Electric MeterElectricity filled the room at the “Preservation Through Energy Efficiency Road Show” in Philadelphia last week.  This initiative is the brainchild of Thom Amdur, Executive Director of the National Housing and Rehabilitation Association (NH&RA), who was awarded a grant from the MacArthur Foundation to spread the word across the country about immediate actions that can be taken to finance and implement energy efficiency improvements in affordable housing.  The Philadelphia event received additional support from the Philadelphia Housing Finance Agency.  This was truly an action packed, day-long event that included seven panel discussions on various energy efficiency topics such as planning, financing, operations & measurement, and tenant engagement.

Financing energy efficiency improvements in multifamily housing is still an evolving area, with many panelists commenting that they feel like they are flying the plane while still working on the engine.  Only a small number of lenders are willing to lend for these types of improvements and underwrite using the cost savings created by the improvements.  There is no one-size-fits all approach.  Variables can include the age of the building, climate, different utilities, how the building is operated, systems management, and how energy savings are calculated, acknowledging there are constant fluctuations in energy pricing.

While there were a lot of juicy nuggets of information, one of the most interesting was the fact that utility companies are an often-overlooked source of funds for energy improvements.  Utilities often have rebate programs for energy efficient equipment.  PSE&G, servicing New Jersey, has a remarkable program that will pay for the majority of the costs of a major energy efficiency retrofit.  All funds for this particular program are committed at the moment, but it is an interesting model for other utilities that may have something similar.

Another underlying issue is that the incentives for making energy efficiency improvements do not always accrue to the Owner – sometimes Owners benefit only from the costs of the common areas, which may be nominal in the overall cost of operations.  However, many in the room agreed that there is payback, although it may not be immediately evidenced in the daily bottom line.  Greater energy efficiency can save tenants money paying utilities, freeing up more money for rental payments.  Such improvements can extend the life of the building, decrease long-term maintenance costs, and make the property more desirable for tenants.   With improvements in technology, even improvements made five years ago can be made more efficient with new equipment – for example, less expensive low-flow toilets and L.E.D. light fixtures.  We also learned a new term: “green-skimming” – only making improvements that provide the quickest payback (low-flow toilets shower heads, faucet aerators, and hall lighting) can jeopardize future financing of a more complete retrofit that could include systems upgrades, appliances, and insulation.   

In addition to securing financing for energy efficient improvements, owners and operators of HUD subsidized housing have to consider the HUD program requirements which sometimes work at cross purposes with the financing tools.  HUD has clearly heard these concerns and shared that it will be creating new flexibility around energy efficiency for HUD-insured multifamily properties which will be released in series of Housing Notices this summer.  We are hopeful that there will be additional flexibility for our public housing authority clients, many of whom participate in HUD’s EPC program, but would also like additional options and incentives to “green” their stock.          

Hats off to Thom and NH&RA for creating an great vehicle for elevating the conversation around one of the most cutting edge and important issues in affordable housing today.  The “Road Show” will come to Denver on July 14th with plans to make additional stops in Minneapolis and Atlanta in Fall, 2014, and Indianapolis in Winter, 2015.  NH&RA is also hosting a web-based  knowledge exchange for PTEE participants to access resources, exchange ideas, and otherwise network following the events.  More information about NH&RA events can be found here.  For housing policy geeks like us, this was like eating candy all day long.  We strongly encourage you to participate one of these lively and informative programs.