Section 5.1 of the Sustainable Affordable Housing Management Print/eBook combo from Vendome Real Estate Media, Taking Advantage of HUD Energy-Efficiency Incentives.

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SECTION 5.1
Taking Advantage of HUD Energy-Efficiency
Incentives
The president’s Better Buildings Challenge began in 2013 with
$2 billion in financing commitments from the private sector for
energy-efficiency updates to commercial buildings. Since then, the
U.S. Department of Energy (DOE) and HUD have expanded the
challenge to multifamily housing to cut energy waste and eliminate
market and technical barriers to greater site efficiency in housing.
The Better Buildings Challenge is a voluntary leadership initiative
that asks building owners and managers to make a public commit-
ment to energy efficiency. This
expansion recognizes the role that
creating healthy housing and
increasing energy efficiency can
play in reducing air and carbon
pollution, fostering healthy com-
munities, and improving the
financial condition and stability of
the country’s housing stock, while
creating jobs and building a stron-
ger economy.
Over 87 multifamily housing part-
ners so far, representing roughly
200,000 units, have committed to
the challenge. HUD and DOE are

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5.1: HUD Energy-Efficiency Incentives
partnering with owners of market-rate multifamily housing, public
housing authorities, low-income housing tax credit property owners,
and HUD-assisted multifamily property owners. The multifamily
housing partners commit to creating strategies to increase energy
efficiency in a variety of ways, including through lighting improve-
ments, heating and cooling system upgrades, rooftop solar instal-
lations, new financing for energy retrofits, and green construction.
Their goal is to reduce energy consumption by at least 20 percent
during the next 10 years.
Requirements to Participate
BBC multifamily partners can be owners and managers of market-
rate (unsubsidized) multifamily housing, public housing, Low-Income
Housing Tax Credit properties, and/or HUD-assisted multifamily
properties. Those participating in the challenge commit to:
• Sign a Partnership Agreement with both DOE and HUD (if
you are interested in joining, email to betterbuildingschal-
lenge@ee.doe.gov)
• Conduct an energy use assessment of your site and pledge
an organization-wide energy savings goal of 20 percent over
10 years
• Develop an energy reduction plan within six months of
joining the program
• Showcase an energy-efficiency project and launch that
project within 12 months
• Share information about the data and approaches for your
energy-saving efforts
BBC partners must give HUD data for each building as a whole,
using a tracking software tool like, EPA’s ENERGY STAR Portfolio
Manager or another similar format that tracks energy and water
usage data and share data.
For more information on how to collect and track energy use data, see
• Section 1.2: Charting Progress with Data Collection, Benchmarking &
Energy Audits

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5.1: HUD Energy-Efficiency Incentives
HUD Energy-Efficiency Incentives for BBC Multifamily Partners
HUD’s Office of Multifamily Housing Programs offers a number of
incentives to help make it easier for sites to participate and pay for
some of the necessary energy- and water-efficiency improvements.
Management fee incentive. HUD expands the add-on fees sites can
claim under Management Agent Handbook 4381.5 to include eligible
energy- and water-efficiency activities to pay for the additional cost
of best practices in energy management. Given BBC’s requirement
for data reporting, this incentive will alleviate some of the cost bar-
riers associated with entering the competition. The eligible activities
will include the cost of data collection, input, benchmarking, and
potentially green operations and maintenance activities. Specifically,
applicable costs include:
• Development of a green operations and maintenance plan,
such as staff or consulting costs to develop the plan, train-
ing and certifications, and technical assistance
• Resident engagement and education to encourage energy
and water efficiency
• Utility data information, including technical support, utility
bill paying and auditing services, costs of staff or third
party to collect and input site and resident utility data, and
fees to utility companies up to $100 per building per year
• Installation and use of energy data benchmarking and
reporting software, including cost of software and training,
benchmarking services and subscriptions, and technical
support
The fee submitted for each is limited to a total of $1 per unit per
month or a total annual per site fee of $5,000 per year.
In two memoranda to staff, dated April 24, 2014, and Sept. 19, 2014,
HUD details the eligible fees, and spells out the application process
for submitting the Management Certification Form—use either the
“Project Owner’s Certification for Owner-Managed Multifamily
Housing Projects” (HUD Form 9839-A), or the “Project Owner’s
and Management Agent’s Certification for Multifamily Housing

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5.1: HUD Energy-Efficiency Incentives
Projects for Identity-of-Interest or Independent Management
Agents” (HUD Form 9839-B), depending on which one applies to
you. See the memoranda, HUD Memorandum, Multifamily Better
Buildings Challenge Incentive: Allowable Management Add-On Fees,
April 24, 2014 and HUD Memorandum, Multifamily Better Buildings
Challenge Incentive: Allowable Management Add-On Fees Revised,
Sept. 19, 2014, for more information.
Project Rental Assistance Contract (PRAC) shared savings incen-
tive. HUD allows BBC Section 202 and Section 811 PRAC partners
to invoice energy savings payments associated with property and
resident utility allowance reductions as an eligible expense to the
property’s budget. PRAC properties typically have a more difficult
time recapitalizing, and their budget rent-setting process allows
HUD to include reasonable eligible expenses. Many PRAC sites are
older and in need of energy-efficiency updates to bring them up to
date, but these sites are often not in a position to take on new debt
to make these energy- and water-saving improvements. Also, there is
little financial incentive for improving the financial performance on
these sites, because generally, the operating cost savings that PRAC
properties would realize from making such efficiency improvements
get absorbed into a residual receipts account and applied toward
future rent increases, instead of eliminating the financial incentive
for improved financial performance (a.k.a. the split incentive
between the site owner and HUD).
To help BBC PRAC partners meet their energy-reduction commit-
ments HUD established the PRAC Shared Savings Incentive (SSI).
This incentive targets a segment with great need by allowing owners
to recoup 100 percent of their energy savings in their budget to
service debt or access surplus cash associated with energy savings
installed to reach the Better Buildings Challenge of 20 percent
consumption savings. This incentive addresses the split incentive
between HUD and PRAC owners who pay all, or a portion of, a
site’s utility costs by allowing owners to capture savings from energy
and water improvements over a 12-year payback period. PRAC sites
where residents pay 100 percent of the utilities are not eligible.

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5.1: HUD Energy-Efficiency Incentives
HUD Memorandum to staff, dated Sept. 26, 2014, spells out the
eligibility and submission requirements and supporting documen-
tation of energy savings you must provide to take advantage of this
incentive, and includes several sample budget narratives. HUD will
not provide sites using this incentive any additional funding for
the retrofits, but it may approve reserve for replacement or sponsor
capital releases to be paid back over the 12-year period.
Expedited reserve for replacement incentive. HUD requires most
assisted housing sites to maintain a reserve for replacements account
so funds are readily available to pay for repair and replacements
of major systems and capital items. Most sites that are required to
maintain reserves must get HUD’s prior approval before using the
reserves. These rules are set out in the site’s regulatory agreement
and/or housing assistance payments (HAP) contract, and HUD
Handbooks 4350.1, par. 4-2 and Handbook 4370.2, par. 2-7.
HUD’s Office of Multi-Family Housing will approve requests for
certain stand-alone green measures (that are not part of a larger
rehab) with a clear set of parameters and schedule for BBC partic-
ipants in order to enable streamlined green rehab. These pre-ap-
proved measures would not require a full review and approval in the
field, which can be time consuming. In a memorandum to staff, dated
June 12, 2014, the HUD Office of Multifamily Housing Programs
spells out the eligibility and application process for BBC partners
to get expedited access to their reserve for replacement account
funds needed to fund energy- and water-efficiency improvements.
Requests must be submitted by one of two paths for approval:
1. Energy- and water-efficiency improvements are already
identified as part of a site’s Green Capital Needs Assess-
ment (CNA), which HUD defines as a traditional site CNA
that includes an energy audit and utility consumption
baseline; or the improvements are identified and on sched-
ule as part of a site CNA, exceed code requirements and
will contribute to the water and energy savings goals at the
site (for example, your CNA already includes a new boiler
replacement this year and you opt to replace it with one
that exceeds code requirements and will contribute to the

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5.1: HUD Energy-Efficiency Incentives
site’s water and energy savings). HUD will approve path
one requests within seven business days of receipt.
2. The improvement is outside of the site’s green or other
CNA but, subject to HUD’s approval, is intended to create
water and energy savings. See the memorandum for the
documentation requirements, which include a reserve anal-
ysis to ensure that there are enough funds to meet the site’s
capital needs; modeling, software, or third-party analysis
or measure of expected savings; and a printout of the site’s
BBC profile page at http://www4.eere.energy.gov/challenge/.
HUD will approve path two requests within 15 business
days of receipt.
For both types of requests, follow other HUD Handbook 4350.1
rules and use Form 9250. If you expect that the energy and water
savings associated with the improvements you intend to fund fully
or partially with replacement reserves to exceed 20 percent, submit
your site as a “Showcase Project” through DOE’s Better Buildings
Challenge.
On-bill financing and repayment incentive. HUD invites BBC
participants to send proposals if they want to use on-bill financing
or repayment to finance energy retrofits. Currently, HUD neither
expressly permits nor prohibits owners from on-bill financing,
repayment, or utility tariff programs, but because HUD regulations
might be interpreted to require HUD’s approval, HUD wants
owners and lenders to seek clarification before moving forward with
on-bill options. This incentive invites BBC participants to propose
ways to use on-bill financing and repayment for energy and water
improvements at their sites, when applicable and available.
For more information about on-bill financing, see
• Section 5.2: Exploring 12 Categories of Financing for Renewable Energy
& Efficiency Improvements
Mark-to-market (M2M) incentive. HUD provides an incentive
performance fee increase for meeting specific energy- and water-
efficiency requirements. Several owners have expressed a concern

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5.1: HUD Energy-Efficiency Incentives
that older M2M properties undergoing rehab do not get proper
incentives to green their properties. Generally, only existing M2M
properties that achieve a green certification via rehab (such as
LEED and Enterprise Green Communities) are eligible for the
Incentive Performance Fee (IPF) that increases owner distribution.
This policy is inconsistent with the policy for properties entering
the M2M Green Initiative for the first time. This incentive allows
existing M2M properties that adopt 75 percent of the green energy
measures and all the water conservation measures recommended
in the Green PCNA access to the IPF, consistent with the policy for
first-time M2M Green Initiative properties.
Increased distributions. HUD will temporarily offer additional
distributions for the 10 years of the BBC to for-profit and nonprofit
owners of Section 8 properties that participate in the challenge and
meet their targets: Up to 100 percent for nonprofit Section 8 owners.
This helps owners of Section 8 properties to capture excess cash
associated with energy savings to which they otherwise would not
be able to get access. There are accountability checkpoints created
to ensure owners are reaching their energy-savings targets, and the
distribution will be on a site-by-site basis.
Other Ways HUD Helps BBC Multifamily Partners
HUD also offers BBC partners other resources to help them plan
and meet their energy and water efficiency targets:
Ongoing collaboration and technical assistance. The program has
$1.5 million in technical assistance funds available and each partner
is assigned to a BBC Account Manager that conducts quarterly
check-in calls and is available to assist as needed on topics such as:
• Energy and site assessments
• Design specifications, construction review
• Green operations and maintenance, resident engagement
• Financing (e.g., power purchase agreements, leveraging
capital sources, energy performance contracts)
• Portfolio planning

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5.1: HUD Energy-Efficiency Incentives
• Benchmarking and energy management
HUD also offers webinars and an annual conference for
participants.
Referral to government and industry resources. BBC Account
Managers share the latest available information from other gov-
ernment and industry organizations. They connect “Partners” with
energy-efficiency stakeholders such as government, industry, service
providers, financial institutions, and utilities, as well as “Allies” that
dedicate resources to help Partners achieve their goal.
Public recognition. HUD and DOE will nationally recognize the
success of BBC partners and offer preference in certain HUD
competitive funding processes.
Owners may contact HUD at MFBBC@hud.gov for more details and
with any questions. Or email betterbuildingschallenge@ee.doe.gov.
Use Free Tool to Find Out Which Energy-Saving Targets
Can Help You Meet the BBC
For an easy and free way to find out which energy and water
improvements can help you and are most cost effective to reach or
exceed the 20 percent target for the Better Buildings Challenge,
try the EZ Retrofit Tool. Developed by the Stewards of Affordable
Housing for the Future (SAHF) and Bright Power, Inc., through a
HUD and DOE grant, the Benchmarking and Audit tool is free for
owners and managers of multifamily housing sites. Using building
data input by the owner or manager, the tool gives you:
• An assessment of the energy and water savings potential for
a building based on comparison with similar buildings in
the same geographic area, using two metrics: site energy use
intensity and site water use intensity
• Detailed information on proposed retrofit improvements
including consumption and cost savings, installation cost
estimates, expected useful life, and payback period
• Summary information for a package of measures selected

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5.1: HUD Energy-Efficiency Incentives
• Graphs of utility costs and consumption for proposed
retrofit improvements
The tool is a Microsoft Excel-based file and has all user instructions
and reference materials embedded within it. They can be accessed
by clicking on the “How Do I Do It?” button after opening the Excel
file. SAHF created a webinar that gives you an overview of the EZ
Retrofit tool, a demonstration, and a discussion by an owner and an
energy engineer about their experiences using the tool.
SAHF can also help you learn about opportunities for financing any
major improvements the tool may recommend. Email ezretrofit@
sahfnet.org.
RESOURCES
Department of Energy (DOE), Better Buildings Challenge, Multifamily
Partners
EPA ENERGY STAR Portfolio Manager
EZ Retrofit Tool
HUD Memorandum, Better Buildings Challenge Multifamily Partner
Incentive: Expedited Reserve for Replacement Account Releases to
Support Energy and Water Savings, June 12, 2014
HUD Memorandum, Better Buildings Challenge Multifamily Partner
Incentive: PRAC Shared Savings, Sept. 26, 2014
HUD Memorandum, Multifamily Better Buildings Challenge Incentive:
Allowable Management Add-On Fees, April 24, 2014
HUD Memorandum, Multifamily Better Buildings Challenge Incentive:
Allowable Management Add-On Fees Revised, Sept. 19, 2014
HUD, Technical Assistance (TA) Request for Better Buildings Challenge
Partners