May 2008
In this Issue
Housing: Critical for Working Families and Communities
Rewarding Design and Innovation
Affordable and Green?
Assessing GSE Performance
In the next issue of ResearchWorks
Affordable and Green?
"Green" affordable housing is housing that both costs no more than 30 percent of low- and moderate-income family earnings and has features that offer health, economic, and environmental benefits. According to the National Association of Home Builders, the benefits of building green are reduced operating costs, improved comfort, healthier indoor air, greater durability, and less maintenance. The green features implemented in a particular affordable home will vary, says the American Institute of Architects, depending on the climate, the materials and systems available, and the builder and homebuyer striking a balance between initial costs and long-term savings.
Does Building Green Really Cost More?
To test the common assumption that green building techniques are too expensive to be practical in affordable housing, New Ecology, Inc. (NEI) and the Tellus Institute surveyed green affordable housing projects from across the United States. The resulting report, The Costs & Benefits of Green Affordable Housing (see www.newecology.org), describes some projects that have achieved a sound affordable-environmental balance. One case study is of Columbia Terrace in Cambridge, Massachusetts, a renovation of 42 affordable apartments. Kitchens and bathrooms were redone, common areas upgraded, and improvements made in lighting, security, and stormwater management. The developer, a nonprofit community development corporation, used energy-efficient appliances and lighting, did some low-water-use landscaping, and recycled nearly 90 percent of the construction and demolition material generated by the project. The estimated additional cost of the green elements in this $9.58 million project was $58,955 — almost entirely offset by $58,024 in ENERGY STAR® rebates.
NEI's systematic analysis of the costs and benefits of 16 of these projects found that the additional upfront cost of building green ranged from -18 percent to +9 percent and averaged 2.42 percent of total development costs, which were largely attributable to construction outlays. Over a projected 30-year life cycle, the benefits of building green were greater than the costs in all but two of the projects; the positive difference averaged over $15,000 per unit, due largely to reduced energy, water, and replacement costs. Most of these benefits will accrue to residents and owners over time. As a rule, developers did not realize a proportionate share of these benefits, although grants and rebates helped defray the extra expense of greening affordable projects. The study found few options other than long-term ownership through which developers could realize the fiscal benefits of green projects.
At the same time, social and market pressures to build green are gaining momentum. Leadership in Energy and Environmental Design (LEED) rating standards for building green homes have been released by the U.S. Green Building Council, and similar guidelines for green affordable housing are available from groups such as the American Institute of Architects, Green Communities, and Earthcraft House™. Guidelines such as those listed in the requirements of contractor bid packages submitted to the Housing and Redevelopment Division (HRD) of Santa Monica, California are further encouraging green building practices. Designed to let developers know they will be held accountable for making green affordable housing a priority, HRD's bid packages instruct bidders about the costs of recommended green practices as follows:
Some...involve no additional costs. Others may involve marginally or significantly higher initial costs. Please do not dismiss some items just because they may cost more, as the city may be willing to fund the increased cost in the interest of promoting a healthy environment.
LIHTCs Can Boost Greening
Federal low-income housing tax credits (LIHTCs) are also valuable tools for promoting the greening of affordable housing. The LIHTC program provides incentives to developers and investors in affordable rental housing. Each year, the IRS allocates housing tax credits to designated state agencies — usually state housing finance agencies — that award credits to developers of qualified projects through a competitive process. The state agency develops a plan to allocate the credits, giving priority to developments that will serve the lowest income families and remain affordable for the longest period. Developers may claim housing tax credits directly, but most sell them to raise capital for their projects. The buyer is either an investor or a syndicator who becomes part of the property ownership entity.
Two recent studies have sought to determine the extent to which LIHTCs are used to boost the greening of affordable housing. In 2005, Global Green USA released a study showing how states encouraged the use of green practices in affordable housing programs through the criteria they used to allocate LIHTCs.1 The researchers identified tax credit policies that rewarded four sets of green building practices: smart growth, energy efficiency, resource conservation, and health protection. The researchers found that only 17 states had established some criteria in each of the four categories, and concluded that significant potential exists in states' green building requirements.
Enterprise Community Partners (ECP) has also studied states' green affordable housing policies, as reflected in their plans for allocating LIHTCs.2 ECP's research focuses on five categories of greening practices: energy efficiency, sustainable site selection, resource conservation, enhanced indoor air quality, and other sustainable development practices. This review also goes beyond the formal allocation plans for LIHTCs, recognizing green elements in other relevant state regulations and policies. ECP concludes that all states address sustainable development in some way and that most states encourage affordable green building. After repeating this study in each of the past three years, ECP observes a trend in which green elements continue to gain a stronger position in state housing credit allocation plans.
Along with incentives to plan and build affordable green housing, developers have other ways of keeping the extra upfront costs low. The Partnership for Advancing Technology in Housing (PATH), a public-private partnership spearheaded by HUD and aimed at advancing housing technology, has explored the resources available for financing affordable green construction. Noting that developers can save in both the short and long term, PATH points to green building options that cost less right from the start of a project, such as using recycled materials and resource-efficient design and construction practices. A list of resources and web links to assist developers in all aspects of greening affordable housing, compiled by PATH, includes information on financing, tax credits, tax incentives, energy rebates, and discounts. To learn more, visit "Affordably Green" at www.pathnet.org/sp.asp?id=24008 where you will find this compendium.
1. The report Making Affordable Housing Truly Affordable: Advancing Tax Credit Incentives for Green Building and Healthier Communities is available at www.globalgreen.org/media/greenbuilding/qap_report_2006.pdf.
2. The report Greener Policies, Smarter Plans is available at www.practitionerresources.org/showdoc.html?id=65431.
