Green Affordable Housing: HUD Has Made Progress in Promoting Green Building, but Expanding Efforts Could Help Reduce Energy Costs and Benefit Tenants
Published: 2008-10-07T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.

section_title: Letter
paragraphs: 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.
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).  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.
subsections: section_title: Background
paragraphs: 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.
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.
section_title: HUD Has Taken Positive Steps to Promote Energy Efficiency, but Efforts to Encourage Voluntary Actions Have Limitations
paragraphs: 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.
subsections: section_title: HUD Has Made Progress in Implementing Its Energy Strategy and Offering Some Incentives
paragraphs: 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.
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. 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. 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. 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.  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. 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. 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. 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.
section_title: HUD Is Beginning to Address Limitations in Program Incentives and Management for Energy Efficiency in Certain Program Areas
paragraphs: 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.
subsections: section_title: Public Housing
paragraphs: 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. 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. 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.
section_title: Multifamily Housing
paragraphs: 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. 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.
section_title: Mortgage Insurance Programs
paragraphs: 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. 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.
section_title: Energy Performance Measures
paragraphs: 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). 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.
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.
section_title: HUD Has Not Implemented the Statutory Requirement for Energy- Efficient Products and Appliances in Public Housing
paragraphs: 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. 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.
section_title: The Office of Manufactured Housing Has Not Updated Its Code to Incorporate Energy Efficiency Requirements
paragraphs: 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. 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.
section_title: Some Updates to Guidance about Energy Efficiency Opportunities Are Incomplete
paragraphs: 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:  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.
section_title: Green Building Can Raise Up-front Costs and Provide Long- term Benefits, but HUD Lacks the Data to Identify Current Costs and Future Savings
paragraphs: 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.
subsections: section_title: Green Building Can Add to the Up-front Costs of Developing Affordable Housing
paragraphs: 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. 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.
subsections: section_title: Hard Costs of Green Building
paragraphs: 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.
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Rita. 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.
section_title: Soft Costs of Green Building
paragraphs: 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. 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. 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. 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. 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. 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.
section_title: Regional Differences and Green Building
paragraphs: 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. 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.
section_title: Green Building Practices Can Provide Long-term Financial Savings and Health Benefits
paragraphs: 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. 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.
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. 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.
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. 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).
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.
section_title: HUD Invests Significant Resources in Utilities, but Only Benchmarks Utility Use in a Portion of Its Assisted Housing Portfolio
paragraphs: 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. 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. 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. In addition, HUD does not currently collect either utility  costs or utility consumption data in a number of its assisted multifamily  properties.
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. 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. 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.  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. 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.
section_title: Standards and Financial Incentives Used Elsewhere for Green Building Could Provide Lessons for HUD
paragraphs: 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.
subsections: section_title: The Use of Green Building Standards by State and Local Governments, as Criteria for Affordable Housing Programs, Could Provide Lessons for HUD
paragraphs: 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. 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.
section_title: The Impact of HUD’s Energy-Related Incentives Is Unclear and HUD Offers Few Nonenergy Green Building Incentives
paragraphs: 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.
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. 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.
High Point, locted in the Delridge  neighorhood in Sttle, Washington was  originlly  716-nit public housing project  built dring World Wr II. With over $7  million in HOPE VI fnding, the Sttle  Housing Athority converted thi lighted  ublic housing property into  mixed income  commnity tht cover 4 city lock nd has  1,600 home ownerhip nd rentnit—hlf  ffordable housing, hlf mrket rte. The  green fere of the home in High Point  inclde the following: Energy Spplince,  wter- conerving fixtre, use of pint with  no nd low voltile orgnic compond, nd  dable hrd flooring inted of crpeting.   Alo, l rinwter dringe tem  was creted for the property to prevent  toxin—such as motor oil—from rnning off  the ite into  creek ner the  neighorhood.
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. 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.  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 Houin Tax Credit Cliforni dminiter federnd te  low-income tx credit progr. Throgh it  Qualified Alloction Pln (QAP) the te  provide two incentive to encoge the use  of green building prctice. Firt, the te  provide ximm of eight competitive  incentive point for pplicnt thgree to  either chooe from rry of green building  prctice or commit to certify the property  nder  green building ndrd—such as  LEED or Green Commnitie. Second,  projectn oin  4 percent increase in  the mont of fnding they re eligile to  receive if they gree to meet  higher energy  ndrd—5 percent above the te’s  energy code—or chooe three green building  prctice from  lit of higher cot prctice  lited in the QAP—such as greeing to  recycle 75 percent of the project’s  contrction 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. 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.
section_title: Conclusions
paragraphs: 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.
section_title: Recommendations for Executive Action
paragraphs: 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.
section_title: Agency Comments and Our Evaluation
paragraphs: 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 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.
section_title: Appendix I: Scope and Methodology
paragraphs: 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; 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.
section_title: Appendix II: HUD’s Legal Authority to Incorporate Green Building Requirements into Its Affordable Housing Programs
paragraphs: 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. 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.
section_title: Appendix III: Overview of Planned HUD Actions in Energy Strategy and HUD Reported Status
subsections: section_title: Provide incentives for energy efficiency in housing financed through HUD’s competitive grant programs
paragraphs: Numerous competitive HUD programs provide a  rating point for energy efficiency-related activities in  applications for funding.
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).
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.
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.
HUD has established numerous partnerships with  state and local governments.
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.
Feasibility assessments have been conducted for 20  multifamily properties.
Combined heat and power has been promoted at  conferences and in some HUD informational  materials.
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.
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.
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.
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.
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.
Little progress has been made on this action item.
Some training has been provided but the extent of  this training is unclear.
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.
HUD has made some efforts to promote energy  efficiency for multifamily housing but there is no  evidence of the outcome of these actions.
Early efforts to explore weatherization partnerships  nationally yielded limited results, but some state and  local initiatives have been implemented.
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.
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.
Explore asset management strategies and guidance for  energy efficiency in HUD-subsidized multifamily  properties.
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.
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.
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.
HUD has established numerous partnerships with  state and local governments.
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.
Through HUD’s Office of Healthy Homes and Lead  Hazard Control, HUD expects to implement this  measure in 2005.
section_title: Appendix IV: Multifamily Task Force Energy Conservation Recommendations
paragraphs: 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.
section_title: Appendix V: Examples of State, Local, and Nonprofit Green Building Affordable Housing Programs
subsections: section_title: 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.
paragraphs: 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.
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.
Vermont has developed green building standards that developers must use to receive LIHTC funding.
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.
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.
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.
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.
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.
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.
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.
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.
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.
GreenPoint Rated is a regional green building standard developed by the Build It Green organization  for use in the state of California.
section_title: Appendix VI: Comments from the Department of Housing and Urban Development
section_title: Appendix VII: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: 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.