News & Press
Green Incentives on the Rise
Multi Family Executive
Developers tap into federal and local funding to green new and existing housing stock
July 28, 2009
Trying to green a property but can't find the money to make the budget pencil out? You might just be in luck. An increasing number of both federal and local incentives are coming down the pipeline to support energy efficiency and renewable energy projects.
Nearly every week, money is released to states throughout the country through the American Recovery and Reinvestment Act. Most recently, the U.S. Department of Energy (DOE) announced more than $141 million in Recovery Act funding for six states and territories: Hawaii, Maine, Nebraska, New Mexico, the Northern Mariana Islands, and Texas. Under DOE's State Energy Program, eligible activities include energy audits, building retrofits, education and training efforts, transportation efforts to increase the use of alternative fuels and hybrid vehicles, and new financing mechanisms to promote energy efficiency and renewable energy investments.
Additionally, developers also can tap into a number of other green funding sources through the stimulus act, including $3.2 billion of energy conservation blocks grants and the $1 billion community development block grant program.
There's more: Starting this month, the U.S. Treasury Department is now accepting grant applications for investments by businesses in alternative energy-generating assets. The grants can be taken in lieu of federal income tax credits that would otherwise be available for properties placed in service in 2009 and 2010. The grants are available for the Section 45 production tax credit or Section 48 energy tax credit and are worth up to 30 percent of the qualifying investments.
"This is big," says Richard Raeke, director of project financing at San Diego-based manufacturer Borrego Solar Systems. "We have been waiting since February to see what this program is going to look like and how difficult the application is going to be. Owners and developers can begin submitting applications August 1 and then get a check 60 days later from the Treasury for 30 percent of the cost of the system."
Boston-based WinnDevelopment, for one, plans to take advantage of the green grants. The firm, one of the largest affordable housing developers and managers in the country with a 70,000-unit portfolio, hopes to use the funding for additional solar initiatives. "We have been very interested in doing another solar project, but one of the reasons we haven't started it yet is because the tax credit market has fallen apart," says Heather Clark, Winn's director of green building. "I think [the Treasury grant] is going to be a big benefit because you don't have to have a third-party syndicator."
Clearly, funding opportunities are out there. The challenge is staying in the know. "The multifamily developers we are in contact with are really staying on top of all of these different pockets of money and staying in touch with local officials to see if they might get a share of community development block grants or energy efficiency and conservation block grants," Raeke says. "There is a lot of money coming down, and, as you can imagine, it's pretty hard to keep track of all the programs." (One good source Raeke recommends checking out: dsireusa.org, which offers a database of state incentives for renewables and efficiency.)
If you do your homework and tap into the right sources, it's possible, for instance, to install solar systems on multifamily buildings for no cost. EAH Housing, a San Rafael, Calif.-based nonprofit developer and manager with nearly 80 properties in California and Hawaii, figured out how to use new construction rebates coupled with traditional tax credit financing to pay for photovoltaic systems at all of the common areas on its new construction projects.
Retrofitting its housing stock, however, has proved more challenging. "EAH spent a lot of time trying to do this a couple of years ago and just couldn't get it done," says Andy Blauvelt, a project manager at EAH. That was until California introduced the Multifamily Affordable Housing Program, better known as MASH, this past spring to encourage the greening of existing affordable product. The program offers a rebate of $3.30 a watt for the common load (central lighting, AC, HVAC) and $4.00 a watt to offset any tenant load. "MASH, together with the extension of the federal solar tax credits gets, gets you most of the way there toward building your system; three-fourths of your system is paid for from those two programs," Blauvelt adds.
To finance that gap, EAH taps into a growing trend: A model in which a third-party group agrees to buy the system for the property and then sells the power at a reduced rate to the nonprofit. "As a nonprofit, we have to partner with someone who pays taxes to use that federal tax credit," Blauvelt says.
EAH aims to add solar to as many of its existing properties as it can by the end of the year. But Blauvelt admits that despite the incentives, the journey isn't easy for a nonprofit developer. "There are a lot more green incentives out there [today], but most of it is bewildering, and, honestly, it may not be worth the effort, he says. "It's very hard developing affordable housing and new money is great and critical, but it doesn't always make sense to try to spend the time to jump through all the hoops for the funding."
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