On August 21, 2008, Boston City Mayor Thomas M. Menino announced a new Green Affordable Housing Program, designed to develop affordable housing that, through the use of green technologies and materials:  (1) results in low maintenance and energy costs for renters and homeowners, (2) promotes the health and well-being of residents, and (3) minimizes the environmental impacts of development by conserving water, energy, and other resources, and reduces greenhouse gas emissions.  The City Department of Neighborhood Development’s Design Guidelines now include green and energy efficiency standards that require development projects to be LEED Silver certifiable as well as meet ENERGY STAR standards.  In January 2007, Boston stepped up to the forefront of the green building movement when it became the first major U.S. City to adopt a green building article in its zoning code, requiring all private development to meet LEED Certified standards.Green building is key to combating climate change.  As recently studied, buildings in the U.S. account for:

• 40 percent of total energy use,
• 12 percent of the total water consumption,
• 68 percent of total electricity consumption,
• 38 percent of total carbon dioxide emissions, and
• 60 percent of total non-industrial waste generation.

On average, green buildings reduce energy use by approximately 30 percent, carbon emissions by 35 percent, water use by 30 to 50 percent, and results in waste cost savings of 50 to 90 percent.

Merging green building with affordable housing can make significant strides in addressing the nation’s environmental and socio-economic problems at once.  “Green and affordable must be one and the same,” testified Edward Norton, trustee of the Enterprise Community Partners, Inc., before the House Select Committee on Energy Independence and Global Warming.  As Norton explained,

There are roughly 25 million households with annual incomes of $25,000 or less in the country…. Rising home energy costs have far outpaced income gains for very low-income people in recent years.  Utility bills often impose a financial hardship on these households, forcing many to make desperate tradeoffs between heat, electricity and other basic necessities…. Low-income people and communities suffer disproportionately from housing challenges, energy costs and the effects of climate change.  We can make progress on all these issues, create green jobs and lock-in long term environmental benefits by making green affordable homes a national priority.

A major leader in the affordable housing industry, Enterprise Community Partners, Inc., has spearheaded a Green Communities Initiative since 2004.  To date, Green Communities has invested more than $570 million to support 250 developments with more than 11,000 green affordable units complete or underway - a huge leap forward for environmental justice.

Nonetheless, upfront construction costs have held back other potential green affordable housing developers.  Research shows that the average green building pushes costs up about 2 percent, and that, in the affordable housing sector, the average “green premium” in total development costs is about 2.42 percent.  These costs, however, are more than recouped through reduced expenses in follow-on years.  From a life-cycle perspective, the benefits of green building far outweigh the initial investment - through energy and water utility savings, decreased operating expenditures, reduced maintenance costs due to the use of more durable materials.  Residents also receive improved indoor air quality and comfort, as well as significant health benefits.  For the affordable housing developer, the ultimate return on investment can be multifold, in part because the sustainable building material or technology lasts much longer than its conventional counterpart.

Construction costs aside, project financing is the other big concern.  In this regard, the government may be able to help.  The Federal Energy Policy Act of 2005 established federal tax credits for energy efficiency and photovoltaic systems.  Increasingly, state and local governments are providing their own solar and other green development tax credits.  Electricity, gas, and water utilities now offer rebate programs for energy efficient equipment, renewable energy installations, and water-saving technologies.  Beyond government assistance, there is a budding trend in green building financing and mortgages.  For example, some banks are looking into issuing green mortgage-backed securities that would give construction-financing breaks to developers of LEED certified buildings.  Finally, developers can also approach foundations for additional funding opportunities.  As an example, for the Boston Green Affordable Housing Program, the Massachusetts Technology Collaborative provided a $2 million grant, which was awarded to six affordable developments around Boston.

In conclusion, recognizing the far-reaching benefits of green affordable housing and overcoming the traditional economic barriers to their development merely takes us to the threshold.  In the years ahead, policy-makers, developers, and the design community must continue to work together to make green and affordable one and the same as a matter of course.

For further information about this topic, please contact Akin Gump.