Key Outcomes

Stakeholder feedback was gathered between January 2023 – June 2023 via interview. This feedback indicated building design practices were already aligned with ENERGY STAR ® guidelines and ZERH and Phius+ standards were less familiar.  The pilot opted to focus on these less familiar building standards to understand market barriers and opportunities when adopting higher-performance building standards.
 

The pilot offered a design team incentive and project completion incentive. The design team incentive was intended to offset the additional costs of modifying a building design to adhere to certification requirements. An incentive of $7,000 was offered for ZERH and $10,000 for Phius+. An incentive was offered upon project completion and receipt of final certification. The incentive was at the rate of $3,000/unit for ZERH or $4,000/unit for Phius+. Projects enrolled in Focus on Energy’s Energy Design Assistance (EDA) program were precluded from participating in the pilot unless there were additional savings identified because of the technical assistance received through the pilot.
 

The pilot launched via webinar in October 2023. The webinar introduced the pilot offering to developers who would potentially participate in their next project.  Projects were recruited for the pilot through direct outreach to developers awarded Low Income Housing Tax Credits (LIHTC). Three LIHTC projects expressed interest in the pilot, however they were already enrolled in EDA and no additional savings were able to be identified through the pilot support. Recruitment efforts continued through May 2024 and no projects were identified fitting within the pilot’s timeframe.
 

Lessons Learned

• Recruitment Timeline: The best time to recruit projects was prior to submission of the LIHTC application. Once the LIHTC application was submitted and/or awarded, budgeting and design considerations have been decided and little opportunities remain for large efficiency gains.  A flexible funding structure may be able to better accommodate the long development and financing timelines of affordable housing development. 

• Market Awareness: The industry is not familiar with the requirements or the process of third-party certification. Design teams were not eager to pursue energy certifications as the additional effort increases costs, can delay project execution, and adds complexity to their processes with a low-level of certainty it will provide benefits. Design teams were especially reluctant to build to Phius+ certification as the requirements and processes were more stringent than ZERH.  

• Policies and Tax Credits:  Policies and tax credits are the greatest drivers of building design, making energy efficiency incentives an afterthought. The impending Home Energy Appliance Rebates (HEAR) added another element of complexity as they had the potential to provide substantial incentives for heat pump technologies and would reduce the eligible cost basis used for calculating the LIHTC award.  Due to the uncertainty about how applying for HEAR and the incentives provided by this pilot may affect customers’ LIHTC awards, the customers were unwilling to jeopardize their main source of funding to pursue potential incentives and the benefits of certification.  

Working with key stakeholders such as WHEDA and local housing development authorities to align performance requirements could help increase market interest in adopting more efficient building practices and participation in energy efficiency programs. 

• Eligibility Requirements: While LIHTC funds most new affordable housing, the complicated financing structure, long development timelines, and investor aversion to risk limits the likelihood for more innovative building practices. Consider other programs supporting affordable housing such as HOME American Rescue Plan, Community Development Block Grants, USDA Rural Housing, Section 8, or local programs like inclusionary zoning.

Recommendations and Next Steps

This pilot was discontinued due to the challenges in recruiting qualifying projects. Focus on Energy is evaluating expanding the current Energy Design Assistance offering to include enhanced incentives for affordable housing properties without requiring third-party certification. Additional training and education is being explored to help increase market awareness and understanding of the varying high-performance building certification pathways.
 

Questions?

Contact the Future Focus team at futurefocus@focusonenergy.com