HUD Urges Energy Reduction Measures

June 10, 2011

As energy costs continue to rise, the Department of Housing and Urban Development is urging for senior housing units to become more energy-efficient. HUD’s Fiscal Year 2010-2015Strategic Plan called for better energy efficiency in all of its housing units, which would bring about an overall reduction in energy costs and thus allow more rental subsidies.

HUD’s Office of Policy Development & Research recently published a report titled Enhancing Energy Efficiency and Green Building Design in Section 202 and Section 811 Programs, which details ways to conserve energy in an effort to cut back on operating costs. Section 202, Supportive Housing for the Elderly program, functions by having tenants pay rent of about 30% of their adjusted monthly incomes, with HUD’s Section 8 contributing rental assistance to cover any disparity between rental operating costs and what the tenant can afford.

Rising energy expenses increase operating costs and limit the section’s ability to meet seniors’ housing needs, however, causing increased demand for more HUD subsidies.

“Over time, it is expected that fewer new units will be funded because the increasing cost of subsidizing the existing portfolio of assisted housing will consume an ever-larger portion of the annual appropriation,” says HUD. This is troublesome news since there is still a great need for affordable housing for senior citizens, as “A 2006 AARP study estimated that, for every Section 202 unit that becomes available,10 elderly households could benefit from that unit.”

If HUD is able to convert its existing units into more energy-efficient models while constructing new, environmentally-friendly housing, it will allow government subsidies to provide more Section 202 housing. The department is collaborating with the U.S. Environmental Protection Agency to encourage “the incorporation of energy efficiency measures in the design, construction, rehabilitation, and refinancing of Section 202 projects,” says HUD.

HUD planned requirements for green measures in its Section 202 units to go into effect in 2011, saying, “At a minimum, energy efficiency strategies and water conservation appliances and fixtures must be incorporated in the design, construction, and operation of all projects. HUD provides an incentive to encourage sponsors and owners to develop their projects using the principles of green building design.”

HUD’s 2010 Notice of Housing Funds requires owners and sponsors of new Section 202 construction to “ensure that low-rise multifamily developments (up to three stories) meet or exceed the requirements of EPA’s ENERGY STAR qualified homes” in order to receive funding. Additionally, HUD says, “Beginning with the 2010 NOFA, sponsors and owners must install ENERGY STAR-labeled appliances, perform pre- and post-construction energy audits, and incorporate conservation techniques in their projects.”

In some cases, lower utility costs will have an effect on the amount of funds Section 8 needs to offer. “Under budget-based adjustments to Project Rental Assistance Contracts or Section 8, reductions in utility costs will result in a reduction in the amount of rental assistance provided at the next renewal. The reduction is commensurate with the utility cost savings, so the owner will not be harmed by the change,” the HUD finds. “However, none of the benefits of the savings go to the owner or the property; instead, it is the Section 202 program as a whole that benefits.” In some cases where energy units are individually metered and thus paid for by tenants, they would have an economic incentive to conserve on utilities, according to the report.

In its report, HUD lists several strategies for implementing energy efficiency and green measures into Section 202 projects, including energy audits, leveraging additional funding, and educating occupants and influencing their behavior in regards to water and energy conservation. Increased energy efficiency of Section 202′s units will serve to expand the amount of subsidies HUD is able to grant for senior housing subsidies.

For more information on how your firm’s work on HUD projects may qualify for the Section 179D Deduction, please contact Concord Managing Member Dennis J. Stilger, Jr. either via email at or at 888-897-5445 Today!

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