Glenn Barnes is senior project director with the Environmental Finance Center based at the UNC School of Government.
Increasingly, units of government are taking an interest in improving the energy efficiency of public buildings as well as residential and business units throughout the community. Efficiency improvements reduce energy consumption, which in turn saves money and limits environmental impacts.
Recently, the US Environmental Protection Agency released guidance on energy efficiency in affordable housing, which may or may not be owned by the unit of government itself. This is the latest guide in their series on local government climate and energy strategy and is part of their larger state and local climate program.
According to the EPA, households across the country spend more than $160 billion on electricity, heating, and cooling annually in the United States, and these costs can be a burden especially for low-income residents. In fact, low income residents can pay 19 percent of their annual income for energy, compared to the national average of 4 percent.
Improving the energy efficiency of a home obviously can lower energy bills, and it may also increase the value of the home. For units of government, promoting energy efficiency in any home can help create jobs in the local area and reduce reliance on public energy assistance programs.
The guide outlines planning and design approaches for energy efficiency in new affordable housing units and in existing housing stock. It also offers strategies for successful program implementation and financing opportunities. Finally, the guide showcases two in-depth case studies of successful programs in Philadelphia and Boston.
If the affordable housing consists of rental units, governments should pay particular attention to solving the “split incentives” problem. Typically, building owners would pay for efficiency upgrades, but if they do not pay the energy bill for the rental unit, they cannot reap the financial benefits of the lower electricity bills. But the renters who would benefit from lower bills are unlikely to (and, in some cases, unable to) invest in permanent improvements to a building they do not own. Certain types of finance programs such as grants, rebates and on-bill financing address the split incentives program.