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Last Updated: June 1, 2012
Issue Background: Weatherization
Created in 1976, the Department of Energy (DOE) Weatherization Assistance Program (WAP) is designed to reduce the energy use of low-income households, a population that is especially hard hit by rising energy costs. Permanent energy savings are achieved through residential energy efficiency improvements and renewable energy technologies. DOE provides grant funding to states on the basis of relative need for assistance among low-income persons. States then fund a network of local community action agencies, nonprofit organizations and local governments that provide weatherization services. Funds are allocated to individual recipient households according to need-based criteria. Assistance is limited to $6,500 per dwelling unit for energy efficiency improvements and $3,000 for renewable energy technologies. The program is historically funded at around $200 million annually. Under the American Recovery and Reinvestment Act (ARRA; Public Law 111-5), WAP received an additional funding boost of $5 billion. To date, WAP has provided weatherization services to over 6.4 million low-income households. States have historically directed the bulk of WAP funds to single-family residences, although assistance for multifamily rental properties is specifically authorized by statute.
Current Policy Status
Affordable multifamily properties have difficulty accessing WAP funds. The primary hurdle is the impact of grant funds on projects financed with the Low Income Housing Tax Credit (Housing Credit). Enacted in 1986, the Housing Credit is a federal program that is the primary source of equity for affordable multifamily housing. This tax credit has financed the production of over 1.7 million units of housing since its inception, funding nine out of every ten apartments for low-income households. Housing Credit funds both new construction and rehabilitation activities.
Under federal tax law, any federal grant to a project financed with the Housing Credit results in a reduction in the “eligible basis,” which determines the amount of tax credits the project is able to receive. Consequently, Housing Credit projects are not able to utilize WAP funds in this form because the weatherization money does not add equity to the project. Furthermore, grants may also be considered taxable income, therefore increasing Housing Credit investors’ tax liability. Treating WAP funding as a grant therefore reduces the amount of equity that investors are willing to put into a project.
This hurdle can be overcome by allowing WAP funds to be disbursed as loans rather than grants. Providing states and subgrantees with the flexibility to structure WAP funds as loans will leverage private equity under the Housing Credit, expand the benefits of weatherization to a much wider range of low-income households, achieve large-scale energy savings, create green jobs and help states meet their quantitative production goals under ARRA. Unfortunately, DOE has determined that it does not have the authority to permit issuance of WAP funds as loans.
Legislative and Regulatory Priorities
Enterprise supports legislative and regulatory efforts to facilitate the use of WAP funds for multifamily housing. It is our interpretation that neither the WAP statute nor the regulations preclude the use of weatherization funds as loans. Therefore, Congress and DOE should issue guidance that gives states the flexibility to structure weatherization loans in ways that will avoid negative tax implications for Housing Credit-financed projects.
Publications and Resources
DOE/HUD Weatherization Assistance Program Guidance
- DOE maintains a partial list of qualified multifamily properties based on HUD and Department of Agriculture datasets as part of a larger effort to facilitate the weatherization of multifamily housing (for the latest update, read the April 20, 2011 edition of Capitol Express).
- In February 2011, HUD released updated guidance - to a January 2010 rule (10 CFR Part 440; RIN 1904-AB97) creating an expedited certification process that allows owners of HUD-assisted multifamily properties to self-certify eligibility for WAP funding (for more information, read the March 9, 2011 edition of Capitol Express)
- In December 2011, DOE previously released WAP guidance (Notice 11-4) -which stated that the department would provide technical assistance and prohibited states from expressly excluding the use of WAP funds for multifamily buildings.
- For the latest program funding levels, visit the Enterprise Budget and Appropriations webpage
- Weatherization Best Practices Fact Sheet from Enterprise and the National Housing Trust
- The Portfolio Approach to Green Retrofits: The Case of Enterprise's Multifamily Weatherization Program in New York, Enterprise Green Communities
Public Comment on Weatherization of Multifamily Properties
- On March 22, 2010, Senior Vice President, National Initiatives and Innovation Naomi Bayer provided Public Comment on Weatherization Assistance Program Sustainable Energy Grants.
- On March 26, 2009 Enterprise, the National Housing Trust, and NeighborWorks America sent a memo to the Office of Management and Budget, DOE and HUD on Recommendations to Maximize Job Creation Opportunities by Leveraging Department of Energy ARRA Funding in Multifamily Housing
- DOE Weatherization Assistance Program
- DOE Weatherization and Intergovernmental Program
- DOE Guidance on HUD Multifamily Properties Eligible for Weatherization Assistance
- Factsheet on DOE and HUD Partnership for Multifamily Weatherization
- HUD Data on Properties Eligible for WAP Funding (March 2010)
- National Housing Trust (NHT)
- National Housing Trust Use of Neighborhood Stabilization Program (NSP) and Weatherization Funds to Preserve and Improve Multifamily Housing; NHT (case studies of projects undertaken by the NHT-Enterprise Preservation Corporation)
- Weatherization Assistance Program Technical Assistance Center