green building practices.
Enterprise's Green Communities was designed specifically for use in
affordable housing developments, but it lacks third party verification
requirements required by other standards. The Green Communities
contains a number of mandatory items. People we spoke to thought that
Green Communities was a good standard for affordable housing. However,
others believed that the inflexible nature of the criteria and the lack
of third party verification render it inappropriate for some types of
projects.
Regional green building standards such as EarthCraft, Green Point
Rated, and Evergreen provide green building guidance that takes into
account the regional characteristics of the location where the housing
is built--such as the local climate and regulatory structure. Some
state and local officials use regional green building standards,
because these standards took into account local climatic and regulatory
conditions. Some local jurisdictions have even developed their own
regional green building standards, because existing standards did not
meet their specific needs. For example, Washington State worked with
Enterprise to develop the Evergreen Sustainable Development Standard to
allocate their LIHTC and housing trust fund dollars.
The Impact of HUD's Energy-Related Incentives Is Unclear and HUD Offers
Few Nonenergy Green Building Incentives:
HUD efforts to use green building incentives have focused primarily on
energy efficiency, but it is unclear whether these incentives truly
encourage greater energy efficiency, and few encourage nonenergy green
building practices, such as water conservation and indoor air quality
measures. HUD's primary incentive is provided through its competitive
housing development grant programs such as HOPE VI, Section 202, and
Section 811, which provide 1 incentive point for energy efficiency
through its NOFA. In addition, in the Section 202 program, HUD also
awards 15 points for the applicant's experience and 5 points for ties
to the local community. HUD officials asserted that competitive grant
applicants had strong incentives to seek every possible point in the
application, but the strength of the existing energy efficiency point
incentives for these programs is unclear. HUD data indicate that a
majority of applicants for the HOPE VI, Section 202, and Section 811
programs earned the point in fiscal year 2007, and it is unclear what
impact, if any, the single incentive point may have had on funding
decisions. Because almost all applicants that were deemed eligible to
receive funding received the point, it does not appear to have been a
determining factor for most applicants that received funding. We did
not examine the extent to which applicants believed 1 point (out of a
total of 100 or 120 points) would make a significant difference in
their prospects for success. According to a HUD official, it generally
does not verify that planned improvements have been implemented; the
impact of this incentive on energy efficiency also remains unclear.
According to HUD, it has not assessed whether the single incentive
point is sufficient to stimulate higher levels of energy efficiency in
HUD-funded projects, and does not verify the installation of all energy
efficiency improvements. When providing an incentive in a competitive
grant process, it is important to understand whether the incentive
point is having its intended effect. This lack of understanding makes
it difficult for HUD to know whether these single point incentives are
strong enough to encourage energy efficiency in its programs.
Figure:
This figure is a photograph with text showing an example of Green Hope
VI Project.
High Point, located in the Delridge neighborhood in Seattle, Washington
was originally a 716-unit public housing project built during World War
II. With over $37 million in HOPE VI funding, the Seattle Housing
Authority converted this blighted public housing property into a mixed
income community that covers 34 city blocks and has 1,600 home
ownership and rental units”half affordable housing, half market rate.
The green features of the homes in High Point include the following:
Energy Star appliances, water- conserving fixtures, use of paints with
no and low volatile organic compounds, and durable hard flooring
instead of carpeting. Also, a natural rainwater drainage system was
created for the property to prevent toxins”such as motor oil”from
running off the site into a creek near the neighborhood.
[See PDF for image]
Source: GAO.
[End of figure]
Although green building practices can provide long-term benefits and
savings opportunities, HUD has focused its attention primarily on
energy efficiency and currently has few incentives to encourage
nonenergy green building in its affordable housing portfolio.[Footnote
41] Occasionally, HUD funding is used to build green affordable
housing, but according to PHA officials we spoke to, these decisions
are typically made at the local level and not in response to HUD
incentives or encouragement. For example, the Boston Housing Authority
used HOPE VI funding to build a LEED-certified redevelopment project.
According to officials from the housing authority, the decision to
build green was influenced primarily by the city's overall housing and
environmental strategies. A number of building professionals we spoke
to stated that their decision to build new green affordable housing was
in response to state and local requirements or incentives--such as the
LIHTC--but not HUD's policies. However, some of HUD's affordable
housing portfolio may not participate in programs such as the LIHTC.
Many state and local governments have used financial incentives to
encourage the use of green building practices in their affordable
housing programs. Currently, nearly all states have used competitive
funding to encourage some level of green building in affordable
housing.[Footnote 42] The most prominent program in this regard is the
LIHTC. LIHTC dollars are provided to local developers in accordance
with state Qualified Allocation Plans that states are required to
develop and that outline the competitive processes that will be used to
award these funds. Most states employ a competitive point system to
award LIHTC funds and have provided incentive points for projects that
agree to use green building practices.[Footnote 43] For example,
Virginia's Qualified Allocation Plan provides 30 points to applicants
that agree to build to the EarthCraft or LEED green building standards.
Applications that don't meet a threshold of a total of at least 450
points will not be considered for the tax credits. California also
provides competitive points for green building and offers additional
LIHTC funding for projects that agree to build green. In addition to
the LIHTC, states have used other funding sources to encourage green
building. For example, Washington State requires that all projects
receiving state housing trust fund dollars agree to use green building
practices, and Texas has developed a Green Building Revolving Loan Fund
that is self-sustaining and provides financial support to projects that
agree to build green.
California Low-Income Housing Tax Credit:
California administers federal and state low-income tax credit
programs. Through its Qualified Allocation Plan (QAP) the state
provides two incentives to encourage the use of green building
practices. First, the state provides a maximum of eight competitive
incentive points for applicants that agree to either choose from an
array of green building practices or commit to certify the property
under a green building standard”such as LEED or Green Communities.
Second, projects can obtain a 4 percent increase in the amount of
funding they are eligible to receive if they agree to meet a higher
energy standard”35 percent above the state‘s energy code”or choose
three green building practices from a list of higher cost practices
listed in the QAP”such as agreeing to recycle 75 percent of the
project‘s construction waste.
City government and nonprofit organizations have also used a mix of
financial approaches to encourage green building practices, which could
provide examples for HUD. For instance, the City of Seattle required
that applicants for the city's affordable housing funds submit a
sustainability plan that incorporates elements of its SeaGreen Green
Building Guide. However, the city recently retired SeaGreen and
currently requires projects funded through the city to incorporate the
Washington State Evergreen Sustainable Development Criteria.[Footnote
44] City officials told us that green building practices are not
required to remain competitive for city funds. However, these
developers must incorporate elements of the SeaGreen guide. Nonprofit
groups like the Local Initiative Support Corporation (LISC) and the
Enterprise Community Partners have also developed strong financial
incentives to support green building. At the local level, the
California Bay Area LISC chapter has developed a "green loan fund."
Eligibility for loans from the fund is contingent upon demonstrating
that projects will meet minimum green building standards. Enterprise
Community Partners provides loans and grants to affordable housing
projects that follow its Green Communities Criteria. These programs
include a predesign grant program meant to support the early planning
and adoption of green building practices--energy and nonenergy--at the
design stage of development (see app. V for a list of sample state,
local, and nonprofit green building financial incentives). However, the
lack of nonenergy green building incentives in many of HUD's programs
makes it less likely that HUD funding will be used to support the
development of green affordable housing.
Conclusions:
Energy costs account for a significant portion of HUD's expenditures
for assisted housing, and these costs are expected to rise as the cost
of energy increases. To offset these costs and benefit from the growing
body of knowledge about the environmental and health effects of
buildings, HUD could benefit from expanding its efforts to support the
building and rehabilitation of sustainable, healthy, and energy-
efficient housing. While HUD has made some progress in encouraging
green building practices, more remains to be done to ensure that the
agency itself, its grantees, and program recipients are benefiting to
the extent possible from the advantages that green building offers. In
part because of a decision to delay the issuance of a proposed
regulation due to concerns about a separate proposed regulation, a
statutory requirement to require energy-efficient products and
appliances in all public housing has not been met, and this may result
in housing authorities purchasing products and appliances that are not
energy efficient. Although manufactured housing is an area in which HUD
has significant influence because it has been responsible for
establishing manufactured building code requirements since 1974, HUD
has not made significant energy efficiency updates to code for this
program since 1994. HUD officials told us that they intended to wait to
make energy efficiency updates to the code due to their concerns about
overlapping agency responsibilities between DOE and the Office of
Manufactured Housing. However, the current energy efficiency-related
codes are antiquated by HUD's own description, and DOE is not required
to develop its energy standards for manufactured housing until 2012.
Waiting for DOE to take action when DOE has until 2012 to do so and
when the current code is already so outdated could result in additional
years of some manufactured homes being built without improved energy
efficiency standards. As a result, the agency has missed an opportunity
to reduce the energy costs and other green building impacts associated
with manufactured housing. Program handbooks have not been updated to
reflect current guidance on green building, so that many staff may be
unaware of opportunities to make properties more energy efficient and
green.
While some green building practices can add to up-front costs, they can
also provide long-term financial and health benefits. HUD invests
significant resources in support of utilities in multifamily
properties, but does not fully understand the differences in utility
consumption across these properties. HUD's public housing office has
shown leadership and initiative in partnering to develop a utility
benchmarking tool that could be used to identify properties with high
levels of utility consumption, but HUD's multifamily assisted housing
has no such tool. In the absence of such a tool, HUD cannot target
certain multifamily properties for green building improvements, which
could result in benefits, including reduced resource consumption.
A number of state and local governments provide targeted green building
financial incentives that have helped to support the development of
green affordable housing, but HUD has few such incentives. HUD's
incentives for its competitive grant programs have focused entirely on
energy efficiency through the awarding of one incentive point, but the
impact of these incentives is unclear. Recognizing that HUD awards
incentive points in numerous competing priority areas in its
application, HUD's lack of understanding about the impact of the single
incentive point for energy efficiency makes it difficult to assess
whether these incentives are strong enough to sufficiently encourage
greater energy efficiency in its programs. In recent years HUD has
devoted limited resources to financing green building efforts or
studying the costs and benefits of green building. Additional resources
may expand HUD's reach in green building beyond its current efforts to
include an improved understanding of national and regional green
building standards as well as the costs and benefits of green building
practices. Models for targeting resources to green building exist in a
number of states and localities. For example, Texas has created a self-
sustaining revolving loan fund that provides initial funding for green
building. Such HUD green building programs could provide affordable
housing developers with financial assistance to deal with the added
costs of green building and HUD with the data it needs to understand
the relationship between the up-front costs and long-term benefits of
green building. HUD's public housing and Mark-to-Market programs are
able to promote green building, in part because they provide financial
incentives to program participants. Participants in other HUD programs
may not build green without incentives similar to those provided by
state and local governments. Without green building-focused incentives,
HUD may be missing an opportunity to stimulate higher levels of
resource-efficient and environmentally friendly housing.
Recommendations for Executive Action:
In order to better promote green building practices, we recommend that
the Secretary of HUD direct the appropriate program offices to take the
following actions:
* ensure completion of the regulation that would require the use of
energy-efficient products and appliances for public housing as directed
by the Energy Policy Act of 2005,
* proactively work with DOE to expeditiously implement energy-
efficiency updates to the HUD Manufactured Housing Code,
* ensure that updates to handbooks are regularly completed in a timely
fashion to provide more current guidance on energy-efficient and other
green building practices,
* consider working with DOE's Oak Ridge National Laboratory and EPA to
develop a utility benchmarking tool for multifamily properties, and:
* assess whether the single-point incentive awarded for energy
efficiency is sufficient to stimulate higher levels of energy
efficiency for its competitive grant programs and consider providing
nonenergy green building incentive points for these programs.
Agency Comments and Our Evaluation:
We provided a draft of this report to HUD for review and comment. In
written comments, HUD's Deputy Secretary stated that HUD welcomed our
recommendations and that the agency would give serious consideration to
their implementation with the resources it has available. The Deputy
Secretary's letter is reprinted in appendix VI. We also received
general and technical comments from HUD that provided additional detail
on issues discussed in the letter that we have incorporated as
appropriate. HUD made comments suggesting that we did not provide
enough information describing HUD's progress in implementing green
building practices or provide enough direction in how HUD should manage
its programs. Discussed below are a number of concerns HUD had with
certain aspects of the report and our response.
First, HUD stated that we did not sufficiently distinguish between
energy-related and non-energy-related green building strategies and the
costs and benefits associated with them. While we did distinguish
between energy-related and non-energy-related green building strategies
and also describe the potential costs and benefits for a variety of
green building practices, we did not compare the costs and benefits of
the different approaches. As we note in the report, energy efficiency
is one of a number of important elements of green building. We continue
to believe that other non-energy-related measures, such as conserving
water and improving indoor air quality, may also provide important
benefits and thus merit HUD's consideration. As discussed in the
report, HUD officials we interviewed identified water conservation
savings as significant and among the biggest potential opportunities
for financial savings.
Second, HUD stated that we did not sufficiently distinguish among the
different strategies that would be needed to expand green building in
the wide array of HUD programs. Our report is not intended to suggest
that HUD adopt any particular green building criteria or strategy but
rather aims to point out that a variety of strategies are available and
that HUD may want to consider some or all of them for its programs. We
recognize the diversity of HUD's programs and have emphasized the fact
that many green building strategies are available for HUD's
consideration.
Third, in acknowledging that we identified the potential added costs of
green building, HUD also commented that we had made no recommendations
on how to address these costs. In additional comments provided to us,
HUD stated that such higher costs would translate into fewer units that
would be assisted or subsidized by HUD. While we agree that these costs
may vary across HUD programs, sufficient data were not available to
perform the type of cost-benefit analysis necessary to make such
recommendations. The limited availability of data such as utility cost
and consumption information was one of the reasons that we recommended
that HUD work with DOE's Oak Ridge Laboratory and EPA to develop a
utility benchmarking tool for multifamily properties. HUD could
consider whether the agency needs to address the potentially higher
costs associated with green building incentives or requirements in
every program. For example, some state housing finance agencies that
administer programs supporting affordable housing told us that they had
not observed a drop in the number of affordable housing units built
after incentives or requirements for green building were added to their
programs. As a result, these agencies did not need to address the issue
of higher costs.
Fourth, HUD commented that in describing the growing number of state
and local green building standards and initiatives, our report did not
say whether HUD should set standards of its own or defer to the state
and local initiatives. Our report did not seek to make such a
determination for the wide array of diverse housing programs that HUD
administers. Rather, it was intended to present the experiences of
other governments and nonprofits in developing their green building
efforts as useful practices for HUD to consider in developing its green
building efforts.
Fifth, HUD noted that we did not fully address staffing or resource
issues. We acknowledge in our report that additional dedicated
resources may be needed if HUD is to continue harnessing the potential
benefits of green building. However, the extent to which additional
staffing or resources would be needed is an internal management issue
that we leave to HUD's discretion.
Sixth, HUD noted that our report did not highlight the activities of
certain offices or programs, such as HUD's efforts to support
affordable housing in transit-oriented development. In this report we
did not provide a complete listing of all HUD's efforts related to
energy efficiency and green building and we have added language to our
scope and methodology to clarify this point. HUD itself has provided a
description of its efforts in its original Progress Report to Congress
on the status of its energy efficiency efforts and is scheduled to
provide an updated report soon. As an overview of HUD's efforts, we
have provided highlights of HUD's efforts, targeted descriptions, and
examples that reflect the scope of these efforts in the areas of energy
efficiency and green building. Appendix III, which was included in the
draft report, provides additional information on all of the actions
items identified in HUD's Energy Strategy. Finally, we have ongoing
work on HUD's efforts to support affordable housing in transit-oriented
developments, and we may conduct more focused work on other particular
areas of HUD's green building efforts in the future.
In addition, HUD noted that our report misstates the extent of the
authority that Congress has given HUD to require green building
practices other than those related to energy efficiency. We did not
mean to suggest in our report that Congress had given HUD specific
authority to require green building measures. In fact, HUD is currently
promoting green building practices in programs for which the underlying
statutory authority does not explicitly authorize those practices. For
example, in the Mark-to-Market program, HUD is relying on its authority
to require "the addition of significant features" to a housing
project's rehabilitation plan to induce eligible owners to participate
in the program's Green Initiative. Further, in the HOME program, HUD is
relying on the statutory provision that mandates the competitive
reallocation of $1.5 million dollars previously allocated but never
spent to jurisdictions that agree to build green affordable housing. In
addition, in support of the goals of the President's National Energy
Policy, HUD recently issued Public and Indian Housing Notice 2008-25,
"Renewable Energy and Green Construction Practices in Public Housing,"
which "strongly encourages Public Housing Agencies (PHAs) to use solar,
wind, and other renewable energy sources, and other 'green'
construction and rehab techniques whenever they procure for
maintenance, construction, or modernization." Finally, through its
authority under the Native American Housing Assistance Act to provide
block grants for the "new construction . . . of affordable housing" (25
U.S.C. § 4132), HUD allows costs for "incorporating green building,
energy efficiency or other innovative practices" into such housing
(Public and Indian Housing Notice 2006-17). These examples demonstrate
that a particular program's authorizing legislation can provide HUD the
discretion to mandate green building measures.
Finally, HUD disagreed with GAO's characterization of HUD's
implementation of the Energy Policy Act requirement mandating the
purchase of energy-efficient appliances in public housing. In our draft
report, we provided a narrative of events at HUD that described a
"miscommunication" between HUD officials as contributing to the delay
in HUD implementing the Energy Policy Act requirement. HUD stated in
its technical comments that GAO's narrative of events was not
accurately portrayed by the term "miscommunication." We removed the
discussion of the miscommunication, as it was not necessary to support
our finding that HUD has not yet implemented this Energy Policy Act
requirement from 2005. As stated in our report, HUD said that it had
not implemented this requirement because the agency wished to
consolidate related rules and save clearance and process time for the
public. However, we continue to believe that a single rule could have
been implemented to address the statutory requirement to purchase
energy-efficient products and appliances in public housing. Given that
HUD's process has thus far resulted in a 3-year delay in implementing
this statutory requirement, in our view, it would have been appropriate
to promulgate a single rule rather than incurring a delay by trying to
develop a consolidated rule. Without such a rule, public housing
authorities may be purchasing products and appliances that are not
energy efficient. We also noted in our report that HUD had issued a
notice encouraging the purchase of energy-efficient products, but such
a notice does not take the place of or have the same effect as a
requirement. Further, of the 52 percent of public housing authorities
that responded to a HUD survey on the issue of purchasing energy-
efficient appliances, only about half of the respondents, or about one-
quarter of all PHAs, specifically identified plans to make such
purchases. Given these results, it is unclear whether three-quarters of
all PHAs are purchasing the required appliances, which can provide
significant savings on energy and water costs.
We are sending copies of this report to the appropriate congressional
committees and the Secretary of Housing and Urban Development. We will
also make copies available to others upon request. In addition, the
report will be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staff have any questions about this report or need
additional information, please contact me at 202-512-8678 or
shearw@gao.gov. Contact points for our Office of Congressional
Relations and Office of Public Affairs may be found on the last page of
this report. Key contributors to this report are listed in appendix
VII.
Signed by:
William B. Shear:
Director, Financial Markets and Community Investment:
[End of section]
Appendix I: Scope and Methodology:
To examine the status of the Department of Housing and Urban
Development's (HUD) current efforts to promote energy efficiency and
the performance measures the agency uses to assess these efforts, we
obtained and analyzed documentation on HUD's programs that support
energy efficiency and related performance measures. We also interviewed
HUD officials at HUD headquarters who are responsible for managing HUD
programs as well as members of HUD's Energy Task Force, including the
cochairs of the task force. In addition, we conducted site visits to
three HUD field offices (Boston, Massachusetts; San Francisco,
California; and Seattle, Washington) and conducted interviews with HUD
officials, including staff responsible for the numerous HUD programs
that were included as part of our review. We also obtained perspectives
of the Department of Energy (DOE), the U.S. Environmental Protection
Agency (EPA), nonprofit organizations, developers, and energy
efficiency practitioners on HUD's efforts to incorporate energy
efficiency and sustainable building practices into its affordable
housing programs. We did not seek to provide a complete listing of all
of HUD's efforts related to energy efficiency but instead to provide an
overview of HUD's efforts that reflects the scope of its efforts in
this area.
To describe the potential costs and long-term benefits of incorporating
green building practices into HUD's affordable housing programs, we
reviewed relevant research and interviewed individuals with experience
in the area of green building. In order to identify the studies we
reviewed, we searched with a variety of Internet and library search
engines. Because there is limited research available on the costs and
benefits of green affordable housing, we reviewed studies that assessed
the costs and benefits of green building in a variety of building
types--such as affordable housing, office buildings, schools, and
hospitals. Due to limitations in the studies we reviewed, none of the
findings could be generalized beyond the sample of properties reviewed
in each study. In order to gain a perspective for the costs and
benefits of building green affordable housing specifically, we also
interviewed individuals with experience financing green affordable
housing projects--such as green building organizations, affordable
housing developers, and affordable housing funding providers. The
knowledgeable individuals we interviewed represented organizations that
included Global Green USA, Home Depot Foundation, U.S. Green Building
Council, National Association of Home Builders, Enterprise Community
Partners, and Local Initiatives Support Corporation.
To provide information on lessons learned at selected sites that
promote green building practices; we conducted interviews and site
visits in locations that have incorporated green building practices
into their affordable housing programs. To select these locations, we
interviewed knowledgeable individuals in the area of green building and
reviewed relevant literature on government and nonprofit green building
efforts. From a list of 23 locations, we selected a judgmental sample
of 4 locations with active green affordable housing initiatives:
Austin, Texas; Boston, Massachusetts; the California Bay area;[Footnote
45] and Seattle, Washington. We also conducted interviews with two
state housing finance agencies in Virginia and Vermont, but did not
visit these locations. These sites were selected because they each had
green building practices taking place in state and local governments
and in the nonprofit and for-profit housing development sector, and
represented regional diversity in locations. We also sought to choose
sites that were located in proximity to HUD regional offices. During
these site visits we interviewed local and state government officials,
and nonprofit and for-profit developers, and conducted site visits to
green building properties.
[End of section]
Appendix II: HUD's Legal Authority to Incorporate Green Building
Requirements into Its Affordable Housing Programs:
HUD has the legal authority to implement green building requirements.
Provisions of the Energy Policy Act of 2005, the Energy Security and
Independence Act of 2007, and other relevant statutes grant HUD the
authority to incorporate and update green building-related requirements
in its housing programs. As described earlier, Section 152 of the
Energy Policy Act of 2005 requires pubic housing authorities (PHA) to
purchase energy-efficient appliances when doing so would be cost-
effective. Section 153 of the act amended Section 109 of the Cranston-
Gonzalez National Affordable Housing Act to require that all public and
assisted housing rehabilitated or constructed with Urban Revitalization
Demonstration Program (HOPE VI) funds must meet the 2003 International
Energy Conservation Code.[Footnote 46] HUD implemented this provision
by incorporating this requirement into the 2007 HOPE VI Notice of
Funding Availability (NOFA).
The Energy Security and Independence Act of 2007 required that HUD
update energy efficiency standards for new construction and
rehabilitation projects in public and assisted housing. Section 481 of
this act amended Section 109 of the Cranston-Gonzalez National
Affordable Housing Act again to require that all new construction and
rehabilitation in HUD "public and assisted housing" meet the 2006
International Energy Conservation Code. This requirement applies to
public housing, the project-based Section 8 program, and other programs
providing grants and rental assistance, such as the Section 202 and
Section 811 programs. The Energy Security and Independence Act provides
HUD with the authority to incorporate this requirement into the
regulations for the HOME program as the authorizing legislation for
HOME references Section 109 of the Cranston-Gonzalez Act. The HOPE VI
program, which provides funds for the rehabilitation and construction
of public housing, has incorporated this requirement into its fiscal
year 2008 NOFA.
HUD has the authority to implement energy efficiency requirements
beyond those explicitly authorized in statute for most of its
competitive and formula grant programs. In the 2008 NOFA for its
competitive grant programs, HUD stated it was reviewing whether to
require grantees in fiscal year 2009 to incorporate "energy efficiency
measures in the design, construction, rehabilitation, and operation of
properties designed, built, rehabilitated, or operated with funds
awarded through HUD's NOFAs," as well as to require grantees that
provide counseling and training to include information on Energy Star
products as part of those services. HUD officials noted that adding
green building-related requirements to the Community Development Block
Grant (CDBG) program (a formula program) would represent a major change
to the program, and should preferably occur with specific support from
Congress.
HUD imposes most new requirements, including energy efficiency
requirements, on grantees through rulemaking. The rulemaking process
usually incorporates an opportunity for the public to comment on the
new requirements before they are finalized in regulations. For example,
in the 2008 NOFA for its competitive programs, HUD stated that it would
provide the public with advance notification and the opportunity to
comment before mandating energy efficiency requirements in its programs
for fiscal year 2009. While the HOPE VI program does not have program
regulations, HUD attorneys said that HUD would nevertheless incorporate
energy efficiency requirements into the HOPE VI NOFA through
rulemaking. HUD attorneys observed that HUD may have to go through the
rulemaking process to implement point incentives for energy efficiency
that effectively serve as requirements. For example, HUD may not have
the authority to significantly increase the one-point NOFA incentive
for energy efficiency without going through rulemaking.
[End of section]
Appendix III: Overview of Planned HUD Actions in Energy Strategy and
HUD Reported Status:
Action number: 1;
Planned action: Provide incentives for energy efficiency in housing
financed through HUD's competitive grant programs;
Status[A]: * Numerous competitive HUD programs provide a rating point
for energy efficiency-related activities in applications for funding.
Action number: 2;
Planned action: Include energy efficiency performance measures in the
annual performance plan and management plans;
Status[A]: * Energy efficiency performance measures have been included
in the annual performance plan and the management plans but the
measures have been primarily focused on outputs (i.e., activities) and
not outcomes (i.e., energy savings).
Action number: 3;
Planned action: Promote the use of Energy Star products and standards
through HUD's partnership for home energy efficiency with DOE and EPA;
Status[A]: * HUD has promoted the use of Energy Star products, through
HUD's participation in the Energy Star Change a Light Campaign, and
HUD's partnership with EPA's Energy Star program.
Action number: 4;
Planned action: Conduct training on energy-efficient housing for
building residents and organization building or rehabilitating
affordable housing;
Status[A]: * HUD has conducted training but has not yet developed
standardized training modules in many programs;
* According to HUD officials the HOME program has developed a
standardized training module for Green Building and Energy Efficiency.
Action number: 5;
Planned action: Establish residential energy partnerships with cities,
counties, states, and other local partners;
Status[A]: * HUD has established numerous partnerships with state and
local governments.
Action number: 6;
Planned action: Encourage energy efficiency in HOME- and CDBG-funded
new construction and housing rehabilitation projects;
Status[A]: * HUD has reported promoting energy efficiency for both
programs in numerous workshops and presentations;
* HUD has begun to track the number of units built to Energy Star
standards under both programs, reporting significant numbers of HOME-
funded units that meet the standards.
Action number: 7;
Planned action: Identify opportunities and assist with feasibility
analysis for combined heat and power in multifamily housing;
Status[A]: * Feasibility assessments have been conducted for 20
multifamily properties;
* Combined heat and power has been promoted at conferences and in some
HUD informational materials.
Action number: 8;
Planned action: Base appliance and product purchases in public housing
on Energy Star standards unless not cost-effective;
Status[A]: * HUD has a notice that encourages housing authorities to
purchase energy-efficient appliances but has yet to put forward a
requirement for housing authorities to do so, as is required through
statute.
Action number: 9;
Planned action: Build Hope VI developments to a high level of energy
efficiency;
Status[A]: * HUD has encouraged the adoption of Energy Star and
provided a rating point incentive;
* Recent statutes have set certain minimum energy efficiency standards
that must be met by HOPE VI projects.
Action number: 10;
Planned action: Improve tracking and monitoring of energy efficiency in
public housing;
Status[A]: * Public housing authorities have begun to report utility
consumption data for individual properties;
* HUD has developed through a partnership a benchmarking tool that can
be used to identify public housing properties that use large amounts of
energy to operate.
Action number: 11;
Planned action: Streamline energy performance contracting in public
housing;
Status[A]: * HUD has required field offices to review energy
performance contract proposals within 45 days and has contracted with
an outside company to provide technical support related to energy
performance contracts.
Action number: 12;
Planned action: Promote energy conservation for federally assisted
housing on Indian lands;
Status[A]: * HUD offers a one-point rating incentive for applications
to its Indian Community Development Block Grant program that address
Energy Star goals;
* HUD allows a waiver to total development costs for additional costs
associated with energy efficiency and green building;
* HUD has instituted a series of national and regional training
workshops on green building in Indian housing.
Action number: 13;
Planned action: Feature the energy efficiency mortgage as a priority
loan product;
Status[A]: * Little progress has been made on this action item.
Action number: 14;
Planned action: Provide training on how Federal Housing Administration
single family programs can be effectively used to promote energy
efficiency;
Status[A]: * Some training has been provided but the extent of this
training is unclear.
Action number: 15;
Planned action: Continue improved tracking and evaluate performance of
energy efficient mortgages;
Status[A]: * HUD has made improvements to the tracking of energy-
efficient mortgages but has not evaluated their performance due to a
lack of available research funds.
Action number: 16;
Planned action: Promote energy efficiency in assisted multifamily
housing and multifamily programs;
Status[A]: * HUD has made some efforts to promote energy efficiency for
multifamily housing but there is no evidence of the outcome of these
actions.
Action number: 17;
Planned action: Continue HUD-DOE multifamily weatherization
partnerships;
Status[A]: * Early efforts to explore weatherization partnerships
nationally yielded limited results, but some state and local
initiatives have been implemented.
Action number: 18;
Planned action: Encourage the use of Energy Star new home standards in
the design, construction, and refinancing of Section 202 and 811
projects;
Status[A]: * HUD provides a one-rating point incentive to applicants
who indicate they will use energy-efficient measures in their
properties;
* The point does not currently require that any specific measures are
met. HUD has developed more detailed specifications for future funding
awards.
Action number: 19;
Planned action: Explore incentives for energy efficiency through FHA
multifamily insurance programs;
Status[A]: * HUD's Office of Multifamily Housing convened a task force
that recommended incentives for increasing energy efficiency in its
insured housing programs;
* The incentives are currently being considered and have not yet been
implemented;
* The Mark-to-Market program has implemented a green initiative that
offers financial incentives for owners to adopt green building
practices.
Action number: 20;
Planned action: Explore asset management strategies and guidance for
energy efficiency in HUD-subsidized multifamily properties;
Status[A]: * HUD has issued guidance to Multifamily Field Offices
encouraging the use of Energy Star appliance and methods in conjunction
with disbursements from Reserve for Replacement funds. No action to
date has been taken on developing specific informational guidelines for
staff and property owners.
Action number: 21;
Planned action: Support energy-efficient training for multifamily
managers and maintenance staff;
Status[A]: * A four- part training series was offered in 2007, and
specialized on-site training was offered in 2005 in a number of
locations, but additional specialized training has not been provided.
Action number: 22;
Planned action: Implement energy efficiency recommendations of the
Manufactured Housing Consensus Committee in HUD- code manufactured
homes;
Status[A]: * Recommendations have not been implemented and HUD is not
moving forward with the recommendations because of a new statute that
provides DOE with the authority to establish energy-related regulations
for HUD code homes.
Action number: 23;
Planned action: Partner with local energy efficiency groups, HUD
program offices, and other agencies to educate HUD customers about
reducing energy costs;
Status[A]: * HUD has established numerous partnerships with state and
local governments.
Action number: 24;
Planned action: Conduct energy-related policy analysis and research to
support the department's energy goals;
Status[A]: * HUD has utilized limited research funds to support the
development of uniform remodeling protocols, as well as demonstrations
and field evaluations of energy efficient technologies through the
Partnership for Advancing Technology in Housing (PATH) program, but
continued research efforts have been limited by severe funding
constraints.
Action number: 25;
Planned action: Develop a computerized tool for integrating
environmental and energy retrofits;
Status[A]: * Through HUD's Office of Healthy Homes and Lead Hazard
Control, HUD expects to implement this measure in 2005.
Source: HUD.
[A] Status of actions items is as reported by HUD officials.
Independent documentation of status was not conducted by GAO for all
action items.
[End of table]
[End of section]
Appendix IV: Multifamily Task Force Energy Conservation
Recommendations:
* Reduce application and/or inspection fee by half for properties using
energy conservation techniques and/or achieving an Energy Star
certification by returning one-half of the fee after closing.
* Extend the maximum term of the mortgage for a project that receives
an Energy Star certification.
* Allow installation of certain combinations of Energy Star products to
be considered a major building component for determination of
Substantial Rehabilitation in order to use 221(d)(4) (90 percent
mortgage) instead of 223(f) (85 percent mortgage):
* A notice is to be placed in the Real Estate Management System (on the
Reserve Tracking Screen) that this project used Energy Star; future
replacement items should contain at least the same energy conservation.
* Expand existing Section 241 Supplemental Loan into Section 241-e loan
available only for properties that are master-metered and, are
currently insured by HUD and only for energy-efficient systems.
* Add new wording in Rating Factor 3 to define Energy Conservation (for
Section 202 and Section 811 programs):
* Allow for an increased owner distribution through increasing the
amount of the initial equity by the cost of the Energy Conservation
Methods/Upgrades implemented.
* Allow nonprofit owners (except cooperatives) a distribution based on
energy conservation for use in furthering the housing needs of the
community; and allow the amount of the new energy conservation methods/
upgrades to increase the original amount of the initial equity of the
property with the appropriate distribution percentage applying to a
"new" equity position.
* Allow the management company to share in the savings of energy
conservation (for a certain period--say 5 years) through the use of a
"Master Plan" created by the agent and approved by HUD.
* Encourage the use of Energy Star for replacement of lighting,
fixtures, and appliances through normal servicing contact with owner
and agent.
* Allow the management company to share in the savings for reduction of
total utility usage. The shared savings will be through use of a
management fee add-on. Usage is an owner option.
* Request the Office of Policy, Development and Research to facilitate
an amendment of the memorandums of understanding between DOE and HUD to
delegate the authority to HUD for qualifying residents as part of the
DOE Weatherization program.
* To be most accurate in what energy conserving methods are needed in a
given property currently in HUD's portfolio, HUD should encourage the
owner to utilize an energy audit from a recognized professional energy
evaluator.
[End of section]
Appendix V: Examples of State, Local, and Nonprofit Green Building
Affordable Housing Programs:
State governments: Massachusetts;
The Massachusetts Low-income Housing Tax Credit (LIHTC) program awards
a variety of points for green building practices through its Qualified
Allocation Plan, such as creating housing near public transportation;
The Massachusetts Housing Finance Agency provides targeted funding to
promote the construction of green affordable housing, and requires that
housing built with this funding meet the Energy Star standard; The
Massachusetts Technology Collaborative provides a rebate that pays 70
percent of the cost for renewable energy technologies for affordable
housing developments.
State governments: Virginia;
The Virginia LIHTC program provides 30 incentive points to developers
that agree to build to the EarthCraft green building standard; The
Virginia LIHTC program has partnered with Southface to provide green
building technical assistance to local developers and builders.
State governments: Vermont;
Vermont has developed green building standards that developers must use
to receive LIHTC funding.
State governments: Washington;
Washington is in the process of requiring that all affordable housing
developments using state Housing Production Trust or LIHTC funding meet
the Evergreen Sustainable Development Criteria.[A].
Local governments: Boston, Mass;
The City of Boston has passed a zoning ordinance that requires that all
large buildings-- including affordable housing--be built to meet the
LEED certified green building standard.[B]; The City's Green Affordable
Housing Initiative requires that affordable housing projects that use
city funding meet the LEED Silver or the Energy Star for Qualified Home
standards; The city has partnered with the Massachusetts Technology
Collaborative to provide renewable energy rebates, such as solar
photovoltaic.
Local governments: San Francisco, Calif;
The San Francisco Mayor's Office of Housing and the city's
Redevelopment Agency require projects applying for affordable housing
funding to meet the GreenPoint Rated green building standard.c.
Local governments: Seattle, Wash;
Seattle has developed the SeaGreen Guidelines that provide a menu of
green building options for developers to choose from when applying for
city affordable housing funding; Compliance with SeaGreen is officially
voluntary; however projects applying for funding must address whether
or not elements of the guidelines are included in their development's
sustainability plan submitted to the city when applying for affordable
housing funding.[D].
Nonprofits: Enterprise Community Partners;
Enterprise Community Partners has invested $555 million--in grants,
loans, and LIHTC equity--marked for use over a 5-year period to build
8,500 green affordable housing units across the country; Enterprise
developed the Green Communities Criteria, which is the first national
green building standard, to provide a clear and cost-effective
framework of green building, and to support funding decisions.
Nonprofits: Local Initiative Support Corporation (LISC);
LISC's Green Development Center provides financial resources, technical
assistance, partnership opportunities, and education to accelerate the
use of green building practices in low- income communities; Through
this national initiative several local LISC chapters have developed
local green building programs focused on promoting green building in
their communities; The Bay Area LISC chapter recently launched the
Green Connections program, which provides a green loan fund to support
the creation of green affordable housing.
Nonprofits: Home Depot Foundation;
The Home Depot Foundation invests millions of dollars each year in
nonprofit organizations whose missions are to support the production
and preservation of green affordable housing; In 2007, the foundation
supported the production of 12,223 green affordable housing units.
Nonprofits: National Housing Trust; State governments:
National Housing Trust recently established the Green Affordable
Housing Preservation Loan Fund to provide predevelopment and interim
development loans to affordable housing developers seeking to
incorporate green building practices in the rehabilitation of existing
affordable housing.
[A] The Evergreen Sustainable Development Criteria was developed by the
Washington Department of Community, Trade and Economic Development, and
is based on Green Communities, which was developed by Enterprise
Community Partners.
[B] Boston's green building zoning ordinance requires that applicable
buildings meet a LEED certifiable standard. This means that buildings
subject to this ordinance must be planned, designed, and constructed to
achieve the level LEED certified under the rating point system, but the
Boston Redevelopment Authority will review the LEED certifiability of
projects under its jurisdiction.
[C] GreenPoint Rated is a regional green building standard developed by
the Build It Green organization for use in the state of California.
[D] According to an official we spoke to, most developers understand
that projects that incorporate elements of the SeaGreen guidelines are
better positioned to complete for city funding.
[End of table]
[End of section]
Appendix VI: Comments from the Department of Housing and Urban
Development:
U.S. Department Of Housing And Urban Development:
The Deputy Secretary:
Washington, DC 20410-0050:
[hyperlink, http://www.hud.gov]:
[hyperlink, http://www.espanol.hud.gov]:
September 12, 2008:
Mr. William B. Shear:
Director, Financial Markets and Community Investment:
U.S. Government Accountability Office:
Washington, DC 20548:
Dear Mr. Shear:
Thank you for the opportunity to comment on the Government
Accountability Office (GAO) draft report GAO-08-943, entitled "Green
Affordable Housing: HUD Has Made Progress in Promoting Green Building,
but Expanding Efforts Could Help Reduce Energy Costs and Benefit
Tenants."
The focus of this report was to review HUD's efforts to promote energy
efficiency in its programs and the use of performance measures; assess
the potential costs and long-term benefits of green building in HUD's
affordable housing programs; and identify lessons that could be learned
elsewhere that HUD could use to promote green building.
The draft report finds that HUD has made progress in bringing energy
efficiency to significant segments of its public or assisted housing
stock, but recommends additional actions: that HUD require energy-
efficient products and appliances in public housing; work with the
Department of Energy to implement updates to the building code for
manufactured housing; consider developing a utility benchmarking tool
for multifamily properties; and consider providing non-energy green
building incentive points in some grant programs. HUD welcomes these
recommendations; the Department will give serious consideration to
their implementation with the resources that arc available to us.
HUD previously provided extensive comments on the draft report. Our
broader comments on green building in the affordable housing sector
include the fact that GAO does not sufficiently distinguish among
energy-related measures (which often pay for themselves) and non-energy
green building practices (which may not), and among the different
strategies that will be needed to expand green building in the wide
array of HUD programs. GAO correctly identifies the issue of the "green
premium," but does not provide recommendations on how to address these
higher costs (through, for example, higher Total Development Cost
limits), or on whether HUD should set standards of its own or defer to
the growing number of state and local green initiatives that are noted
in the report.
The report also does not fully address staffing and resource issues,
and the work that HUD has initiated, in part at the direction of
Congress, on transit-oriented development as a key element of green
building. The report also misstates the extent to which Congress has
given HUD specific authority to require green building beyond energy
efficiency.
In addition to these general comments, our technical comments identify
several areas in the draft report that HUD found to be inaccurate,
ambiguous, or require further clarification. Activities of some offices
were not sufficiently highlighted, and progress in some areas was
overlooked. We also disagree with GAO's characterization of HUD's
implementation of the Energy Policy Act's requirement for Energy Star
products in public housing. HUD is of course committed to publishing a
regulation on this matter; however, with 53 percent of all PHAs
reporting that they are buying Energy Star, we are making progress in
that area. HUD's complete comments will be posted at [hyperlink,
http://www.hud.gov/energy].
Given the growing interest in Congress and in the affordable housing
industry about this issue, HUD welcomes GAO's assessment of the
potential for green building in federally assisted housing. We believe
that we have made significant progress through the work of our Energy
Task Force, primarily in the area of energy efficiency. The Energy Task
Force is a unique Departmentwide effort that has significantly raised
the awareness of this issue among HUD's customers and partners, as well
as among HUD staff. We will shortly be submitting a progress report to
Congress describing our accomplishments so far, as required under
Section 154 of the Energy Policy Act of 2005.
We are also pleased with the work that is underway at HUD to promote
green building beyond energy efficiency, including: water conservation
through energy performance contracting in public housing; training and
capacity building in Indian country; HUD's first grant competition for
green building, recently announced by the HOME Investment Partnerships
program; and the Green Remodeling Initiative in the Mark-to-Market
multifamily housing arena.
There are also several important initiatives at the field office level:
in Region 9, for example, a partnership has been developed to install
solar energy in CDBG- and HOME-funded projects. Region 6 hosted a
conference in Texas on the "next frontier" of greening affordable
housing. Similar activities are to be found in other regions. We are
also greening HUD's own Robert C. Weaver Headquarters building, with
photovoltaic panels and a green roof.
Please be assured that the Department takes both the discussion in your
report and your recommendations very seriously. Energy costs are a
critical element of housing affordability, and the building sector can
play a critical role in addressing climate change. We will consider
your findings carefully as we continue our efforts to reduce HUD's
energy costs, and to address the interests of Congress and the
affordable housing industry in green affordable housing.
Sincerely,
Signed by:
Roy A. Bernardi:
[End of section]
Appendix VII: GAO Contact and Staff Acknowledgments:
GAO Contact:
William B. Shear, (202) 512-8678 or shearw@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Andy Finkel (Assistant
Director), Emily Chalmers, John Fisher, Jeremie Greer, John McGrail,
Marc Molino, Luann Moy, and Andy Pauline made key contributions to this
report.
[End of section]
Footnotes:
[1] See Pub. L. 109-58, Section 154.
[2] Housing finance agencies are state-chartered authorities
established to help meet the affordable housing needs of residents of
their states. They serve as lenders and resource providers.
[3] LIHTC is an indirect federal subsidy used to finance the
development of affordable rental housing for low-income households.
LIHTC is an Internal Revenue Service program based on Section 42 of the
Internal Revenue Code and was enacted by Congress in 1986 to provide
the private market with an incentive to invest in affordable rental
housing.
[4] The International Residential Code is a stand-alone building code
that provides minimum regulations for one-and two-family dwellings of
three stories or less. The code covers all building, plumbing,
mechanical, energy, and electrical systems. The International
Residential Code provides both prescriptive (measures) and performance
(energy modeling) approaches to determine compliance.
[5] HUD provides funding to PHAs to operate and repair public housing
units through both the operating fund and the capital fund. The
operating fund provides annual subsidies to PHAs to make up the
difference between the amounts collected in rent and the costs of
operating the units. The capital fund provides grants to PHAs for the
major repair and modernization of the units.
[6] Under the 3-year rolling base policy, the utility component of a
PHA's operating subsidy is based on the average utility consumption for
the prior 3 years. Following utility conservation measures, this 3-year
average will fall over time, but will not reflect the new, lower
utility consumption level until 3 years have passed. For example, 1
year following utility conservation measures, 2 of the 3 years included
in the operating subsidy calculation will reflect the previous, higher
level of utility consumption, and the 3-year average and operating
subsidy will fall as 1 year included in the average will reflect lower
utility use. But the PHA may retain some savings as the utility
component of its operating subsidy will be based on a utility
consumption level that exceeds its expected utility use.
[7] Typically, an ESCO guarantees a certain level of consumption
savings. According to HUD officials, several large PHAs have acted as
their own ESCOs and HUD provides guidance to PHAs considering whether
this option is appropriate for them.
[8] For example, a PHA contracting with an ESCO will pay certain fees
to the ESCO that could be avoided if the PHA identified and implemented
the improvements on its own.
[9] The field office must complete its review and issue its decision or
required changes within 30 business days. If a revised submittal by the
housing authority is required, the HUD field office has 15 business
days after the receipt of the revised energy services agreement to
review and issue a decision.
[10] Each PHA has a certain number of properties for which it is
responsible, and each of the properties has a certain number of units
where tenants live. Under asset management, PHAs with 250 or more units
will convert to a management approach that includes project-based
budgeting and accounting, instead of budgeting and accounting at the
PHA level.
[11] LEED accreditation is for professionals who have demonstrated a
thorough understanding of green building practices and principles and
familiarity with LEED requirements, resources, and processes.
[12] According to HUD officials, some ESCOs have determined that it is
not financially feasible to work with PHAs with fewer units. HUD
officials told us that smaller housing authorities generally lack the
expertise to manage the execution of major energy improvement packages
without the assistance of an ESCO.
[13] In an aggregated energy performance contract, multiple public
housing authorities agree to group their properties together in a
single energy performance contract to achieve the scale necessary to
make the project economically attractive to an ESCO. According to HUD
officials, housing authorities may find it challenging to agree on the
terms of the contract, including what improvements will be installed at
which properties.
[14] Owner distributions are those funds available to ownership after
the payment of debt service and all defined property-related expenses.
[15] The Home Energy Rating System inspection, which determines the
cost of potential energy improvements and estimates energy savings, is
a standard measurement of a home's energy efficiency.
[16] HUD issues a management plan annually that includes some goals for
agency programs.
[17] The Energy Policy Act of 2005 also states that PHAs can purchase
products and appliances that meet Federal Energy Management program
guidelines.
[18] The Manufactured Housing Consensus Committee is a statutory
Federal Advisory Committee body charged with providing recommendations
to the Secretary on the revision and interpretation of HUD's
manufactured home construction and safety standards and related
procedural and enforcement regulations. The Consensus Committee was
also charged with developing proposed model installation standards for
the manufactured housing industry.
[19] Some manufacturers do build to an Energy Star standard.
[20] HUD's fiscal years 2007-2008 Implementation Plan for its Energy
Action Plan includes planned updates for the Energy Performance
Contracting Handbook and the Multifamily Handbook.
[21] William Bradshaw and others, "The Costs and Benefits of Green
Affordable Housing," (2005), and Greg Kats, The Cost and Financial
Benefits of Green Buildings: A Report to California's Sustainable
Building Task Force, (October 2003). The study on the costs and
benefits of affordable housing reported an added cost for 16 affordable
housing properties across the country. The other study reported the
added cost of green building for 33 LEED registered buildings in
California. Due to the limitations of these studies, the results cannot
be generalized to a broader population. Due to limited research on the
costs and benefits of building green affordable housing, we also
reviewed literature that focused on other building types, such as
schools, office buildings, hospitals, and other commercial structures,
in carrying out this portion of the analysis. For a description of how
we selected the literature we reviewed, see appendix 1.
[22] GAO, Energy Efficiency: Important Challenges Must Be Overcome to
Realize Significant Opportunities for Gulf Coast Reconstruction, GAO-07-
654, (Washington, D.C.: June 26, 2007).
[23] Certification is obtained after submitting an application
documenting compliance with the requirements of the rating system as
well as paying registration and certification fees.
[24] LEED levels are Certified, Silver, Gold, and Platinum, with
Certified being the lowest and Platinum the highest level of green
building certification.
[25] Kats, The Cost and Financial Benefits of Green Buildings: A Report
to California's Sustainable Building Task Force.
[26] Lisa Matthiessen and Peter Morris, Costing Green: A Comprehensive
Cost Database and Budget Methodology, Davis Langdon, (July 2004).
[27] Lisa Matthiessen and Peter Morris, Costing Green Revisited:
Reexamination of the Feasibility and Cost Impact of Sustainable Design
in the Light of Increased Market Adoption, Davis Langdon, (July 2007),
p. 16.
[28] Mattiessen and others, Costing Green: A Comprehensive Cost
Database and Budget Methodology. This study analyzed the added green
building cost of projects in five different climate types, and found
that the cost varied by climate and level of green certification--from
Platinum to Silver. According to the study, the cost variation can be
explained by differences in the type of mechanical systems used in
different climates.
[29] Bradshaw, The Costs and Benefits of Green Affordable Housing.
[30] Kats, The Cost and Financial Benefits of Green Buildings: A Report
to California's Sustainable Building Task Force. This report assesses
the cost and benefits of 33 LEED certified green buildings by different
factors such as energy, water, emissions, and occupant health.
[31] Kats, The Cost and Financial Benefits of Green Buildings: A Report
to California's Sustainable Building Task Force.
[32] Bradshaw, The Costs and Benefits of Green Affordable Housing.
[33] Utility allowances are provided to building owners, who provide
the funds to tenants of assisted multifamily and public housing when
the tenant is responsible for paying the unit utility expenses. Tenants
in these programs are required to pay 30 percent of their income toward
their rental costs. Utility subsidies are provided to the owners of
assisted multifamily housing and PHAs when they are responsible for the
entire buildings utility expenses. In public housing, the subsidy is
provided in the form of a payment to the PHA, and in assisted
multifamily housing, the utility subsidy is a component of the rent
charged to the tenant and HUD.
[34] In properties that receive a utility allowance, HUD collects data
on the number and size of the allowances provided to tenants in public
and assisted multifamily housing. It also collects data on the utility
expenses in public housing that it pays through utility subsidies.
[35] All properties with FHA insured mortgages, with or without Section
8 contracts, file audited financial statements. However, a number of
noninsured properties with Section 8 contracts are not required to file
financial statements. HUD does not have utility expenditure data for
these properties. Also, the financial statement data received by HUD
cover the entire property. For those properties that are partially
subsidized, the data do not reflect what portion was paid by HUD and
what portion by residents. In addition in the Section 8 program,
residents pay 30 percent of their income toward their rent. The Section
8 subsidy pays the remaining portion up to the total rent payment.
Financial statement data do not reflect what portion of any expenditure
was covered by Section 8 and what portion was covered by the resident's
payment. The resident portion of the total rent revenues will be
different in each property, as residents' incomes vary from resident to
resident.
[36] Portfolio Manager, which is administered through the Energy Star
program, is an interactive energy management tool that allows you to
track and assess energy and water consumption across your entire
portfolio of commercial buildings. Users of the tool can rate their
facilities' energy performance on a scale of 1-100 relative to similar
buildings nationwide. The comparative analysis is based on the energy
performance of buildings captured in the Commercial Building Energy
Consumption Survey (CBECS), which is a national survey of buildings
performed by the Department of Energy.
[37] Oak Ridge Laboratory is a science and technology laboratory
managed by DOE. Oak Ridge conducts basic and applied research and
development to strengthen the nation's leadership to increase the
availability of clean and abundant energy, restore and protect the
environment, and contribute to national security.
[38] Harvard University Graduate School of Design, Public Housing
Operating Cost Study: Final Report, Cambridge, MA (June 2003)
[39] The public housing benchmarking system was developed in
partnership with the Oak Ridge National Laboratories through the DOE,
EPA, and HUD Energy Star® memorandum of understanding. The model was
developed using building characteristics and consumption data collected
from 3,342 public housing properties and was found to predict at a high
level the relationship between properties being compared using the
model. According a HUD official the department did not bear much in the
way of additional cost for developing the system. HUD simply provided
data to DOE for use in developing this and another benchmarking system
used by the New York State Energy Research and Development Authority in
its green affordable housing program.
[40] National Association of Home Builders (NAHB) is in the process of
developing a new green building standard in coordination with the
International Code Council and the American National Standards
Institute. According to officials from NAHB, the certification costs of
completing this standard will be much lower than those of LEED. These
officials also stated that the standard will be more flexible that
LEED, and be appropriate for use in affordable housing. Currently, NAHB
publishes the NAHB Model Green Home Building Guidelines, and provides
information on green building on its website.
[41] Some HUD incentives that focus on nonenergy components of green
building include the Market-to-Market Green Initiative and energy
performance contracts.
[42] James Tassos, Greener Policies, Smarter Plans: How States are
Using the Low-Income Tax Credit To Advance Healthy, Efficient, and
Environmentally Sound Homes, Enterprise Community Partners, (2007).
This author has been monitoring the extent to which state housing
finance agencies have incorporated green building practices into their
LIHTC Qualified Allocation Plans.
[43] There is no federal requirement that a state incorporate green
building practices into its QAP. States that have either required or
mandated green building practices have made the policy decision to do
so independent of federal requirements.
[44] In the summer of 2008, the City of Seattle retired its SeaGreen
Program. In order to maintain consistency with the state affordable
housing program, the city will adopt the Evergreen Sustainable
Development Standard, administered by the Washington State Department
of Community, Trade and Economic Development for its affordable housing
programs.
[45] Through this visit we spoke with government officials from Alameda
County, the City of Oakland, and the City of San Francisco.
[46] The International Code Council, a membership association, develops
the codes used to construct residential and commercial buildings. The
2003 International Energy Conservation Code provides energy
conservation provisions for residential and commercial buildings.
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