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entitled 'Green Affordable Housing: HUD Has Made Progress in Promoting 
Green Building, but Expanding Efforts Could Help Reduce Energy Costs 
and Benefit Tenants' which was released on October 7, 2008. 

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Report to the Chairman, Subcommittee on Transportation, Housing and 
Urban Development, and Related Agencies, Committee on Appropriations, 
House of Representatives: 

United States Government Accountability Office: 

GAO: 

October 2008: 

Green Affordable Housing: 

HUD Has Made Progress in Promoting Green Building, but Expanding 
Efforts Could Help Reduce Energy Costs and Benefit Tenants: 

GAO-09-46: 

GAO Highlights: 

Highlights of GAO-09-46, a report to the Chairman, Subcommittee on 
Transportation, Housing and Urban Development, and Related Agencies, 
Committee on Appropriations, House of Representatives. 

Why GAO Did This Study: 

Rising energy prices and concerns about the environment have fueled 
interest in “green building”—resource-efficient construction and 
maintenance practices that reduce adverse impacts on the natural 
environment. The Department of Housing and Urban Development (HUD), 
spends an estimated $5 billion on energy costs annually in its 
affordable housing programs and has recently taken steps to reduce its 
energy costs. GAO was asked to review (1) HUD’s efforts to promote 
energy efficiency in its programs and the use of performance measures, 
(2) potential costs and long-term benefits of green building in HUD’s 
affordable housing programs, and (3) lessons learned elsewhere that HUD 
could use to promote green building. GAO reviewed HUD program documents 
and studies on green building, interviewed HUD officials and industry 
representatives, and made site visits to locations that use green 
building practices. 

What GAO Found: 

HUD has taken steps to promote energy efficiency by providing 
information, training, and technical assistance, but its efforts have 
limitations. HUD has also provided some financial incentives to promote 
green building, including energy efficiency, for public housing and for 
a small segment of the multifamily properties HUD supports. 
Additionally, HUD has developed some performance measures to track the 
progress of its energy efficiency efforts. However, HUD has not begun 
requiring energy-efficient products and appliances in its public 
housing properties, as required by statute. HUD has also not 
implemented major energy efficiency updates to the building code for 
manufactured housing in more than a decade. Without such requirements 
and updates, public housing authorities may be spending more on utility 
expenses than is necessary and manufacturers may lack an incentive to 
build energy- efficient manufactured homes. 

Green building practices can increase up-front costs but may also 
provide long-term benefits, including financial, environmental, and 
health benefits. But the benefits in rental housing may not go to the 
party incurring the up-front costs, potentially discouraging the use of 
green building practices in a significant segment of affordable 
housing. HUD has partnered with others to develop a utility 
benchmarking tool for identifying savings in public housing, but only 
for the public housing portfolio. Utility benchmarking is often used to 
assess energy consumption and to help identify properties that could 
improve their energy efficiency. HUD does not collect the data needed 
to understand its current utility costs or future savings possibilities 
in some parts of its multifamily housing portfolio. HUD officials told 
GAO that developing a utility benchmarking tool for this portfolio 
would be helpful but could be costly to HUD and property owners. 
However, a 2003 study by Harvard University—and funded by HUD—found 
that collecting consumption data in insured privately owned multifamily 
housing would not be unreasonably burdensome. Without such a tool, HUD 
cannot fully understand the utility costs for over 1.6 million units in 
its portfolio and may be missing opportunities to reduce utility 
expenses for some properties. 

HUD has focused its attention on incentives that encourage energy 
efficiency but has few financial incentives, such as those used by 
states, to encourage other green building practices such as water 
conservation. Many state and local governments have used financial 
incentives to promote the development of green affordable housing. For 
example, in the scoring systems for some competitive funding, 
applicants are awarded additional incentive points for energy and 
nonenergy green building practices. Without financial incentives for 
nonenergy green building, HUD is likely missing opportunities to make 
its affordable housing more resource efficient and environmentally 
friendly. 

What GAO Recommends: 

GAO recommends, among other things, that HUD ensure the completion of a 
regulation to require energy-efficient products and appliances in 
public housing, work to implement updates to the building code for 
manufactured housing, consider developing a utility benchmarking tool 
for multifamily properties, and consider providing nonenergy green 
building incentive points in some grant programs. In written comments, 
HUD welcomed GAO’s recommendations but had concerns with certain 
aspects of the report. 

To view the full product, including the scope and methodology, click on 
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-09-46]. For more 
information, contact William B. Shear at (202) 512-8678 or 
shearw@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

HUD Has Taken Positive Steps to Promote Energy Efficiency, but Efforts 
to Encourage Voluntary Actions Have Limitations: 

Green Building Can Raise Up-front Costs and Provide Long-term Benefits, 
but HUD Lacks the Data to Identify Current Costs and Future Savings: 

Standards and Financial Incentives Used Elsewhere for Green Building 
Could Provide Lessons for HUD: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: HUD's Legal Authority to Incorporate Green Building 
Requirements into Its Affordable Housing Programs: 

Appendix III: Overview of Planned HUD Actions in Energy Strategy and 
HUD Reported Status: 

Appendix IV: Multifamily Task Force Energy Conservation 
Recommendations: 

Appendix V: Examples of State, Local, and Nonprofit Green Building 
Affordable Housing Programs: 

Appendix VI: Comments from the Department of Housing and Urban 
Development: 

Appendix VII: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: Examples of Green Building Standards: 

Table 2: Objectives in HUD's Energy Strategy: 

Table 3: HUD Fiscal Year 2008 Annual Management Plan Goals: 

Table 4: Payback Period for Energy Star-labeled Products and 
Appliances: 

Table 5: HUD Utility Expenses for 2007: 

Figure: 

Figure 1: Example of Possible Distribution of Costs and Benefits for 
Green Building Practices: 

Abbreviations: 

CDBG: Community Development Block Grant: 

DOE: Department of Energy: 

ECM: energy conservation measure: 

EEM: Energy Efficient Mortgage: 

EPA: Environmental Protection Agency: 

ESCO: energy services company: 

FHA: Federal Housing Administration: 

GSA: General Services Administration: 

HUD: Department of Housing and Urban Development: 

LEED: Leadership in Energy Efficiency and Design: 

LIHTC: Low-Income Housing Tax Credit: 

LISC: Local Initiative Support Corporation: 

NOFA: Notice of Funding Availability: 

OAHP: Office of Affordable Housing Preservation: 

OGC: Office of General Counsel: 

PATH: Partnership for Advancing Technology in Housing: 

PHA: public housing authority: 

PIH: Office of Public and Indian Housing: 

VOC: volatile organic compound: 

[End of section] 

United States Government Accountability Office: 

Washington, DC 20548: 

October 7, 2008: 

The Honorable John W. Olver: 
Chairman: 
Subcommittee on Transportation, Housing and Urban Development, and 
Related Agencies: 
Committee on Appropriations: 
House of Representatives: 

Dear Mr. Chairman: 

Rising energy costs and concerns about health and the environment have 
fueled interest in "green building"--resource-efficient construction 
and maintenance practices that reduce adverse impacts on the natural 
environment--in both the private and the public sectors. Residential 
buildings in the United States accounted for an estimated 22 percent of 
the nation's total energy consumption and an estimated 18 percent of 
the country's total carbon emissions in 2005, a fact that could 
contribute to long-term global climate change. The costs associated 
with this energy usage are particularly significant for low-income 
individuals. According to HUD officials, the Department of Housing and 
Urban Development (HUD) spends an estimated $5 billion--more than 10 
percent of its budget--on energy costs, either directly in the form of 
public housing operating subsidies or indirectly through utility 
allowances and contracts for assisted multifamily housing. Many of 
these expenditures are for older properties, which often have higher 
energy-related operating costs than newer ones. Residents of some HUD- 
assisted housing who are responsible for their own utilities are also 
affected by high energy prices. 

Energy efficiency and other forms of resource conservation are relevant 
to most HUD housing programs, which incur energy costs as well as other 
resource expenses (such as water expenses and building materials for 
new or existing housing units). For example, HUD administers federal 
aid to local public housing authorities (PHA) that manage public 
housing developments for about 1.2 million low-income households. In 
addition, HUD assists privately owned and operated properties to help 
provide affordable housing for over 3 million households. This housing 
includes properties that get some form of rental assistance from HUD, 
properties whose mortgages are insured by HUD, and properties that are 
financed by HUD. HUD also administers billions of dollars in grant 
programs to local jurisdictions that support a range of activities, 
including the development of housing and rental assistance, and 
federally regulates all new manufactured homes under a national 
building code. 

In 2001, HUD established an Energy Task Force, which adopted an Energy 
Action Plan aimed at promoting energy efficiency in public and assisted 
housing and in housing financed through its competitive and formula 
grant programs. As part of this plan, HUD has disseminated information 
and provided training on energy efficiency, offered incentives for 
green building practices in some programs, and tracked energy 
performance measures for some of its programs. In 2006, HUD outlined 
its Energy Strategy, which updated the Energy Action Plan in compliance 
with a provision in the Energy Policy Act of 2005 that directed the 
agency to develop a department wide strategy for reducing energy costs 
in assisted and public housing.[Footnote 1] 

In light of the opportunities associated with green building for HUD 
and residents of HUD-sponsored housing and interest in HUD's efforts to 
promote green building practices, you asked us to review the actions 
that HUD has taken to promote green building and issues related to 
those efforts. Specifically, we examined (1) the status of HUD's 
current efforts to promote energy efficiency and the performance 
measures the agency uses to assess these efforts; (2) the potential 
costs and long-term benefits of incorporating green building practices 
into HUD's affordable housing programs; and (3) lessons learned 
elsewhere that HUD could apply to promoting green building practices in 
its programs. We also examined HUD's legal authority to incorporate 
mandatory green building requirements into its affordable housing 
programs (see app. II). 

To address these objectives, we reviewed relevant program documentation 
and interviewed officials from a number of HUD program offices, 
including three HUD field offices (Boston, San Francisco, and Seattle). 
We also reviewed studies on green building and interviewed 
knowledgeable individuals from building industry associations, 
affordable housing organizations, and environmental organizations. We 
reviewed legal documents and interviewed officials from HUD's Office of 
General Counsel. Finally we conducted site visits (Austin, Boston, 
Oakland, San Francisco, and Seattle), and interviewed five state 
housing finance agencies (California, Massachusetts, Vermont, Virginia, 
and Washington).[Footnote 2] We selected the five site visit locations 
based on several factors, including (1) discussions with knowledgeable 
individuals in the field of green building, (2) a review of literature 
on local and state efforts to promote green building, (3) active green 
building efforts at the state or local level, and (4) proximity to HUD 
regional offices. 

We conducted this performance audit from October 2007 to September 2008 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe that 
the evidence obtained provides a reasonable basis for our findings and 
conclusions based on our audit objectives. More details about our scope 
and methodology appear in appendix I. 

Results in Brief: 

HUD and its program offices have taken steps to implement most of the 
actions in the agency's Energy Strategy, but this strategy includes few 
requirements that promote energy efficiency and relies to a large 
extent on voluntary actions taken by program participants. HUD has also 
provided information, training, and technical assistance; formed 
partnerships to leverage resources; and offered incentives to promote 
green building in some of its programs. For example, about 100 HUD 
assisted privately owned multifamily properties are eligible for 
financial incentives each year to promote green building. Additionally, 
HUD has developed some performance measures to track the progress of 
its energy efficiency efforts. But some of HUD's efforts have 
limitations. HUD has yet to implement a regulation requiring PHAs, 
which manage about 1.2 million housing units, to purchase energy- 
efficient products and appliances. HUD's Office of Manufactured 
Housing, which regulates the construction of all new manufactured homes 
in the United States, has not implemented major energy efficiency 
updates to its code for more than a decade. Without such requirements 
and updates, public housing authorities and manufactured housing 
residents may be spending more on utility expenses than is necessary. 
Also, HUD has not updated information about energy efficiency in public 
housing and multifamily handbooks, which include important guidance on 
administering these programs. 

Green building practices tend to increase up-front construction costs 
but often provide long-term benefits that may offset these increases. 
However, HUD does not collect the data necessary for many of its 
programs to understand how much these practices could save the 
department or its stakeholders over time. The up-front costs of green 
building practices can add to a project's total costs, although these 
costs differ by project. Some green building practices--such as hiring 
building contractors with experience in green building--can minimize 
some of the up-front costs. When used in affordable housing projects, 
green building practices can result in long-term financial and health 
benefits for residents and could save money for HUD. For example, 
energy efficiency improvements can provide significant long-term 
savings on utility costs. According to the Environmental Protection 
Agency (EPA) and the Department of Energy (DOE), Energy Star Qualified 
Homes, which HUD has actively promoted building in a number of its 
affordable housing programs, use approximately 30 percent less energy 
than standard homes and can save homeowners approximately $200 to $400 
per year. However, in rental housing the party that makes the initial 
investment in green building may not see the immediate benefits, a fact 
that could discourage the use of green building practices in affordable 
housing. For example, a building owner that pays a higher cost for an 
energy-efficient boiler may not see the savings, which instead accrue 
to the tenant (if the tenant pays the utility bills). As a result, the 
building owner may not want to invest in higher cost green building 
practices. HUD paid an estimated $5 billion in utility costs in 2007 
but does not have the data necessary to understand the breakdown of 
these costs or the potential savings opportunities of green building 
for many of its programs. HUD has partnered with EPA and DOE to develop 
a utility benchmarking system that identifies savings opportunities in 
public housing. However, HUD does not collect the data on utility 
consumption that would be necessary to establish or use a benchmarking 
system in its privately managed assisted housing portfolio. HUD 
officials told us that developing a utility benchmarking tool for its 
privately owned assisted multifamily portfolio would be helpful, but 
could be costly to HUD and the property owners. However, a 2003 study 
by Harvard University--and funded by HUD--found that collecting 
consumption data in privately owned multifamily housing would not be 
unreasonably burdensome. Without such a tool, HUD cannot fully 
understand the utility costs for over 1.6 million units in its 
portfolio, and may be missing opportunities to reduce utility expenses. 

Standards and financial incentives used elsewhere to encourage green 
building could provide lessons for HUD. National and regional green 
building standards are often used to provide a framework for how to 
build green. Developers we spoke with expressed the need for 
flexibility when choosing a green building standard, because some 
national standards may not be appropriate for all affordable housing 
projects. Regional standards provide guidance that takes into account 
local characteristics such as climate and regional regulatory 
conditions. Some state and local jurisdictions have developed their own 
regional standards because the existing green building standards did 
not meet their needs. In addition, HUD has few nonenergy incentives to 
encourage green building. States, cities, and nonprofit organizations 
currently use a mix of financial incentives to encourage the use of 
green building practices in their affordable housing programs. For 
example, many states use programs, such as the Low-Income Housing Tax 
Credit (LIHTC), to provide incentives for or to require the use of 
green building practices.[Footnote 3] The LIHTC is a prominent source 
of federal funding for building and rehabilitating affordable housing. 
It is administered at the state level, where developers compete for 
limited funds based on a review of their applications, in which a point 
scoring system is used to determine those that will be funded. HUD has 
focused its attention on creating incentives to encourage energy 
efficiency, but it provides few financial incentives to encourage 
broader and more comprehensive green building practices--such as water 
conservation and indoor air quality. For example, HUD assigns in its 
scoring systems one incentive point (out of a total of 100 or 120 
points) for energy efficiency in its competitive housing grant 
programs, and offers few incentives for incorporating nonenergy green 
building practices. HUD cannot demonstrate that 1 incentive point is 
sufficient to promote energy efficiency. While HUD's competitive grant 
programs are occasionally used to build green affordable housing, the 
decision to do so is typically made at the local level. 

This report contains recommendations to HUD designed to improve and 
expand its efforts to promote green building in HUD-assisted 
properties. We recommend that HUD ensure the completion of a regulation 
to require the use of energy-efficient products and appliances in 
public housing, reach out to DOE about energy efficiency updates to 
manufactured housing, and update handbooks to include current 
information on energy efficiency and green building. We also recommend 
that HUD consider developing a utility benchmarking tool for 
multifamily properties, assess the impact of the point awarded for 
energy efficiency in competitive grant programs, and consider providing 
nonenergy green building incentive points for these programs. 

We provided a draft of this report to HUD for review and comment. We 
received written comments from HUD, which are discussed later in this 
report and are reprinted in appendix VI. We also received general and 
technical comments from HUD, which have been incorporated as 
appropriate. In its response, HUD welcomed our recommendations and said 
that the agency would give serious consideration to their 
implementation with the resources it has available. However, the agency 
made comments suggesting that we did not provide enough information 
describing HUD's progress in implementing green building practices or 
provide enough direction in how HUD should manage its programs. For 
example, HUD stated that activities of some offices were not 
sufficiently highlighted and that we had not fully addressed the work 
that HUD has initiated on transit-oriented development. We were not 
intending to provide a complete listing of all of HUD's efforts and we 
have made that clear in our scope and methodology section. Further, we 
have ongoing separate work on transit-oriented development. HUD also 
stated that we did not fully address staffing or resource issues, but 
that is an internal management issue which we leave to HUD's 
discretion. Additional HUD comments and our response are discussed 
later in this report. 

Background: 

HUD's Energy Task Force, which is tasked with developing and monitoring 
the implementation of the department's Energy Action Plan, is made up 
of representatives from several HUD program offices. The Energy Task 
Force is cochaired by representatives from HUD's Office of Policy 
Development and Research and Office of Community Development and 
Planning. Also, an energy coordinator representing each HUD regional 
office on the task force is responsible for a range of energy-related 
activities, including hosting trainings and identifying local 
opportunities to promote energy efficiency. All members of the task 
force participate on a part-time basis and have other full-time 
responsibilities in HUD. 

Several HUD program offices play a role in the implementation of the 
Energy Action Plan, including the following: 

* The Office of Public and Indian Housing (PIH) oversees about 3,300 
PHAs. PHAs are typically local housing agencies that manage public 
housing units. HUD supports over 1 million public housing units, which 
represent about 25 percent of HUD's total rental assistance units. HUD 
provides PHAs with operating subsidies to assist in funding the 
operating expenses of their dwellings, including utilities, and capital 
funds to modernize existing public housing developments. PIH also 
administers the Urban Revitalization Demonstration Program, commonly 
known as HOPE VI. HOPE VI seeks to improve the living environment of 
residents in severely distressed public housing by redeveloping 
obsolete public housing, revitalizing public housing sites and their 
surrounding neighborhoods, and providing housing that avoids or 
decreases the concentration of poverty. The HOPE VI program has awarded 
239 grants totaling approximately $5.7 billion dollars, between fiscal 
years 1993 and 2006. PIH also administers the Housing Choice Vouchers 
Program, which supports over 2 million housing units. This program 
provides rental vouchers to low-income tenants for use in the private 
rental market through the local PHA. Tenants are responsible for 
finding a suitable housing unit that the owner agrees to rent under the 
program. Rental units must meet minimum health and safety standards set 
by the PHA. The PHA pays a housing subsidy to the landlord, and the 
tenant pays the difference between it and the actual market rent. PIH 
also seeks to provide decent, safe, and affordable housing for Native 
American, Alaska Native, and Native Hawaiian families. 

* The Office of Multifamily Housing administers a number of rental 
assistance programs that deal with new construction, preservation, 
property assistance, and finance programs. These programs support over 
1.6 million housing units. The Office of Multifamily Housing manages 
competitive grant programs that include the Section 202 and 811 
programs. These programs provide capital advance grants for the 
development of elderly housing under Section 202, and persons with 
disabilities under Section 811. Both 202 and 811 projects receive 
operating assistance through Project Rental Assistance Contracts. In 
addition, HUD also administers mortgage insurance to multifamily 
properties under a multitude of programs through the Federal Housing 
Administration (FHA). These programs seek to enhance the credit for 
rental housing developments through the provision of federal loan 
guarantees that provide a financing option in addition to those 
available in the private conventional market. Through these programs, 
FHA supports the construction of new apartment projects and the 
refinancing of the rehabilitation of older ones. 

* The Office of Community Planning and Development administers the 
Community Development Block Grant (CDBG) and the HOME Investment 
Partnerships (HOME) programs. These are formula grant programs that 
divide billions of dollars across local jurisdictions and numerous 
activities on an annual basis using funding formulas established 
through statute and by HUD. Activities funded by CDBG can include 
housing, economic development, neighborhood revitalization, and 
community development. CDBG funds can be used by local jurisdictions to 
support a range of eligible activities, including energy conservation 
and renewable energy resources. The HOME program provides federal 
assistance to participating jurisdictions for housing rehabilitation, 
rental assistance, homebuyer assistance, and new housing construction. 
Recipients of CDBG and HOME funding have a great deal of flexibility in 
how they use these grants, and must submit an annual action plan to 
HUD. 

Other HUD program offices play a role in the implementation of the 
energy action plan. The Office of Single Family Housing administers a 
program to insure private lenders against losses from borrower defaults 
on mortgages that meet certain criteria for properties. HUD's Office of 
Healthy Homes and Lead Hazard Control provides funding for the 
development of programs to address and study the effects of lead-based 
paint and other home health hazards on children and families. The 
office is also responsible for enforcing HUD's lead-based paint 
regulations. The Office of Policy Development and Research conducts 
housing research for HUD and coordinates the Partnership for Advancing 
Technology in Housing (PATH). PATH focuses on accelerating the 
development and use of technologies to improve the quality, durability, 
energy efficiency, environmental performance, and affordability of 
housing nationwide. HUD's Office of Manufactured Housing regulates the 
production of manufactured housing in the United States. The National 
Manufactured Housing Construction and Safety Standards Act of 1974 
directed HUD to establish a national building code, known as the HUD 
Code, for manufactured housing. HUD monitors industry compliance to 
ensure that every manufactured home is built to this code. 

Energy Star® is a joint program of EPA and DOE that aims to protect the 
environment by promoting the use of energy-efficient products and 
practices. The Energy Star labeling program was created to identify 
energy efficiency standards for several categories of household 
products and appliances without sacrificing performance. Manufacturers 
are permitted to apply the Energy Star label to qualified products that 
meet EPA or DOE criteria. The Energy Star for Qualified Homes program 
provides an Energy Star label for newly built homes that meet strict 
guidelines of energy efficiency set by EPA. Energy Star homes certified 
under this program are at least 15 percent more energy efficient than 
homes built to the 2004 International Residential Code.[Footnote 4] 

Green building is the practice of creating structures and using 
practices that are environmentally friendly and resource efficient. 
There are a number of green building standards that builders and 
developers can use to certify whether a particular structure is a green 
building. These standards include the Leadership in Energy Efficiency 
and Design (LEED) rating system, which is a nationally accepted 
standard developed and administered by the U.S. Green Building Council. 
Many of these standards use a system that assigns points for a variety 
of practices and certify a building at various levels of "green" 
depending on the number of points acquired (see table 1). While energy 
conservation is an integral part of green building, these standards 
also include several other categories of green building measures such 
as water conservation, sustainable site selection, building material 
conservation, and enhanced occupant health. Since 2003 the U.S. General 
Services Administration (GSA) has required that all new federal 
buildings under its authority be constructed using green building 
practices. 

Table 1: Examples of Green Building Standards: 

Green building standards: National standards: Energy Star for Qualified 
Homes; Administering organization: EPA; 
Locations covered: Nationwide; 
Levels of green: 1; 
Third party verification required: Yes; 
Type of building: Single-family new construction; 
Existing retrofitted homes; 
Multifamily (under 3 stories). 

Green building standards: National standards: Green Communities 
Criteria; 
Administering organization: Enterprise Community Partners; 
Locations covered: Nationwide; 
Levels of green: 1[A]; 
Third party verification required: No; 
Type of building: Single-family new construction and rehabilitation; 
Multifamily new construction and rehabilitation; 
Affordable housing. 

Green building standards: National standards: Leadership in Energy and 
Environmental Design ™ (LEED); 
Administering organization: U.S. Green Building Council; 
Locations covered: Nationwide; 
Levels of green: 4; 
Third party verification required: Yes; 
Type of building: Commercial new construction; 
Multifamily new construction; 
Single-family new construction; 
Schools. 

Green building standards: National standards: Model Green Home Building 
Guidelines; 
Administering organization: National Association of Home Builders; 
Locations covered: Nationwide; 
Levels of green: 3; 
Third party verification required: Yes; 
Type of building: Single-family new construction and rehabilitation. 

Green building standards: Regional: EarthCraft House™; 
Administering organization: Greater Atlanta Home Builders Associations 
& Southface Energy Institute; 
Locations covered: Southeastern region of the United States; 
Levels of green: 3; 
Third party verification required: Yes; 
Type of building: Single-family new construction and rehabilitation; 
Multifamily new construction and rehabilitation; 
Community development. 

Green building standards: Regional: Evergreen Sustainable Development 
Criteria; 
Administering organization: Washington Department of Economic 
Development and Trade; 
Locations covered: Washington State; 
Levels of green: 1[B]; 
Third party verification required: Yes; 
Type of building: Single-family new construction and rehabilitation; 
Multifamily new construction and rehabilitation; 
Affordable housing. 

Green building standards: Regional: SeaGreen Guidelines; 
Administering organization: Seattle Office of Housing; 
Locations covered: Seattle, Wash; 
Levels of green: 1; 
Third party verification required: No; 
Type of building: Multifamily new construction and rehabilitation; 
Affordable housing. 

Source: GAO analysis. 

[A] In meeting the Green Communities Criteria, a project must meet all 
of the criteria's mandatory categories and obtain 35 points for new 
construction and 30 points for moderate rehabilitation in the 
nonmandatory categories. 

[B] In meeting the Evergreen Sustainable Development Criteria, a 
property must meet all of the mandatory categories and obtain 50 points 
for new construction and 40 points for rehabilitation in the 
nonmandatory categories. 

[End of table] 

HUD Has Taken Positive Steps to Promote Energy Efficiency, but Efforts 
to Encourage Voluntary Actions Have Limitations: 

HUD's energy efficiency efforts, which have focused primarily on the 
voluntary adoption of various measures, have included positive steps 
such as promoting the use of energy performance contracts in public 
housing, developing a benchmarking model that allows for the 
identification of public housing authority properties that consume 
comparatively more energy, and piloting a green initiative. But some of 
HUD's efforts have limitations. HUD has sought to promote energy 
efficiency by providing information, training, and technical 
assistance; offering program incentives; and leveraging resources 
outside of HUD. However, HUD has not instituted certain requirements 
that were set forth in its Energy Action Plan and Energy Strategy, and 
some HUD program areas offer limited program incentives to promote 
energy efficiency. For example, HUD has not implemented a regulation 
requiring PHAs to purchase energy-efficient products and appliances, 
and its Office of Manufactured Housing has not implemented major energy 
efficiency updates to its code for more than a decade. The lack of 
requirements and limited incentives could mean that program recipients 
are not taking advantage of opportunities to reduce energy consumption 
and expenses. Also, HUD's efforts to provide information about energy 
efficiency opportunities are limited by outdated program guidance. For 
a further review of the status of HUD's planned actions for 
implementing its Energy Strategy, see appendix III. 

HUD Has Made Progress in Implementing Its Energy Strategy and Offering 
Some Incentives: 

HUD has demonstrated progress in implementing elements of its Energy 
Strategy. This strategy focuses primarily on encouraging the voluntary 
adoption of energy efficiency measures, a significant component of 
green building. The Energy Action Plan and Energy Strategy included 
specific actions in support of objectives and HUD has taken steps to 
implement many of these actions. Table 2 illustrates the objectives 
included in HUD's Energy Strategy. HUD's efforts to promote energy 
efficiency have focused on areas including providing information and 
technical assistance, offering program incentives, and leveraging 
outside resources. 

Table 2: Objectives in HUD's Energy Strategy: 

Objective 1: Strengthen partnerships with federal agencies and local 
communities to promote Energy Star and energy efficiency in the 
residential sector: Objective 2: Strengthen incentives and implement 
new statutory requirements for energy efficiency through HUD programs. 

Objective 1: Strengthen partnerships with federal agencies and local 
communities to promote Energy Star and energy efficiency in the 
residential sector: Objective 3: Provide training and technical 
assistance on energy efficiency to homeowners, renters, and property 
owners. 

Objective 1: Strengthen partnerships with federal agencies and local 
communities to promote Energy Star and energy efficiency in the 
residential sector: Objective 4: Establish measures to track progress 
in reducing energy consumption and ensure accountability. 

Objective 1: Strengthen partnerships with federal agencies and local 
communities to promote Energy Star and energy efficiency in the 
residential sector: Objective 5: Support further research and 
technology development. 

Source: HUD Energy Strategy. 

[End of table] 

HUD provides information, training, and technical assistance on energy 
efficiency to HUD staff and program participants to promote greater 
awareness and voluntary adoption of energy-efficient practices. In 
partnership with DOE and EPA, HUD committed to expand the use of Energy 
Star products in public and assisted housing. HUD publishes information 
on its Web site, and some HUD program offices provide information 
specific to the needs of their program participants through newsletters 
and brochures. For example, on its Public Housing Environmental and 
Conservation Clearinghouse Web site, PIH posts information on promoting 
energy conservation in public housing properties and information about 
HUD policies related to energy efficiency. PIH also has a monthly 
newsletter, "EcoWise," covering utility conservation issues for PHAs. 
According to HUD officials, PATH's Roadmap for Energy Efficiency in 
Existing Homes identified a variety of strategies for increasing energy 
efficiency in the existing housing sector, including the development of 
uniform protocols for energy-efficient remodeling. To increase 
awareness about energy efficiency and available HUD informational 
resources, regional energy coordinators and other HUD staff have 
incorporated energy efficiency into presentations to and discussions 
with program participants. For example, in presentations to HOME and 
CDBG grantees, HUD has encouraged construction to the Energy Star 
standard for new homes. HUD provides training and technical assistance 
resources that can also increase awareness and in some cases help to 
build greater expertise with certain energy-efficient practices. 
Examples of this training have included the development of an Internet- 
based training curriculum on energy efficiency for its staff and HOME 
grantees, and HUD has launched a Web tool, the Energy Efficiency Rehab 
Advisor, that provides homeowners and HUD program participants with 
guidelines on incorporating energy efficiency into rehabilitation 
projects. HUD's Office of Native American Programs has also sponsored 
training opportunities targeting Native American tribes and related to 
green building that have included a focus on energy efficiency. HUD 
officials told us that Regional Energy Coordinators have also assisted 
with hosting training workshops and identifying local opportunities and 
informational needs in their respective regions. 

Some HUD programs offer incentives for energy conservation measures. 
PHAs receive funds from HUD's capital fund that may be spent on energy 
conservation measures, but HUD officials told us that these funds are 
generally insufficient to cover both the up-front cost of many energy 
improvements and ongoing repair needs.[Footnote 5] HUD's operating fund 
standard rules provide a disincentive to implementing high-cost energy 
improvements. According to HUD officials, a PHA's annual operating 
subsidy is based in part on the prior 3 years of utility consumption, 
which would be expected to fall in the years following such 
improvements. This "3-year rolling base" policy allows PHAs to retain 
75 percent of savings from reducing utility consumption over a 3-year 
period, but according to HUD officials, PHAs cannot retain enough 
savings over this short time to recoup the up-front cost of many large 
energy efficiency improvements such as high-energy-efficiency 
boilers.[Footnote 6] Two HUD incentives can enable PHAs to overcome 
these challenges by allowing them to capture energy savings over a 
longer period and use these savings in lieu of capital fund dollars to 
finance energy efficiency improvements. First, under certain 
conditions, HUD will freeze the 3-year rolling base utility consumption 
for up to 20 years at the level that existed before the energy 
improvements were made, enabling the PHA to finance expensive energy 
improvements with the longer stream of energy savings it can retain. 
Second, HUD can approve an incentive by increasing a PHA's operating 
subsidy for up to 20 years. The additional operating subsidy is then 
used to pay off the loan that financed the energy conservation 
improvements. When actual energy savings exceed debt payments under 
both incentives, PHAs can retain a portion of these savings for 
eligible operating expenses. HUD officials told us that a PHA may 
employ both incentives, but no single energy conservation measure may 
double dip, using both incentives for the same measure. 

PHAs using either of these two incentives can identify and finance 
improvements through energy performance contracting. An energy 
performance contract is an agreement with an energy services company 
(ESCO) that in exchange for a fee, the ESCO could identify, finance, 
and oversee the installation of energy conservation measures.[Footnote 
7] To reduce the burdens on PHAs seeking to engage in energy 
performance contracts, HUD officials told us that PIH has made progress 
toward streamlining its review approval process for energy performance 
contracts through field office and PHA workshops and technical 
assistance contractor support to field offices and PHAs. [Footnote 8] 
HUD has published guidelines instructing field offices to complete the 
review of energy performance contracts within 45 days and has begun 
training field office staff to develop the expertise needed to oversee 
and support these contracts.[Footnote 9] To speed up and standardize 
the process for selecting a contractor for a performance contract, HUD 
plans to pilot a program similar to the Federal Emergency Management 
Program, which provides a preapproved contractor list and a document 
that standardizes the aspects of contracting with each of the included 
contractors. HUD officials acknowledged that energy performance 
contracting has limitations, but said that contracting with ESCOs had 
helped to effect energy efficiency improvements and also water 
conservation measures that might not have been implemented otherwise. 
HUD officials said that water conservation savings were significant and 
among the biggest potential opportunities for financial savings. As of 
2007, 195 energy performance contracts were in progress, achieving 
gross savings of about $50 million annually. 

The transition to asset management in PHAs may provide stronger market- 
based incentives for energy efficiency.[Footnote 10] Under asset 
management, HUD has discontinued the practice of collecting utility 
consumption and expenditure data at the PHA level (which might have 
numerous properties), and has begun collecting these data for 
individual public housing properties. According to HUD officials, to 
the extent that this information facilitates the identification of 
particularly energy-inefficient properties, the switch to asset 
management will result in greater opportunities to improve energy 
efficiency. HUD has contracted with a third party to pilot using energy 
and water consumption data collected from PHAs to develop a 
benchmarking model that may help HUD and PHAs to identify properties 
that are not energy efficient. Benchmarking compares utility 
consumption data among comparable properties to determine potential 
utility savings opportunities. 

In addition, the Mark-to-Market program of the Office of Affordable 
Housing Preservation (OAHP) has created unique incentives for green 
building. The Mark-to-Market program reduces rents on multifamily 
properties participating in the Section 8 program. The Section 8 
program subsidizes the rent of low-income individuals and multifamily 
property owners that have contracts with HUD through which HUD is 
committed to continue to subsidize rents in their properties or units 
until the contract expires. The Mark-to-Market program restructures the 
mortgages on properties to a level that can be supported by lower 
rents. According to HUD officials, restructurings under the Mark-to- 
Market program generally take place when Section 8 contracts are 
renewed. 

In 2007, OAHP launched its Green Initiative, a pilot program designed 
to incorporate green building principles, including energy efficiency, 
into the rehabilitation and ongoing maintenance of project-based 
Section 8 properties undergoing Mark-to-Market restructurings. Through 
a Mark-to-Market restructuring, the owner is able to add to the debt on 
his or her property the cost of any rehabilitation of the property. In 
exchange for choosing a Mark-to-Market restructuring, owners virtually 
always receive a new project-based Section 8 contract with HUD. OAHP 
identified Mark-to-Market restructurings involving property 
rehabilitation as an opportunity to offer incentives to encourage the 
adoption of energy-efficient and other green building practices. For 
property owners voluntarily participating in the pilot, HUD has offered 
to reduce the amount that must be initially paid towards rehabilitation 
costs from 20 percent to as little as 3 percent if the property owners 
make certain green improvements. HUD created the Green Initiative pilot 
program within existing statutory authority by determining that certain 
green building improvements to a property are eligible "significant 
additions," as was already allowed in the relevant statute for the Mark-
to-Market program. Property owners participating in a Mark-to- Market 
restructuring are eligible to receive a payment from the program. Under 
the new pilot program, property owners may also be eligible for an 
increase in the amount they will be paid by the program if they take 
advantage of all opportunities that HUD identifies during a special 
assessment of green building characteristics of their properties, meet 
certain threshold green principles, and provide evidence that a 
professional with a LEED accreditation--or equivalent green building 
accreditation--has been actively involved in the project.[Footnote 11] 
HUD officials noted that while this initiative sets a positive example 
in incentivizing energy efficiency and other green practices in Section 
8 properties, the restructuring event is unique to the Mark-to-Market 
program. Moreover, HUD officials estimated that only about 100 Section 
8 contracts become eligible for these Mark- to-Market green incentives 
each year, a small portion of the total project-based Section 8 
portfolio of over 31,000 contracts. 

Finally, HUD has leveraged existing energy efficiency resources outside 
of the agency through partnerships and other efforts in an effort to 
direct program participants toward such resources. Some state and local 
governments, utility companies, nonprofit organizations, and other 
groups have resources that can supplement HUD's efforts to promote 
energy efficiency. HUD field offices have entered into partnerships 
with several such groups to educate HUD program participants about ways 
to reduce energy costs. For example, in September 2005, HUD's Fort 
Worth Regional Office partnered with the University of North Texas to 
cohost a regionwide conference that provided information and technical 
training on green building practices. The 260 conference attendees 
included officials from public housing authorities, community 
development entities, city leaders, home builders, and many other 
members of the housing industry. In addition to these partnership 
efforts, some HUD regional energy coordinators and field office staff 
have helped HUD program participants identify existing funding, 
informational, and technical resources available within their states or 
localities for green building. Staff in HUD's San Francisco Regional 
Office developed comprehensive state directories of energy efficiency 
resources to facilitate access to financial incentives, rebates, 
services, and tools. HUD officials said that leveraging these outside 
resources not only helped to expand the reach of HUD's energy programs 
but also promoted more efficient use of HUD's resources by avoiding 
unnecessary duplication of existing efforts. 

HUD Is Beginning to Address Limitations in Program Incentives and 
Management for Energy Efficiency in Certain Program Areas: 

While program incentives for its public housing, multifamily housing, 
and mortgage insurance programs have limitations, HUD officials told us 
that they are working to address some of these limitations. HUD is also 
working to improve its program management and monitoring related to 
energy efficiency efforts. 

Public Housing: 

HUD is making efforts to streamline the energy performance contracting 
process that may encourage broader use of the operating subsidy 
incentives, but such contracting may remain a challenge for many small 
PHAs (HUD categorizes PHAs with fewer than 250 units as small) that 
lack the size necessary to attract interest from ESCOs.[Footnote 12] 
The majority of public housing authorities are small. According to HUD 
officials, as of June 2008, 53 small housing authorities out of a total 
of about 3,200 PHAs have an energy performance contract agreement in 
process. HUD has encouraged smaller PHAs to pursue aggregated energy 
performance contracts or to use the additional operating subsidy 
incentive for specific improvements. HUD officials told us that in two 
instances, small PHAs have banded together with other nearby small PHAs 
in aggregated contracts. These contracting arrangements can be 
complicated to execute.[Footnote 13] According to HUD officials, the 
agency is working on a pilot program that will support contracting for 
small PHAs. For the pilot program, HUD is considering streamlining its 
current energy performance contract process by using specific measures 
and incentives to simplify energy performance contract procedures for 
small PHAs. 

Multifamily Housing: 

HUD officials told us that the criteria for awarding the incentive 
point for energy efficiency in some of their multifamily competitive 
grant programs have not always been clear and they are clarifying the 
criteria. In the Notice of Funding Availability (NOFA) for the Section 
202 and Section 811 programs, HUD awards one rating point to projects 
that describe their plans for promoting energy efficiency in the design 
and operation of their proposed projects, but the NOFA does not define 
specific energy efficiency measures that must be taken. As a result, 
some grantees may have earned this point without implementing 
significant energy efficiency improvements. According to HUD officials, 
the Office of Multifamily Housing is currently developing more detailed 
criteria based on a list of specific energy efficiency measures. 

According to HUD officials, in 2007, the Office of Multifamily Housing 
convened a task force composed of staff from its 11 field offices to 
draft recommendations to implement new energy efficiency incentives for 
its programs. Thirteen of the task force's 15 recommendations have been 
approved, including proposed actions for the Office of Multifamily 
Housing's rental assistance programs, mortgage insurance programs, and 
Section 202 and Section 811 programs. To provide greater energy 
efficiency incentives to multifamily property owners, the task force 
recommended increasing owner distributions for energy efficiency for 
some projects and creating new opportunities for management companies 
to share in the cost savings from reductions in utility usage.[Footnote 
14] The Office of Multifamily Housing is currently in the process of 
revising regulations and guidelines to implement new energy efficiency 
incentives, but these efforts will take time, and incentives requiring 
revisions to regulations may encounter opposition in the rulemaking 
process. Appendix IV provides an overview of the approved Office of 
Multifamily Housing's task force recommendations. 

Mortgage Insurance Programs: 

HUD's tool to promote energy efficiency through its mortgage insurance 
programs, the Energy Efficient Mortgage (EEM) product, has not been 
widely used. To date, activity in this program has been very small 
(just over 1,000 of these mortgages have been reported as of 2007). 
EEMs are mortgage loans insured by FHA that borrowers can use to 
finance energy efficiency improvements. Homebuyers, or homeowners when 
refinancing, may use the EEM program to borrow a minimum of $4,000 and 
a maximum of 5 percent (up to $8,000) of the home's appraised value to 
finance these improvements. HUD officials we spoke with cited numerous 
obstacles to this product, including the additional time associated 
with the required home energy inspection--such as a Home Energy Ratings 
System inspection--and loan limits.[Footnote 15] HUD officials said 
that EEM loan limits on the amount that can be financed for energy 
efficiency improvements may be set too low to attract many potential 
users. According to HUD officials, FHA's 203(k) streamlined product, 
which has a higher loan limit of $35,000 and does not require a home 
inspection, overcomes some of the limitations of the EEM product. 
However, in contrast to the EEM, borrowers must qualify for the loan 
funds used for energy efficiency improvements. Moreover, the 203(k) 
streamlined product faces some of the same obstacles to market 
acceptance. EEM loan limits were recently raised by the Housing and 
Economic Recovery Act of 2008. According to HUD officials, HUD will 
implement the new loan limits based on this statute. HUD officials also 
noted that FHA loan products have lost market share over the last 
decade in regions where FHA mortgage limits are below most home prices 
and said that adding additional steps to mortgage transactions could 
give lenders an additional reason not to use FHA products. 

HUD officials explained that they cannot provide incentives for energy 
efficiency by offering lower mortgage interest rates in current FHA 
programs, as these rates are established between FHA-approved lenders 
and borrowers. But these same officials said that HUD does have some 
flexibility to reduce mortgage insurance premiums, although using this 
flexibility to provide incentives for energy efficiency would require 
HUD to study the risk implications for FHA's portfolio. HUD officials 
told us that they have not performed an analysis that addresses the 
risk associated with energy costs, because too few of these loans have 
been issued to provide an adequate sample to study. 

Energy Performance Measures: 

HUD has taken steps to improve its energy program management and 
monitoring through the development of performance measures to track and 
assess the progress of its energy efficiency efforts. According to HUD 
officials, program office staff, in coordination with members of the 
Energy Task Force, developed several energy performance measures to 
track the progress of HUD's energy efficiency efforts. HUD promotes 
accountability in its energy efficiency-related programs by including 
some of these measures as goals in its Management Plan (see table 
3).[Footnote 16] In addition to the measures included in the Management 
Plan, a program office may collect other data to track progress in 
promoting energy efficiency. For example, HUD officials told us that 
the Office of Multifamily Housing tracks the number of replacement 
reserve requests used for energy efficiency measures. Some properties 
are required to maintain replacement reserves that are used throughout 
the life of the mortgage for the replacement of major physical and 
component parts. HUD officials told us that HUD continues to explore 
how to strengthen its performance measures to track and assess HUD's 
energy efficiency efforts. 

Table 3: HUD Fiscal Year 2008 Annual Management Plan Goals: 

Management plan goals: Reduce utility consumption by PHAs and residents 
by increasing the overall investment in energy conservation measures 
(ECM) by 5 percent over the fiscal year 2007 baseline, and by ensuring 
that all energy contract investments are cost-effective during the 
expected life of the equipment; 
Fiscal year 2008 target: 5%. 

Management plan goals: To implement the Secretary's Energy Task Force 
Initiative and the Energy Star memorandums of understanding among HUD, 
DOE, and EPA, HUD will increase the number of Energy Star 
certifications in new construction and gut rehab in the CDBG and HOME 
programs; 
Fiscal year 2008 target: 10%. 

Management plan goals: Provide training on how FHA single-family 
programs can be effectively used to promote energy efficiency (9 per 
Home Ownership Center); 
Fiscal year 2008 target: 36. 

Management plan goals: Feature the Energy Efficient Mortgage (and other 
FHA products) that promote energy efficiency improvements in single- 
family housing; 
Fiscal year 2008 target: Not applicable[A]. 

Management plan goals: Continue improved tracking and evaluate 
performance of Energy Efficient Mortgages; 
Fiscal year 2008 target: Not applicable. 

Management plan goals: Implement Phase II of HUD's plan for increasing 
the energy performance and reducing utility costs in HUD-supported 
housing; 
Fiscal year 2008 target: Not applicable. 

Management plan goals: Continue to process Manufactured Housing 
Consensus Committee proposals that are not in rulemaking (including 
appliance efficiency and improved duct insulation); 
Fiscal year 2008 target: Not applicable. 

Management plan goals: Promote energy efficiency in assisted 
multifamily programs by promoting the HUD Energy Action Plan to 
external partners; 
Fiscal year 2008 target: Not applicable. 

Management plan goals: Promote energy efficiency by encouraging housing 
providers to utilize energy-saving devices and number of industry 
presentations, including Energy Plan discussions; 
Fiscal year 2008 target: To be decided[B]. 

Management plan goals: Increase and preserve Decent Affordable Housing 
through promotion of HUD's Departmental Initiatives (i.e., Energy 
Action Plan, America's Affordable Communities Initiative, Preserve 
America, etc.); 
Fiscal year 2008 target: To be decided. 

Source: HUD fiscal year 2008 Annual Management Plan. 

[A] A fiscal year 2008 target of Not Applicable indicates that there is 
not a specific numeric goal associated with the performance goal. 

[B] A fiscal year 2008 target of To Be Decided indicates that HUD has 
not established specific targets for the goal. 

[End of table] 

Of the 10 performance measures HUD includes as performance goals in its 
fiscal year 2008 Management Plan, 2 go beyond summarizing program 
activities to identify desired outcomes (i.e., measurable energy 
savings). The Office of Management and Budget has identified the 
tracking of program outcomes, which describe the intended results of 
carrying out a program activity--such as energy savings--as the most 
informative measures about performance, because they are the ultimate 
results of the program. For example, HUD's Office of Community Planning 
and Development has set a goal to increase the number of Energy Star- 
certified new homes by 10 percent in its HOME and CDBG programs, and 
PIH has targeted a 5 percent increase in overall investment in energy 
conservation measures in public housing. The other eight HUD 
performance goals track outputs, such as whether certain activities 
outlined in HUD's Energy Strategy are taking place. For example, Single-
Family Housing set goals to continue improved tracking and evaluation 
of EEMs. 

HUD Has Not Implemented the Statutory Requirement for Energy-Efficient 
Products and Appliances in Public Housing: 

PIH has not implemented Section 152 of EPAct 2005, which requires PHAs 
to purchase Energy Star products and appliances when it is cost- 
effective to do so. HUD has issued a notice encouraging PHAs to 
purchase Energy Star products and appliances, but has not issued a 
regulation making this a requirement.[Footnote 17] According to HUD 
officials, HUD planned to draft a regulation that would have included 
this requirement. In the interest of streamlining, HUD intended to 
combine this draft regulation with updates to provisions governing 
contracting terms for energy performance contracts. Before proposing 
this draft regulation, in early 2007, concerns were expressed about a 
potential change to energy performance contracts in a different but 
related draft regulation. HUD officials said that this second draft 
regulation governed operating fund subsidies available to PHAs for 
energy performance contracts. Because of these concerns, HUD chose to 
delay publishing either draft regulation for comment, including the new 
proposed regulation that would have required energy-efficient products 
and appliances for PHAs. While HUD could have separately issued a 
proposed regulation to implement the statutory requirement for energy 
efficient products and appliances for PHAs, it chose not to do so at 
that time. 

Subsequently, HUD officials told us that they have initiated a draft 
regulation requiring energy-efficient products and appliances for PHAs. 
HUD officials said that the controversy regarding the regulation 
related to operating fund subsidies in energy performance contracts had 
been resolved with the passage of the Consolidated Appropriations Act 
of 2008. According to HUD officials, HUD is developing a draft 
regulation that includes the energy-efficient products and appliances 
requirement for PHAs as well as references to energy performance 
contracts. The draft regulation is currently being reviewed by PIH 
officials before it will be sent out for review throughout the agency. 
While the controversy regarding energy performance contracts may have 
been resolved, the statutory requirement for PHAs to use energy- 
efficient products and appliances has been in place since 2005. Based 
on the information provided to us by HUD officials, it is unclear how 
long HUD's regulatory development process may take for the proposed 
regulation. The delay in issuing what could have been a separate 
regulation requiring energy-efficient products and appliances has 
allowed PHAs to purchase less energy-efficient products and appliances 
that could result in higher energy expenses than necessary. 

The Office of Manufactured Housing Has Not Updated Its Code to 
Incorporate Energy Efficiency Requirements: 

The Energy Strategy includes an action for HUD's Office of Manufactured 
Housing to update the code regulating the construction of manufactured 
housing to incorporate the energy efficiency recommendations of the 
Manufactured Housing Consensus Committee.[Footnote 18] HUD officials 
said that some energy standards for manufactured housing remain 
antiquated, with the last major set of updates occurring in 1994. HUD 
officials also stated that the energy standards were so outdated that 
the products meeting current manufactured housing code are no longer 
available. A member of the Consensus Committee has outlined certain 
energy efficiency requirements that could be incorporated into HUD's 
manufactured housing code. For example, the proposed requirements 
include changes to insulation standards and raising standards for the 
use of energy-efficient light bulbs. But HUD has not established a 
clear timeline for making a decision on incorporating the recommended 
energy efficiency changes to the manufactured housing code. 

HUD officials explained that recent legislation directed DOE to develop 
new energy efficiency standards for manufactured housing by 2012. HUD's 
Office of Manufactured Housing is the only HUD program office that has 
a responsibility to regulate construction housing standards. According 
to HUD officials, this new legislation has created uncertainty about 
their role in setting energy efficiency-related codes for manufactured 
housing as well as the process by which these codes will be implemented 
and enforced. HUD officials told us that they are considering letting 
DOE go forward with its implementation of this legislation before it 
takes any further action related to updating energy efficiency 
standards for manufactured housing. HUD officials said that they were 
concerned that overlapping responsibilities between DOE and the Office 
of Manufactured Housing could complicate how energy efficiency 
standards are developed and monitored in manufactured housing in the 
future. According to HUD officials, they have convened one meeting with 
DOE to discuss the implementation of a new energy efficiency standard. 
However, HUD officials stated that next steps were not established in 
this meeting to ensure that new energy efficiency standards could be 
considered and implemented. To the extent that the implementation of 
stronger energy efficiency standards for manufactured housing are 
delayed by not resolving uncertainty about overlapping agency 
responsibilities and a process to move forward in considering new 
energy efficiency standards, manufacturers may lack an incentive to 
build manufactured homes that are energy efficient.[Footnote 19] 

Some Updates to Guidance about Energy Efficiency Opportunities Are 
Incomplete: 

HUD has not completed updates of certain program handbooks and guides 
to provide HUD staff and program participants with current information 
on energy efficiency. HUD's Office of Public and Indian Housing has 
issued interim energy efficiency guidance through Notices 2008-25, 2008-
22, and 2007-30 in order to provide HUD staff and program participants 
assistance until updated handbooks are published. Handbooks for which 
updates related to energy efficiency are needed and for which HUD staff 
told us there are planned updates include the following:[Footnote 20] 

* PIH Utility Allowance Guidebook: Last updated in 1998, this guidebook 
describes how PHAs should establish utility allowances for residents. 
According to HUD officials, 21 percent of PHAs that they interviewed 
said that they did not like or utilize the guidebook due to difficulty 
in following or understanding it. HUD officials told us that numerous 
updates to the guidebook are in process, including adding PIH notices 
regarding energy efficiency and information on gathering consumption 
data. 

* PIH Energy Performance Contracting Handbook: This handbook, which 
provides information about PIH incentives for energy efficiency, energy 
conservation opportunities, and guidance for engaging in an energy 
performance contract, has not been updated since 1992. PIH officials we 
spoke with said that they were revising the handbook to incorporate 
guidance on a broader range of green building practices but noted that 
completing the revisions required changing a program rule. They said 
that they hoped to publish the revised rule and updated handbook by 
January 2009. 

* Multifamily Handbook: HUD's Energy Action Plan also includes an 
action for the Office of Multifamily Housing to develop informational 
guidelines for possible incorporation in a revised chapter on energy 
conservation in the Multifamily Handbook. The Office of Multifamily 
Housing has not updated this chapter since September 1992, when HUD had 
fewer energy conservation efforts under way. HUD officials said that 
the chapter had been revised and was making its way through internal 
departmental clearance. 

HUD officials in PIH and the Office of Multifamily Housing said that 
they were revising these materials to reflect current information on 
energy efficiency. Given the apparent lack of priority to complete 
these updates previously, it will be important for HUD to finalize 
these handbooks and keep them up to date in the future. Without updated 
handbooks that reflect current guidance on green building, HUD staff 
and program recipients may be unaware of opportunities to make 
properties more energy efficient and sustainable. 

Green Building Can Raise Up-front Costs and Provide Long-term Benefits, 
but HUD Lacks the Data to Identify Current Costs and Future Savings: 

Although green building practices can raise up-front costs, the results 
could provide long-term financial and health benefits for residents and 
HUD. However, the lack of immediate benefits for developers or owners, 
coupled with the additional costs, creates a potential disincentive for 
using green building practices in affordable housing. HUD pays an 
estimated $5 billion in utility costs annually but has not collected 
the data that would be necessary to understand its current utility 
costs or the financial benefits that these practices could provide for 
many of its programs. As a result, HUD is limited in its ability to 
take advantage of the possible savings opportunities green building 
affords. HUD has partnered with EPA and DOE to develop a system that 
can identify savings opportunities in some of its programs, but this 
system is not available to its entire assisted housing portfolio. 

Green Building Can Add to the Up-front Costs of Developing Affordable 
Housing: 

The use of green building practices can add to the up-front costs of 
green building, and these costs can vary from project to project. One 
study on the costs of building multifamily green affordable housing 
found that it added an average of 2.42 percent to the total development 
costs of projects, while another study on the costs in commercial 
buildings--such as office buildings and schools--found an average costs 
increase of 1.84 percent.[Footnote 21] In 2004, GSA estimated 
construction costs of building a new courthouse using green building 
standards ranged from saving 0.4 percent to adding 8.1 percent, 
depending on the level of green building certification. A number of 
factors can increase the costs of green building. These include "hard" 
costs for building supplies and labor, the "soft" costs of 
nontraditional activities such as obtaining certification, and regional 
differences such as climate. The contribution of each type of factor to 
project costs varies, so the overall cost increases also vary. In order 
to minimize the additional costs some green building professionals 
recommend incorporating green building measure early in the design 
process. 

Hard Costs of Green Building: 

Hard costs including building materials, equipment, and labor can add 
slightly to overall construction costs, or they can be prohibitively 
expensive, especially for affordable housing developments. For example, 
Energy Star-labeled dishwashers do not cost any more than standard 
dishwashers and can save both water and electricity costs. However, 
some renewable energy technologies, such as solar photovoltaic panels 
that convert the sun's energy to electricity, can be costly, presenting 
significant challenges to their use in affordable housing developments. 
For example, we visited a number of affordable housing developments 
that utilize solar energy, and found that nearly all of these 
properties were located in states that provided financial incentives 
such as rebates and tax credits to offset up-front costs. Many 
developers of these projects told us that they would not have been able 
to use solar energy in their projects without the rebates and tax 
credits. 

Figure: 

This figure is a photograph with text showing the use of soar panels in 
affordable housing. 

The Plaza Apartments are located in San Francisco, California, and have 
been certified LEED Silver. The property provides studio apartment 
housing and on-site supportive services for formerly homeless 
individuals. The San Francisco Redevelopment Agency is the owner and 
developer of the Plaza Apartments, and provided much of the project’s 
development funding. The solar photovoltaic panels on the roof of the 
building were funded in part through the California’s Rebate for 
Renewable Energy Program, which provides financial support to 
developers in California that use renewable energy. 

[See PDF for image] 

Source: GAO. 

[End of figure] 

Hiring contractors with little experience in using green building 
practices can also result in adding to hard costs. In a recent report, 
we identified similar challenges in incorporating energy efficiency 
practices into the federal Gulf Coast rebuilding efforts following 
Hurricanes Katrina and Rita.[Footnote 22] Building professionals we 
spoke to stated that inexperienced contractors often increased their 
prices in order to offset the cost of the learning curve associated 
with using newer materials and unfamiliar building practices. By using 
experienced professionals to build green affordable housing, developers 
could minimize their up-front costs. 

Soft Costs of Green Building: 

Some up-front soft costs of green building, such as obtaining a green 
building certification can also add to the overall costs. Some of the 
green building organizations, such as the U.S. Green Building Council, 
which administers LEED and Southface, which administers EarthCraft, 
collect fees for certifying green buildings.[Footnote 23] The size of 
these fees can vary depending on the level of green building 
certification. For example, GSA found that the soft costs associated 
with building either a federal courthouse or an office building to 
various levels of LEED certification--from LEED Certified to LEED Gold-
-could add $0.35 to $0.80 per square foot. In addition to the fees, 
administrative costs associated with documenting the completion of each 
point category within an organization's green building standard can add 
to the costs of certification. The affordable housing developers we 
spoke to expressed mixed opinions on the cost-effectiveness of 
obtaining green building certification. Some stated that achieving 
green building certification was useful, but others stated that gaining 
certification was an unnecessary expense or that it was not cost- 
effective. 

Using different green building standards or achieving various levels of 
green can also affect costs. The GSA study estimated that the 
additional construction costs of building a new federal office building 
at the LEED-certified level would be 1.4 percent, but constructing the 
same building to meet the LEED Gold standard would likely increase 
construction costs by 8.2 percent.[Footnote 24] Similar variations in 
green building costs were reported in a California study that found 
that a sample of green buildings in the state had average cost premiums 
of 0.66 percent at the LEED-certified level and 6.5 percent at the LEED 
Platinum level.[Footnote 25] Another study comparing the costs of green 
building and traditional buildings found no statistically significant 
difference in the square footage cost between the LEED-rated and non- 
LEED buildings, and observed a high level of cost variation among the 
buildings studied.[Footnote 26] Additionally, the study found that when 
comparing the costs of the LEED buildings--from LEED Certified to LEED 
Platinum--the square footage costs were scattered among all buildings 
studied in no discernable pattern of distribution. 

Building commissioning, which is a third party verification process 
that seeks to ensure that a building's systems are well designed, can 
also add to the soft costs of green building. The added costs of 
commissioning can vary and can depend on a particular building's 
specific characteristics. For example, one study we reviewed found that 
the costs of basic commissioning could range from $1.50 to $3.00 per 
square foot in the buildings reviewed in the study.[Footnote 27] As 
with green building certification, developers had mixed opinions about 
the cost-effectiveness of building commissioning. For example, one 
building professional we spoke to stated that while building 
commissioning could add value, not all systems may need to be tested. 
This developer added that testing only major systems--such as the 
heating and cooling systems--could be more appropriate for an 
affordable housing development with a tight budget. Those who use the 
Green Communities criteria are not required to perform commissioning 
Thus, green commissioning costs may not be accrued by entities that use 
the Green Communities standard. 

Regional Differences and Green Building: 

Regional differences, such as climate variations and the level of 
regional experience, can also affect the up-front costs. Climate 
differences can influence how building systems are designed as well as 
the costs of using those systems.[Footnote 28] For example, DOE 
recommends the use of electric heat pumps for heating and cooling 
equipment in some cold weather climate zones, but in very cold regions-
-that often fall below 30 degrees Fahrenheit--some heat pumps cannot 
comfortably heat a home without using costly equipment not needed in 
warmer climates. Limited regional experience using certain green 
building technologies can also increase the costs of green building. 
For example, in areas where there are more contractors with experience 
building green, contractors may be more willing to take on the cost 
associated with the risks of a project rather than passing those costs 
on to the client, in order to remain competitive with other 
contractors. 

Green Building Practices Can Provide Long-term Financial Savings and 
Health Benefits: 

Some green building technologies that have higher up-front costs can 
provide savings that cover those added costs over time. For example, a 
2005 study on the costs and benefits of green affordable housing 
estimated that 14 of 16 properties reviewed by the authors would 
experience a net financial benefit that includes utility savings and 
lower product replacement costs.[Footnote 29] There are several ways of 
calculating potential savings from green building. One way involves 
assessing the "life-cycle" costs of certain green building practices. 
Life-cycle costing assesses not only the initial costs of materials and 
equipment but also the operating costs associated with them. Using this 
type of calculation, green building products with higher up-front costs 
may provide financial benefits over time. For example, using highly 
durable linoleum flooring may cost more than using sheet vinyl flooring 
initially but can actually cost less over time because the flooring may 
not have to be replaced as often. A second method of calculating the 
savings opportunities from using green building materials is to assess 
the amount of time required to "pay back" the added up-front costs 
through the operational savings generated by a particular green 
building practice. For example, compact fluorescent light bulbs pay 
back their initial added costs in less than 1 year (see table 4 to view 
the payback period for Energy Star-labeled products and appliances). 
Acceptable payback periods can vary depending on the situation. 

Table 4: Payback Period for Energy Star-labeled Products and 
Appliances: 

Energy Star-labeled products: Appliances: Dishwasher; 
Green premium: 0; 
Payback period (years): 0. 

Energy Star-labeled products: Appliances: Refrigerator; 
Green premium: 3%; 
Payback period (years): 4.3. 

Energy Star-labeled products: Appliances: Washer; 
Green premium: 67%; 
Payback period (years): 4.4. 

Energy Star-labeled products: Heating and cooling: Programmable 
thermostat; 
Green premium: 26%; 
Payback period (years): 0.1. 

Energy Star-labeled products: Heating and cooling: Furnace; 
Green premium: 41%; 
Payback period (years): 1.1. 

Energy Star-labeled products: Heating and cooling: Central air 
conditioning; 
Green premium: 8%; 
Payback period (years): 1.6. 

Energy Star-labeled products: Heating and cooling: Boiler; 
Green premium: 20%; 
Payback period (years): 3.0. 

Energy Star-labeled products: Heating and cooling: Heat pump; 
Green premium: 18%; 
Payback period (years): 3.5. 

Energy Star-labeled products: Lighting: Compact fluorescent light 
bulbs; 
Green premium: 600%; 
Payback period (years): 0.3. 

Energy Star-labeled products: Lighting: Fixtures; 
Green premium: 63%; 
Payback period (years): 1.3. 

Source: Energy Star Cost Calculator. 

[End of table] 

Energy efficiency and water conservation measures can reduce utility 
costs and provide relatively quick payback on their initial investment. 
Measures such as properly installing insulation, using energy-efficient 
heating and cooling equipment, and using efficient products and 
appliances can reduce a building's overall energy use and lower its 
utility bills. The Energy Star program estimates that a certified home 
uses approximately 30 percent less energy than an uncertified home and 
can save homeowners from $200 to $400 per year. Additionally, the 
utility savings achieved from these practices can be used to pay the 
additional costs associated with these products and lower a building's 
ongoing operating costs over time. One green building cost and benefits 
study estimated that energy cost savings alone accounted for an average 
$5.79 per square foot financial benefit in LEED-certified buildings 
studied in the report.[Footnote 30] Water conservation measures, such 
as low-flow fixtures, front-loading Energy Star clothes washers, and 
capturing rainwater for landscaping, can also lower a building's 
utility use significantly. For example, high-efficiency toilets use 
approximately 20 percent less water per flush than a standard toilet. 
According to officials we spoke to from the Seattle Housing Authority, 
the agency has saved approximately $800,000 per year by replacing the 
toilets in its properties with higher-efficiency models. Attention to 
building operations and maintenance is essential to ensure that the 
benefits of green building are maximized for the long term. Green 
building practices such as performing regularly scheduled (and 
unscheduled) maintenance of equipment can sustain original energy 
savings investments over the life span of the building's equipment. DOE 
reports that a building operations and maintenance program that targets 
energy efficiency can save 5 percent to 20 percent on energy bills with 
little capital investment. Equally important is tenant education, so 
that building occupants understand how to operate the equipment within 
their units in the most efficient manner. 

Green building practices can also improve health for residents and 
benefit the environment, but these benefits are difficult to measure. 
Health benefits can result from building practices that improve the 
indoor air quality of a building and its units. For example, using 
material--such as carpet and furniture--free of volatile organic 
compounds (VOC) can decrease incidents of health problems such as 
respiratory illnesses. Also, many green building standards place a high 
priority on the design of ventilation systems that improve indoor air 
quality by replacing contaminated indoor air with fresh outdoor air. It 
has been acknowledged for some time that the condition of buildings can 
have an effect on occupant health. According to the Centers for Disease 
Control, an array of health ailments have been linked to substandard 
housing nationwide. Also EPA cites indoor air pollutants such as mold, 
radon, formaldehyde, and tobacco smoke as contaminants that can lead to 
a variety of health ailments, such as asthma, respiratory illness, and 
some forms of cancer. However, according to a representative from a 
national health organization we spoke to, evidence documenting the 
benefits of particular green building improvements is lacking due to 
limited research funding. Currently, the National Center for Healthy 
Homes is conducting a study of the health benefits of green building on 
an affordable housing development in Minnesota, but the results are not 
expected until 2009. One study we reviewed acknowledged that assessing 
the health benefits of green buildings can be complicated.[Footnote 31] 

Green building practices such as using lower carbon-emitting energy and 
resource-efficient building materials, and managing rainwater in a way 
that limits the contamination of local waterways, can improve the 
overall environment. For example, capturing rainwater on site can 
reduce the amount of contaminates that run off the property into local 
waterways and limit a building's impact on a city's storm water and 
sewer system. Other practices, such as using sustainably harvested wood 
products, can reduce a building's global impact by limiting the 
environmental effect of extracting natural resource--e.g., wood 
products--for use in building construction. Also, lower carbon dioxide 
emissions from energy use in buildings can improve human and 
environmental health. 

The financial benefits of green building improvements in a residential 
building are typically directed to the party responsible for the long- 
term costs. A 2005 study found that tenants living in the multifamily 
green affordable housing properties reviewed would benefit the most 
because they typically do not pay the up-front costs, but accrue most 
of the benefits through lower energy and water bills.[Footnote 32] On 
the other hand, the developers and owners of these buildings paid most 
if not all of the initial costs, but receive little benefit from the 
improvements. For example, in a property where rents are established 
through contracts with HUD, if a building owner assumes the up-front 
costs of installing a more expensive and energy-efficient boiler, the 
direct utility savings that may result will be primarily experienced by 
the tenant rather than the owner if the tenant is responsible for 
paying the energy bills. Such challenges can occur when the party 
responsible for the initial investment does not capture the benefits 
associated with that investment. This dynamic is referred to as the 
presence of "split incentives" in multifamily housing, which can create 
disincentives for owners and tenants (see fig. 1 for an example of how 
these costs and benefits can be distributed). 

Figure 1: Example of Possible Distribution of Costs and Benefits for 
Green Building Practices: 

This figure is a chart with illustrations showing an example of 
possible distribution of costs and benefits for green building 
practices. 

[See PDF for image] 

Source: GAO (analysis); Art Explosion (images). 

[End of figure] 

Utility allowance policies--related to HUD supported properties--can 
exacerbate these split incentives. For example, when assisted 
multifamily housing building owners reduce their energy use by making 
energy efficiency improvements to a property, HUD policy requires that 
the utility allowance be adjusted to account for the energy savings. By 
decreasing the utility allowance, HUD captures the utility savings, and 
neither the tenant nor the owner receives the benefit. This leaves the 
owners and tenants with little incentive to make energy efficiency 
improvements or adjust their behavior, because they are not made better 
off by the green building improvements. 

HUD Invests Significant Resources in Utilities, but Only Benchmarks 
Utility Use in a Portion of Its Assisted Housing Portfolio: 

HUD invests significant financial resources in utilities, health, and 
safety in assisted housing properties. Utility allowances and utility 
subsidies are HUD's primary method of supporting the payment of utility 
expenses in its private assisted multifamily and public housing 
portfolios.[Footnote 33] In 2007, HUD reported almost $5 billion in 
utility expenses in multifamily and public housing properties (see 
table 5). HUD currently collects data on utility costs in its public 
housing program and a portion of its assisted housing 
programs.[Footnote 34] However, according to HUD officials, the agency 
does not know exactly how much utility assistance it provides to 
assisted multifamily properties where the building owners are 
responsible for paying the utility expenses. In a 2006 report to 
Congress, HUD reported that buildings in this category had 
approximately $900 million in total utility expenses, part of which was 
paid by HUD. The officials told us that they could not accurately 
determine how much HUD contributed to the utility expenses in these 
buildings because some of the data collected by HUD are not broken out 
to show the share of utility expenses that may be paid for by 
HUD.[Footnote 35] In addition, HUD does not currently collect either 
utility costs or utility consumption data in a number of its assisted 
multifamily properties. 

Table 5: HUD Utility Expenses for 2007: 

Utility allowance provided to tenant: Public housing; 
Number of subsidized units: Utility allowance provided to tenant: 
1,194,747; 
Total annual expense (dollars in millions): $421. 

Utility allowance provided to tenant: Tenant-based Section 8 (housing 
choice vouchers); 
Number of subsidized units: Utility allowance provided to tenant: 
2,204,426; 
Total annual expense (dollars in millions): $2,500. 

Utility allowance provided to tenant: Project-based Section 8; 
Number of subsidized units: Utility allowance provided to tenant: 
1,625,210; 
Total annual expense (dollars in millions): $663. 

Utility allowance provided to tenant: Total; 
Number of subsidized units: Utility allowance provided to tenant: 
5,024,383; 
Total annual expense (dollars in millions): $3,584. 

Utility subsidy provided to PHA: Public housing[A]; 
Number of subsidized units: Utility allowance provided to tenant: -; 
Total annual expense (dollars in millions): $1,321. 

Total HUD utility expense (provided to tenant and PHA); 
Number of subsidized units: Utility allowance provided to tenant: 
[Empty]; 
Total annual expense (dollars in millions): $4,908. 

Source: HUD. 

[A] Public housing subsidy data covers a 9 month period from September 
30, 2006, to June 30, 2007. This reflects utility costs associated with 
the most recent reporting period in HUD's Financial Assessment 
Subsystem data collection system. 

[End of table] 

Utility benchmarking has been used in commercial building management 
for a number of years to assess energy use in properties and help to 
identify properties that could improve their energy efficiency. Since 
1999, the Energy Star program has rated commercial buildings--such as 
office buildings, schools, hospitals, and hotels--by using a utility 
benchmarking tool that compares energy and water consumption in a 
particular building to that of similar buildings across the 
country.[Footnote 36] High-performing buildings that use this tool can 
earn recognition from EPA and be labeled as Energy Star buildings. 
Commercial buildings that are Energy Star rated use on average 35 
percent less energy than standard commercial buildings and generate one-
third of the carbon dioxide. HUD has recently worked with EPA and DOE's 
Oak Ridge National Laboratory, through an existing interagency 
agreement, to develop energy and water benchmarking systems that can be 
used to identify savings opportunities in public housing across the 
country.[Footnote 37] HUD believes that this tool will allow it to 
establish a fair and measurable basis to accurately assess energy use 
in public housing by comparing a given public housing property's 
utility consumption with consumption at other public housing properties 
with similar characteristics such as age, number of units, and 
location. HUD has posted this tool on its Web site and in the future 
plans to use it to set program policies related to utility consumption 
in public housing. 

While HUD has taken steps to benchmark utility use in public housing, 
it has not done so in its privately owned assisted multifamily housing 
programs. As a result, HUD is in a better position to understand its 
utility use and identify future savings opportunities in its public 
housing than it is in other multifamily buildings in its portfolio. 
According to HUD officials, it does not have any plans to use 
benchmarking in its privately owned multifamily housing programs--such 
as Section 8. In 2005, privately owned multifamily housing constituted 
approximately a quarter of the HUD-assisted housing units. HUD 
officials told us that they cannot benchmark utilities in these 
programs, because they do not collect or store utility consumption 
data--which are needed to benchmark utilities--for privately owned 
assisted multifamily housing properties. HUD officials told us that 
collecting these data and developing a benchmarking system could be 
useful to understand the energy use and savings opportunities in its 
multifamily housing portfolio, but that it could be costly to HUD and 
the property owners. A 2003 study by Harvard University--funded by HUD-
-found that collecting consumption data in FHA-insured privately owned 
multifamily housing would not be unreasonably burdensome.[Footnote 38] 
Additionally, benchmarking systems exist for other types of properties, 
such as corporate real estate, hotels, schools, and dormitories. Also, 
the HUD officials responsible for developing the benchmarking system 
for public housing told us that this tool was developed through an 
existing interagency agreement and at minimal cost to HUD.[Footnote 39] 
By not benchmarking utility costs in its multifamily portfolio, HUD is 
missing an opportunity to target less efficient multifamily properties 
for green building improvements, an action that could reduce the 
resource consumption and utility expenses for HUD and its funding 
recipients. 

Standards and Financial Incentives Used Elsewhere for Green Building 
Could Provide Lessons for HUD: 

Standards and financial incentives that are used by states, cities, and 
nonprofit organizations to encourage green building could provide 
lessons for HUD. National and regional green building standards are 
often used to provide a framework for how to build green, and state and 
local jurisdictions have even developed their own regional green 
building standards. HUD has focused its attention on incentives that 
encourage energy efficiency, but it provides few financial incentives 
to encourage more comprehensive green building practices--such as water 
conservation and indoor air quality. For example, HUD provides one 
incentive point for energy efficiency in its competitive housing 
development grant programs, such as Section 202, but according to HUD 
officials, the strength of this incentive is unclear. According to HUD, 
it has not assessed whether the single incentive point is sufficient to 
stimulate higher levels of energy efficiency in HUD-funded projects. 
This lack of understanding makes it difficult for HUD to know if this 
incentive is strong enough to encourage energy efficiency in its 
programs. In addition, while focusing on energy efficiency, HUD does 
not currently have many incentives that focus on the nonenergy green 
building practices. While HUD funding is used occasionally to promote 
green building, the decision to do so is typically in response to state 
and local requirements or incentives, not HUD's policies. Many state 
and local governments have used financial incentives to encourage the 
use of green building, including nonenergy green building practices, in 
their affordable housing programs. The lack of nonenergy green building 
incentives could make it less likely that HUD funding will be used to 
build green affordable housing. 

The Use of Green Building Standards by State and Local Governments, as 
Criteria for Affordable Housing Programs, Could Provide Lessons for 
HUD: 

The use of national and regional green building standards by state and 
local governments could provide lessons for HUD. State and local 
governments use national and regional standards to provide the 
framework for how to use green building practices, to provide minimum 
criteria for green building incentives, and to establish eligibility 
requirements for receiving affordable housing funding. The state and 
local government officials we spoke to report that setting a green 
building standard for funding programs is important to support green 
affordable housing. Some officials we spoke to emphasize the importance 
of flexibility in determining which green building standards or 
practices should be used as criteria. For example, the City of Seattle, 
through SeaGreen, provides a menu of 101 green building measures--such 
as easy access to public transportation, water-conserving plumbing 
fixtures, and using Energy Star windows--as options for developers to 
choose from when applying for city affordable housing funding. 
According to the Seattle officials, the flexibility is emphasized in 
order to recognize the variation in costs associated with some green 
building practices. Some states have worked with organizations with 
experience in green building to promote green affordable housing in 
their regions. For example, Southface--which administers the EarthCraft 
Green building standard--has worked with Virginia and Georgia to 
incorporate green building into each state's LIHTC program. 

National standards are used to provide guidance on how to build green 
affordable housing. LEED and Enterprise Green Communities are 
identified as national green building standards.[Footnote 40] Many of 
the developers we spoke to stated that the cost-effectiveness of using 
some green building standards varies significantly. LEED was cited by 
affordable housing developers and other professionals we spoke to as 
difficult to incorporate into the constrained budget of an affordable 
housing development. The LEED certification fees and administrative 
costs of documenting the completion of LEED points were cited as 
financial barriers for affordable housing developers. However, building 
professionals we spoke to stated that they found value in using LEED, 
because of the third party verification process that ensures that the 
final product actually developed used green building practices. 
Enterprise's Green Communities was designed specifically for use in 
affordable housing developments, but it lacks third party verification 
requirements required by other standards. The Green Communities 
contains a number of mandatory items. People we spoke to thought that 
Green Communities was a good standard for affordable housing. However, 
others believed that the inflexible nature of the criteria and the lack 
of third party verification render it inappropriate for some types of 
projects. 

Regional green building standards such as EarthCraft, Green Point 
Rated, and Evergreen provide green building guidance that takes into 
account the regional characteristics of the location where the housing 
is built--such as the local climate and regulatory structure. Some 
state and local officials use regional green building standards, 
because these standards took into account local climatic and regulatory 
conditions. Some local jurisdictions have even developed their own 
regional green building standards, because existing standards did not 
meet their specific needs. For example, Washington State worked with 
Enterprise to develop the Evergreen Sustainable Development Standard to 
allocate their LIHTC and housing trust fund dollars. 

The Impact of HUD's Energy-Related Incentives Is Unclear and HUD Offers 
Few Nonenergy Green Building Incentives: 

HUD efforts to use green building incentives have focused primarily on 
energy efficiency, but it is unclear whether these incentives truly 
encourage greater energy efficiency, and few encourage nonenergy green 
building practices, such as water conservation and indoor air quality 
measures. HUD's primary incentive is provided through its competitive 
housing development grant programs such as HOPE VI, Section 202, and 
Section 811, which provide 1 incentive point for energy efficiency 
through its NOFA. In addition, in the Section 202 program, HUD also 
awards 15 points for the applicant's experience and 5 points for ties 
to the local community. HUD officials asserted that competitive grant 
applicants had strong incentives to seek every possible point in the 
application, but the strength of the existing energy efficiency point 
incentives for these programs is unclear. HUD data indicate that a 
majority of applicants for the HOPE VI, Section 202, and Section 811 
programs earned the point in fiscal year 2007, and it is unclear what 
impact, if any, the single incentive point may have had on funding 
decisions. Because almost all applicants that were deemed eligible to 
receive funding received the point, it does not appear to have been a 
determining factor for most applicants that received funding. We did 
not examine the extent to which applicants believed 1 point (out of a 
total of 100 or 120 points) would make a significant difference in 
their prospects for success. According to a HUD official, it generally 
does not verify that planned improvements have been implemented; the 
impact of this incentive on energy efficiency also remains unclear. 
According to HUD, it has not assessed whether the single incentive 
point is sufficient to stimulate higher levels of energy efficiency in 
HUD-funded projects, and does not verify the installation of all energy 
efficiency improvements. When providing an incentive in a competitive 
grant process, it is important to understand whether the incentive 
point is having its intended effect. This lack of understanding makes 
it difficult for HUD to know whether these single point incentives are 
strong enough to encourage energy efficiency in its programs. 

Figure: 

This figure is a photograph with text showing an example of Green Hope 
VI Project. 

High Point, located in the Delridge neighborhood in Seattle, Washington 
was originally a 716-unit public housing project built during World War 
II. With over $37 million in HOPE VI funding, the Seattle Housing 
Authority converted this blighted public housing property into a mixed 
income community that covers 34 city blocks and has 1,600 home 
ownership and rental units—half affordable housing, half market rate. 
The green features of the homes in High Point include the following: 
Energy Star appliances, water- conserving fixtures, use of paints with 
no and low volatile organic compounds, and durable hard flooring 
instead of carpeting. Also, a natural rainwater drainage system was 
created for the property to prevent toxins—such as motor oil—from 
running off the site into a creek near the neighborhood. 

[See PDF for image] 

Source: GAO. 

[End of figure] 

Although green building practices can provide long-term benefits and 
savings opportunities, HUD has focused its attention primarily on 
energy efficiency and currently has few incentives to encourage 
nonenergy green building in its affordable housing portfolio.[Footnote 
41] Occasionally, HUD funding is used to build green affordable 
housing, but according to PHA officials we spoke to, these decisions 
are typically made at the local level and not in response to HUD 
incentives or encouragement. For example, the Boston Housing Authority 
used HOPE VI funding to build a LEED-certified redevelopment project. 
According to officials from the housing authority, the decision to 
build green was influenced primarily by the city's overall housing and 
environmental strategies. A number of building professionals we spoke 
to stated that their decision to build new green affordable housing was 
in response to state and local requirements or incentives--such as the 
LIHTC--but not HUD's policies. However, some of HUD's affordable 
housing portfolio may not participate in programs such as the LIHTC. 

Many state and local governments have used financial incentives to 
encourage the use of green building practices in their affordable 
housing programs. Currently, nearly all states have used competitive 
funding to encourage some level of green building in affordable 
housing.[Footnote 42] The most prominent program in this regard is the 
LIHTC. LIHTC dollars are provided to local developers in accordance 
with state Qualified Allocation Plans that states are required to 
develop and that outline the competitive processes that will be used to 
award these funds. Most states employ a competitive point system to 
award LIHTC funds and have provided incentive points for projects that 
agree to use green building practices.[Footnote 43] For example, 
Virginia's Qualified Allocation Plan provides 30 points to applicants 
that agree to build to the EarthCraft or LEED green building standards. 
Applications that don't meet a threshold of a total of at least 450 
points will not be considered for the tax credits. California also 
provides competitive points for green building and offers additional 
LIHTC funding for projects that agree to build green. In addition to 
the LIHTC, states have used other funding sources to encourage green 
building. For example, Washington State requires that all projects 
receiving state housing trust fund dollars agree to use green building 
practices, and Texas has developed a Green Building Revolving Loan Fund 
that is self-sustaining and provides financial support to projects that 
agree to build green. 

California Low-Income Housing Tax Credit: 

California administers federal and state low-income tax credit 
programs. Through its Qualified Allocation Plan (QAP) the state 
provides two incentives to encourage the use of green building 
practices. First, the state provides a maximum of eight competitive 
incentive points for applicants that agree to either choose from an 
array of green building practices or commit to certify the property 
under a green building standard—such as LEED or Green Communities. 
Second, projects can obtain a 4 percent increase in the amount of 
funding they are eligible to receive if they agree to meet a higher 
energy standard—35 percent above the state’s energy code—or choose 
three green building practices from a list of higher cost practices 
listed in the QAP—such as agreeing to recycle 75 percent of the 
project’s construction waste.

City government and nonprofit organizations have also used a mix of 
financial approaches to encourage green building practices, which could 
provide examples for HUD. For instance, the City of Seattle required 
that applicants for the city's affordable housing funds submit a 
sustainability plan that incorporates elements of its SeaGreen Green 
Building Guide. However, the city recently retired SeaGreen and 
currently requires projects funded through the city to incorporate the 
Washington State Evergreen Sustainable Development Criteria.[Footnote 
44] City officials told us that green building practices are not 
required to remain competitive for city funds. However, these 
developers must incorporate elements of the SeaGreen guide. Nonprofit 
groups like the Local Initiative Support Corporation (LISC) and the 
Enterprise Community Partners have also developed strong financial 
incentives to support green building. At the local level, the 
California Bay Area LISC chapter has developed a "green loan fund." 
Eligibility for loans from the fund is contingent upon demonstrating 
that projects will meet minimum green building standards. Enterprise 
Community Partners provides loans and grants to affordable housing 
projects that follow its Green Communities Criteria. These programs 
include a predesign grant program meant to support the early planning 
and adoption of green building practices--energy and nonenergy--at the 
design stage of development (see app. V for a list of sample state, 
local, and nonprofit green building financial incentives). However, the 
lack of nonenergy green building incentives in many of HUD's programs 
makes it less likely that HUD funding will be used to support the 
development of green affordable housing. 

Conclusions: 

Energy costs account for a significant portion of HUD's expenditures 
for assisted housing, and these costs are expected to rise as the cost 
of energy increases. To offset these costs and benefit from the growing 
body of knowledge about the environmental and health effects of 
buildings, HUD could benefit from expanding its efforts to support the 
building and rehabilitation of sustainable, healthy, and energy- 
efficient housing. While HUD has made some progress in encouraging 
green building practices, more remains to be done to ensure that the 
agency itself, its grantees, and program recipients are benefiting to 
the extent possible from the advantages that green building offers. In 
part because of a decision to delay the issuance of a proposed 
regulation due to concerns about a separate proposed regulation, a 
statutory requirement to require energy-efficient products and 
appliances in all public housing has not been met, and this may result 
in housing authorities purchasing products and appliances that are not 
energy efficient. Although manufactured housing is an area in which HUD 
has significant influence because it has been responsible for 
establishing manufactured building code requirements since 1974, HUD 
has not made significant energy efficiency updates to code for this 
program since 1994. HUD officials told us that they intended to wait to 
make energy efficiency updates to the code due to their concerns about 
overlapping agency responsibilities between DOE and the Office of 
Manufactured Housing. However, the current energy efficiency-related 
codes are antiquated by HUD's own description, and DOE is not required 
to develop its energy standards for manufactured housing until 2012. 
Waiting for DOE to take action when DOE has until 2012 to do so and 
when the current code is already so outdated could result in additional 
years of some manufactured homes being built without improved energy 
efficiency standards. As a result, the agency has missed an opportunity 
to reduce the energy costs and other green building impacts associated 
with manufactured housing. Program handbooks have not been updated to 
reflect current guidance on green building, so that many staff may be 
unaware of opportunities to make properties more energy efficient and 
green. 

While some green building practices can add to up-front costs, they can 
also provide long-term financial and health benefits. HUD invests 
significant resources in support of utilities in multifamily 
properties, but does not fully understand the differences in utility 
consumption across these properties. HUD's public housing office has 
shown leadership and initiative in partnering to develop a utility 
benchmarking tool that could be used to identify properties with high 
levels of utility consumption, but HUD's multifamily assisted housing 
has no such tool. In the absence of such a tool, HUD cannot target 
certain multifamily properties for green building improvements, which 
could result in benefits, including reduced resource consumption. 

A number of state and local governments provide targeted green building 
financial incentives that have helped to support the development of 
green affordable housing, but HUD has few such incentives. HUD's 
incentives for its competitive grant programs have focused entirely on 
energy efficiency through the awarding of one incentive point, but the 
impact of these incentives is unclear. Recognizing that HUD awards 
incentive points in numerous competing priority areas in its 
application, HUD's lack of understanding about the impact of the single 
incentive point for energy efficiency makes it difficult to assess 
whether these incentives are strong enough to sufficiently encourage 
greater energy efficiency in its programs. In recent years HUD has 
devoted limited resources to financing green building efforts or 
studying the costs and benefits of green building. Additional resources 
may expand HUD's reach in green building beyond its current efforts to 
include an improved understanding of national and regional green 
building standards as well as the costs and benefits of green building 
practices. Models for targeting resources to green building exist in a 
number of states and localities. For example, Texas has created a self- 
sustaining revolving loan fund that provides initial funding for green 
building. Such HUD green building programs could provide affordable 
housing developers with financial assistance to deal with the added 
costs of green building and HUD with the data it needs to understand 
the relationship between the up-front costs and long-term benefits of 
green building. HUD's public housing and Mark-to-Market programs are 
able to promote green building, in part because they provide financial 
incentives to program participants. Participants in other HUD programs 
may not build green without incentives similar to those provided by 
state and local governments. Without green building-focused incentives, 
HUD may be missing an opportunity to stimulate higher levels of 
resource-efficient and environmentally friendly housing. 

Recommendations for Executive Action: 

In order to better promote green building practices, we recommend that 
the Secretary of HUD direct the appropriate program offices to take the 
following actions: 

* ensure completion of the regulation that would require the use of 
energy-efficient products and appliances for public housing as directed 
by the Energy Policy Act of 2005, 

* proactively work with DOE to expeditiously implement energy- 
efficiency updates to the HUD Manufactured Housing Code, 

* ensure that updates to handbooks are regularly completed in a timely 
fashion to provide more current guidance on energy-efficient and other 
green building practices, 

* consider working with DOE's Oak Ridge National Laboratory and EPA to 
develop a utility benchmarking tool for multifamily properties, and: 

* assess whether the single-point incentive awarded for energy 
efficiency is sufficient to stimulate higher levels of energy 
efficiency for its competitive grant programs and consider providing 
nonenergy green building incentive points for these programs. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to HUD for review and comment. In 
written comments, HUD's Deputy Secretary stated that HUD welcomed our 
recommendations and that the agency would give serious consideration to 
their implementation with the resources it has available. The Deputy 
Secretary's letter is reprinted in appendix VI. We also received 
general and technical comments from HUD that provided additional detail 
on issues discussed in the letter that we have incorporated as 
appropriate. HUD made comments suggesting that we did not provide 
enough information describing HUD's progress in implementing green 
building practices or provide enough direction in how HUD should manage 
its programs. Discussed below are a number of concerns HUD had with 
certain aspects of the report and our response. 

First, HUD stated that we did not sufficiently distinguish between 
energy-related and non-energy-related green building strategies and the 
costs and benefits associated with them. While we did distinguish 
between energy-related and non-energy-related green building strategies 
and also describe the potential costs and benefits for a variety of 
green building practices, we did not compare the costs and benefits of 
the different approaches. As we note in the report, energy efficiency 
is one of a number of important elements of green building. We continue 
to believe that other non-energy-related measures, such as conserving 
water and improving indoor air quality, may also provide important 
benefits and thus merit HUD's consideration. As discussed in the 
report, HUD officials we interviewed identified water conservation 
savings as significant and among the biggest potential opportunities 
for financial savings. 

Second, HUD stated that we did not sufficiently distinguish among the 
different strategies that would be needed to expand green building in 
the wide array of HUD programs. Our report is not intended to suggest 
that HUD adopt any particular green building criteria or strategy but 
rather aims to point out that a variety of strategies are available and 
that HUD may want to consider some or all of them for its programs. We 
recognize the diversity of HUD's programs and have emphasized the fact 
that many green building strategies are available for HUD's 
consideration. 

Third, in acknowledging that we identified the potential added costs of 
green building, HUD also commented that we had made no recommendations 
on how to address these costs. In additional comments provided to us, 
HUD stated that such higher costs would translate into fewer units that 
would be assisted or subsidized by HUD. While we agree that these costs 
may vary across HUD programs, sufficient data were not available to 
perform the type of cost-benefit analysis necessary to make such 
recommendations. The limited availability of data such as utility cost 
and consumption information was one of the reasons that we recommended 
that HUD work with DOE's Oak Ridge Laboratory and EPA to develop a 
utility benchmarking tool for multifamily properties. HUD could 
consider whether the agency needs to address the potentially higher 
costs associated with green building incentives or requirements in 
every program. For example, some state housing finance agencies that 
administer programs supporting affordable housing told us that they had 
not observed a drop in the number of affordable housing units built 
after incentives or requirements for green building were added to their 
programs. As a result, these agencies did not need to address the issue 
of higher costs. 

Fourth, HUD commented that in describing the growing number of state 
and local green building standards and initiatives, our report did not 
say whether HUD should set standards of its own or defer to the state 
and local initiatives. Our report did not seek to make such a 
determination for the wide array of diverse housing programs that HUD 
administers. Rather, it was intended to present the experiences of 
other governments and nonprofits in developing their green building 
efforts as useful practices for HUD to consider in developing its green 
building efforts. 

Fifth, HUD noted that we did not fully address staffing or resource 
issues. We acknowledge in our report that additional dedicated 
resources may be needed if HUD is to continue harnessing the potential 
benefits of green building. However, the extent to which additional 
staffing or resources would be needed is an internal management issue 
that we leave to HUD's discretion. 

Sixth, HUD noted that our report did not highlight the activities of 
certain offices or programs, such as HUD's efforts to support 
affordable housing in transit-oriented development. In this report we 
did not provide a complete listing of all HUD's efforts related to 
energy efficiency and green building and we have added language to our 
scope and methodology to clarify this point. HUD itself has provided a 
description of its efforts in its original Progress Report to Congress 
on the status of its energy efficiency efforts and is scheduled to 
provide an updated report soon. As an overview of HUD's efforts, we 
have provided highlights of HUD's efforts, targeted descriptions, and 
examples that reflect the scope of these efforts in the areas of energy 
efficiency and green building. Appendix III, which was included in the 
draft report, provides additional information on all of the actions 
items identified in HUD's Energy Strategy. Finally, we have ongoing 
work on HUD's efforts to support affordable housing in transit-oriented 
developments, and we may conduct more focused work on other particular 
areas of HUD's green building efforts in the future. 

In addition, HUD noted that our report misstates the extent of the 
authority that Congress has given HUD to require green building 
practices other than those related to energy efficiency. We did not 
mean to suggest in our report that Congress had given HUD specific 
authority to require green building measures. In fact, HUD is currently 
promoting green building practices in programs for which the underlying 
statutory authority does not explicitly authorize those practices. For 
example, in the Mark-to-Market program, HUD is relying on its authority 
to require "the addition of significant features" to a housing 
project's rehabilitation plan to induce eligible owners to participate 
in the program's Green Initiative. Further, in the HOME program, HUD is 
relying on the statutory provision that mandates the competitive 
reallocation of $1.5 million dollars previously allocated but never 
spent to jurisdictions that agree to build green affordable housing. In 
addition, in support of the goals of the President's National Energy 
Policy, HUD recently issued Public and Indian Housing Notice 2008-25, 
"Renewable Energy and Green Construction Practices in Public Housing," 
which "strongly encourages Public Housing Agencies (PHAs) to use solar, 
wind, and other renewable energy sources, and other 'green' 
construction and rehab techniques whenever they procure for 
maintenance, construction, or modernization." Finally, through its 
authority under the Native American Housing Assistance Act to provide 
block grants for the "new construction . . . of affordable housing" (25 
U.S.C. § 4132), HUD allows costs for "incorporating green building, 
energy efficiency or other innovative practices" into such housing 
(Public and Indian Housing Notice 2006-17). These examples demonstrate 
that a particular program's authorizing legislation can provide HUD the 
discretion to mandate green building measures. 

Finally, HUD disagreed with GAO's characterization of HUD's 
implementation of the Energy Policy Act requirement mandating the 
purchase of energy-efficient appliances in public housing. In our draft 
report, we provided a narrative of events at HUD that described a 
"miscommunication" between HUD officials as contributing to the delay 
in HUD implementing the Energy Policy Act requirement. HUD stated in 
its technical comments that GAO's narrative of events was not 
accurately portrayed by the term "miscommunication." We removed the 
discussion of the miscommunication, as it was not necessary to support 
our finding that HUD has not yet implemented this Energy Policy Act 
requirement from 2005. As stated in our report, HUD said that it had 
not implemented this requirement because the agency wished to 
consolidate related rules and save clearance and process time for the 
public. However, we continue to believe that a single rule could have 
been implemented to address the statutory requirement to purchase 
energy-efficient products and appliances in public housing. Given that 
HUD's process has thus far resulted in a 3-year delay in implementing 
this statutory requirement, in our view, it would have been appropriate 
to promulgate a single rule rather than incurring a delay by trying to 
develop a consolidated rule. Without such a rule, public housing 
authorities may be purchasing products and appliances that are not 
energy efficient. We also noted in our report that HUD had issued a 
notice encouraging the purchase of energy-efficient products, but such 
a notice does not take the place of or have the same effect as a 
requirement. Further, of the 52 percent of public housing authorities 
that responded to a HUD survey on the issue of purchasing energy- 
efficient appliances, only about half of the respondents, or about one- 
quarter of all PHAs, specifically identified plans to make such 
purchases. Given these results, it is unclear whether three-quarters of 
all PHAs are purchasing the required appliances, which can provide 
significant savings on energy and water costs. 

We are sending copies of this report to the appropriate congressional 
committees and the Secretary of Housing and Urban Development. We will 
also make copies available to others upon request. In addition, the 
report will be available at no charge on the GAO Web site at 
[hyperlink, http://www.gao.gov]. 

If you or your staff have any questions about this report or need 
additional information, please contact me at 202-512-8678 or 
shearw@gao.gov. Contact points for our Office of Congressional 
Relations and Office of Public Affairs may be found on the last page of 
this report. Key contributors to this report are listed in appendix 
VII. 

Signed by: 

William B. Shear: 

Director, Financial Markets and Community Investment: 

[End of section] 

Appendix I: Scope and Methodology: 

To examine the status of the Department of Housing and Urban 
Development's (HUD) current efforts to promote energy efficiency and 
the performance measures the agency uses to assess these efforts, we 
obtained and analyzed documentation on HUD's programs that support 
energy efficiency and related performance measures. We also interviewed 
HUD officials at HUD headquarters who are responsible for managing HUD 
programs as well as members of HUD's Energy Task Force, including the 
cochairs of the task force. In addition, we conducted site visits to 
three HUD field offices (Boston, Massachusetts; San Francisco, 
California; and Seattle, Washington) and conducted interviews with HUD 
officials, including staff responsible for the numerous HUD programs 
that were included as part of our review. We also obtained perspectives 
of the Department of Energy (DOE), the U.S. Environmental Protection 
Agency (EPA), nonprofit organizations, developers, and energy 
efficiency practitioners on HUD's efforts to incorporate energy 
efficiency and sustainable building practices into its affordable 
housing programs. We did not seek to provide a complete listing of all 
of HUD's efforts related to energy efficiency but instead to provide an 
overview of HUD's efforts that reflects the scope of its efforts in 
this area. 

To describe the potential costs and long-term benefits of incorporating 
green building practices into HUD's affordable housing programs, we 
reviewed relevant research and interviewed individuals with experience 
in the area of green building. In order to identify the studies we 
reviewed, we searched with a variety of Internet and library search 
engines. Because there is limited research available on the costs and 
benefits of green affordable housing, we reviewed studies that assessed 
the costs and benefits of green building in a variety of building 
types--such as affordable housing, office buildings, schools, and 
hospitals. Due to limitations in the studies we reviewed, none of the 
findings could be generalized beyond the sample of properties reviewed 
in each study. In order to gain a perspective for the costs and 
benefits of building green affordable housing specifically, we also 
interviewed individuals with experience financing green affordable 
housing projects--such as green building organizations, affordable 
housing developers, and affordable housing funding providers. The 
knowledgeable individuals we interviewed represented organizations that 
included Global Green USA, Home Depot Foundation, U.S. Green Building 
Council, National Association of Home Builders, Enterprise Community 
Partners, and Local Initiatives Support Corporation. 

To provide information on lessons learned at selected sites that 
promote green building practices; we conducted interviews and site 
visits in locations that have incorporated green building practices 
into their affordable housing programs. To select these locations, we 
interviewed knowledgeable individuals in the area of green building and 
reviewed relevant literature on government and nonprofit green building 
efforts. From a list of 23 locations, we selected a judgmental sample 
of 4 locations with active green affordable housing initiatives: 
Austin, Texas; Boston, Massachusetts; the California Bay area;[Footnote 
45] and Seattle, Washington. We also conducted interviews with two 
state housing finance agencies in Virginia and Vermont, but did not 
visit these locations. These sites were selected because they each had 
green building practices taking place in state and local governments 
and in the nonprofit and for-profit housing development sector, and 
represented regional diversity in locations. We also sought to choose 
sites that were located in proximity to HUD regional offices. During 
these site visits we interviewed local and state government officials, 
and nonprofit and for-profit developers, and conducted site visits to 
green building properties. 

[End of section] 

Appendix II: HUD's Legal Authority to Incorporate Green Building 
Requirements into Its Affordable Housing Programs: 

HUD has the legal authority to implement green building requirements. 
Provisions of the Energy Policy Act of 2005, the Energy Security and 
Independence Act of 2007, and other relevant statutes grant HUD the 
authority to incorporate and update green building-related requirements 
in its housing programs. As described earlier, Section 152 of the 
Energy Policy Act of 2005 requires pubic housing authorities (PHA) to 
purchase energy-efficient appliances when doing so would be cost- 
effective. Section 153 of the act amended Section 109 of the Cranston- 
Gonzalez National Affordable Housing Act to require that all public and 
assisted housing rehabilitated or constructed with Urban Revitalization 
Demonstration Program (HOPE VI) funds must meet the 2003 International 
Energy Conservation Code.[Footnote 46] HUD implemented this provision 
by incorporating this requirement into the 2007 HOPE VI Notice of 
Funding Availability (NOFA). 

The Energy Security and Independence Act of 2007 required that HUD 
update energy efficiency standards for new construction and 
rehabilitation projects in public and assisted housing. Section 481 of 
this act amended Section 109 of the Cranston-Gonzalez National 
Affordable Housing Act again to require that all new construction and 
rehabilitation in HUD "public and assisted housing" meet the 2006 
International Energy Conservation Code. This requirement applies to 
public housing, the project-based Section 8 program, and other programs 
providing grants and rental assistance, such as the Section 202 and 
Section 811 programs. The Energy Security and Independence Act provides 
HUD with the authority to incorporate this requirement into the 
regulations for the HOME program as the authorizing legislation for 
HOME references Section 109 of the Cranston-Gonzalez Act. The HOPE VI 
program, which provides funds for the rehabilitation and construction 
of public housing, has incorporated this requirement into its fiscal 
year 2008 NOFA. 

HUD has the authority to implement energy efficiency requirements 
beyond those explicitly authorized in statute for most of its 
competitive and formula grant programs. In the 2008 NOFA for its 
competitive grant programs, HUD stated it was reviewing whether to 
require grantees in fiscal year 2009 to incorporate "energy efficiency 
measures in the design, construction, rehabilitation, and operation of 
properties designed, built, rehabilitated, or operated with funds 
awarded through HUD's NOFAs," as well as to require grantees that 
provide counseling and training to include information on Energy Star 
products as part of those services. HUD officials noted that adding 
green building-related requirements to the Community Development Block 
Grant (CDBG) program (a formula program) would represent a major change 
to the program, and should preferably occur with specific support from 
Congress. 

HUD imposes most new requirements, including energy efficiency 
requirements, on grantees through rulemaking. The rulemaking process 
usually incorporates an opportunity for the public to comment on the 
new requirements before they are finalized in regulations. For example, 
in the 2008 NOFA for its competitive programs, HUD stated that it would 
provide the public with advance notification and the opportunity to 
comment before mandating energy efficiency requirements in its programs 
for fiscal year 2009. While the HOPE VI program does not have program 
regulations, HUD attorneys said that HUD would nevertheless incorporate 
energy efficiency requirements into the HOPE VI NOFA through 
rulemaking. HUD attorneys observed that HUD may have to go through the 
rulemaking process to implement point incentives for energy efficiency 
that effectively serve as requirements. For example, HUD may not have 
the authority to significantly increase the one-point NOFA incentive 
for energy efficiency without going through rulemaking. 

[End of section] 

Appendix III: Overview of Planned HUD Actions in Energy Strategy and 
HUD Reported Status: 

Action number: 1; 
Planned action: Provide incentives for energy efficiency in housing 
financed through HUD's competitive grant programs; 
Status[A]: * Numerous competitive HUD programs provide a rating point 
for energy efficiency-related activities in applications for funding. 

Action number: 2; 
Planned action: Include energy efficiency performance measures in the 
annual performance plan and management plans; 
Status[A]: * Energy efficiency performance measures have been included 
in the annual performance plan and the management plans but the 
measures have been primarily focused on outputs (i.e., activities) and 
not outcomes (i.e., energy savings). 

Action number: 3; 
Planned action: Promote the use of Energy Star products and standards 
through HUD's partnership for home energy efficiency with DOE and EPA; 
Status[A]: * HUD has promoted the use of Energy Star products, through 
HUD's participation in the Energy Star Change a Light Campaign, and 
HUD's partnership with EPA's Energy Star program. 

Action number: 4; 
Planned action: Conduct training on energy-efficient housing for 
building residents and organization building or rehabilitating 
affordable housing; 
Status[A]: * HUD has conducted training but has not yet developed 
standardized training modules in many programs; 
* According to HUD officials the HOME program has developed a 
standardized training module for Green Building and Energy Efficiency. 

Action number: 5; 
Planned action: Establish residential energy partnerships with cities, 
counties, states, and other local partners; 
Status[A]: * HUD has established numerous partnerships with state and 
local governments. 

Action number: 6; 
Planned action: Encourage energy efficiency in HOME- and CDBG-funded 
new construction and housing rehabilitation projects; 
Status[A]: * HUD has reported promoting energy efficiency for both 
programs in numerous workshops and presentations; 
* HUD has begun to track the number of units built to Energy Star 
standards under both programs, reporting significant numbers of HOME-
funded units that meet the standards. 

Action number: 7; 
Planned action: Identify opportunities and assist with feasibility 
analysis for combined heat and power in multifamily housing; 
Status[A]: * Feasibility assessments have been conducted for 20 
multifamily properties; 
* Combined heat and power has been promoted at conferences and in some 
HUD informational materials. 

Action number: 8; 
Planned action: Base appliance and product purchases in public housing 
on Energy Star standards unless not cost-effective; 
Status[A]: * HUD has a notice that encourages housing authorities to 
purchase energy-efficient appliances but has yet to put forward a 
requirement for housing authorities to do so, as is required through 
statute. 

Action number: 9; 
Planned action: Build Hope VI developments to a high level of energy 
efficiency; 
Status[A]: * HUD has encouraged the adoption of Energy Star and 
provided a rating point incentive; 
* Recent statutes have set certain minimum energy efficiency standards 
that must be met by HOPE VI projects. 

Action number: 10; 
Planned action: Improve tracking and monitoring of energy efficiency in 
public housing; 
Status[A]: * Public housing authorities have begun to report utility 
consumption data for individual properties; 
* HUD has developed through a partnership a benchmarking tool that can 
be used to identify public housing properties that use large amounts of 
energy to operate. 

Action number: 11; 
Planned action: Streamline energy performance contracting in public 
housing; 
Status[A]: * HUD has required field offices to review energy 
performance contract proposals within 45 days and has contracted with 
an outside company to provide technical support related to energy 
performance contracts. 

Action number: 12; 
Planned action: Promote energy conservation for federally assisted 
housing on Indian lands; 
Status[A]: * HUD offers a one-point rating incentive for applications 
to its Indian Community Development Block Grant program that address 
Energy Star goals; 
* HUD allows a waiver to total development costs for additional costs 
associated with energy efficiency and green building; 
* HUD has instituted a series of national and regional training 
workshops on green building in Indian housing. 

Action number: 13; 
Planned action: Feature the energy efficiency mortgage as a priority 
loan product; 
Status[A]: * Little progress has been made on this action item. 

Action number: 14; 
Planned action: Provide training on how Federal Housing Administration 
single family programs can be effectively used to promote energy 
efficiency; 
Status[A]: * Some training has been provided but the extent of this 
training is unclear. 

Action number: 15; 
Planned action: Continue improved tracking and evaluate performance of 
energy efficient mortgages; 
Status[A]: * HUD has made improvements to the tracking of energy-
efficient mortgages but has not evaluated their performance due to a 
lack of available research funds. 

Action number: 16; 
Planned action: Promote energy efficiency in assisted multifamily 
housing and multifamily programs; 
Status[A]: * HUD has made some efforts to promote energy efficiency for 
multifamily housing but there is no evidence of the outcome of these 
actions. 

Action number: 17; 
Planned action: Continue HUD-DOE multifamily weatherization 
partnerships; 
Status[A]: * Early efforts to explore weatherization partnerships 
nationally yielded limited results, but some state and local 
initiatives have been implemented. 

Action number: 18; 
Planned action: Encourage the use of Energy Star new home standards in 
the design, construction, and refinancing of Section 202 and 811 
projects; 
Status[A]: * HUD provides a one-rating point incentive to applicants 
who indicate they will use energy-efficient measures in their 
properties; 
* The point does not currently require that any specific measures are 
met. HUD has developed more detailed specifications for future funding 
awards. 

Action number: 19; 
Planned action: Explore incentives for energy efficiency through FHA 
multifamily insurance programs; 
Status[A]: * HUD's Office of Multifamily Housing convened a task force 
that recommended incentives for increasing energy efficiency in its 
insured housing programs; 
* The incentives are currently being considered and have not yet been 
implemented; 
* The Mark-to-Market program has implemented a green initiative that 
offers financial incentives for owners to adopt green building 
practices. 

Action number: 20; 
Planned action: Explore asset management strategies and guidance for 
energy efficiency in HUD-subsidized multifamily properties; 
Status[A]: * HUD has issued guidance to Multifamily Field Offices 
encouraging the use of Energy Star appliance and methods in conjunction 
with disbursements from Reserve for Replacement funds. No action to 
date has been taken on developing specific informational guidelines for 
staff and property owners. 

Action number: 21; 
Planned action: Support energy-efficient training for multifamily 
managers and maintenance staff; 
Status[A]: * A four- part training series was offered in 2007, and 
specialized on-site training was offered in 2005 in a number of 
locations, but additional specialized training has not been provided. 

Action number: 22; 
Planned action: Implement energy efficiency recommendations of the 
Manufactured Housing Consensus Committee in HUD- code manufactured 
homes; 
Status[A]: * Recommendations have not been implemented and HUD is not 
moving forward with the recommendations because of a new statute that 
provides DOE with the authority to establish energy-related regulations 
for HUD code homes. 

Action number: 23; 
Planned action: Partner with local energy efficiency groups, HUD 
program offices, and other agencies to educate HUD customers about 
reducing energy costs; 
Status[A]: * HUD has established numerous partnerships with state and 
local governments. 

Action number: 24; 
Planned action: Conduct energy-related policy analysis and research to 
support the department's energy goals; 
Status[A]: * HUD has utilized limited research funds to support the 
development of uniform remodeling protocols, as well as demonstrations 
and field evaluations of energy efficient technologies through the 
Partnership for Advancing Technology in Housing (PATH) program, but 
continued research efforts have been limited by severe funding 
constraints. 

Action number: 25; 
Planned action: Develop a computerized tool for integrating 
environmental and energy retrofits; 
Status[A]: * Through HUD's Office of Healthy Homes and Lead Hazard 
Control, HUD expects to implement this measure in 2005. 

Source: HUD. 

[A] Status of actions items is as reported by HUD officials. 
Independent documentation of status was not conducted by GAO for all 
action items. 

[End of table] 

[End of section] 

Appendix IV: Multifamily Task Force Energy Conservation 
Recommendations: 

* Reduce application and/or inspection fee by half for properties using 
energy conservation techniques and/or achieving an Energy Star 
certification by returning one-half of the fee after closing. 

* Extend the maximum term of the mortgage for a project that receives 
an Energy Star certification. 

* Allow installation of certain combinations of Energy Star products to 
be considered a major building component for determination of 
Substantial Rehabilitation in order to use 221(d)(4) (90 percent 
mortgage) instead of 223(f) (85 percent mortgage): 

* A notice is to be placed in the Real Estate Management System (on the 
Reserve Tracking Screen) that this project used Energy Star; future 
replacement items should contain at least the same energy conservation. 

* Expand existing Section 241 Supplemental Loan into Section 241-e loan 
available only for properties that are master-metered and, are 
currently insured by HUD and only for energy-efficient systems. 

* Add new wording in Rating Factor 3 to define Energy Conservation (for 
Section 202 and Section 811 programs): 

* Allow for an increased owner distribution through increasing the 
amount of the initial equity by the cost of the Energy Conservation 
Methods/Upgrades implemented. 

* Allow nonprofit owners (except cooperatives) a distribution based on 
energy conservation for use in furthering the housing needs of the 
community; and allow the amount of the new energy conservation methods/ 
upgrades to increase the original amount of the initial equity of the 
property with the appropriate distribution percentage applying to a 
"new" equity position. 

* Allow the management company to share in the savings of energy 
conservation (for a certain period--say 5 years) through the use of a 
"Master Plan" created by the agent and approved by HUD. 

* Encourage the use of Energy Star for replacement of lighting, 
fixtures, and appliances through normal servicing contact with owner 
and agent. 

* Allow the management company to share in the savings for reduction of 
total utility usage. The shared savings will be through use of a 
management fee add-on. Usage is an owner option. 

* Request the Office of Policy, Development and Research to facilitate 
an amendment of the memorandums of understanding between DOE and HUD to 
delegate the authority to HUD for qualifying residents as part of the 
DOE Weatherization program. 

* To be most accurate in what energy conserving methods are needed in a 
given property currently in HUD's portfolio, HUD should encourage the 
owner to utilize an energy audit from a recognized professional energy 
evaluator. 

[End of section] 

Appendix V: Examples of State, Local, and Nonprofit Green Building 
Affordable Housing Programs: 

State governments: Massachusetts; 
The Massachusetts Low-income Housing Tax Credit (LIHTC) program awards 
a variety of points for green building practices through its Qualified 
Allocation Plan, such as creating housing near public transportation; 
The Massachusetts Housing Finance Agency provides targeted funding to 
promote the construction of green affordable housing, and requires that 
housing built with this funding meet the Energy Star standard; The 
Massachusetts Technology Collaborative provides a rebate that pays 70 
percent of the cost for renewable energy technologies for affordable 
housing developments. 

State governments: Virginia; 
The Virginia LIHTC program provides 30 incentive points to developers 
that agree to build to the EarthCraft green building standard; The 
Virginia LIHTC program has partnered with Southface to provide green 
building technical assistance to local developers and builders. 

State governments: Vermont; 
Vermont has developed green building standards that developers must use 
to receive LIHTC funding. 

State governments: Washington; 
Washington is in the process of requiring that all affordable housing 
developments using state Housing Production Trust or LIHTC funding meet 
the Evergreen Sustainable Development Criteria.[A]. 

Local governments: Boston, Mass; 
The City of Boston has passed a zoning ordinance that requires that all 
large buildings-- including affordable housing--be built to meet the 
LEED certified green building standard.[B]; The City's Green Affordable 
Housing Initiative requires that affordable housing projects that use 
city funding meet the LEED Silver or the Energy Star for Qualified Home 
standards; The city has partnered with the Massachusetts Technology 
Collaborative to provide renewable energy rebates, such as solar 
photovoltaic. 

Local governments: San Francisco, Calif; 
The San Francisco Mayor's Office of Housing and the city's 
Redevelopment Agency require projects applying for affordable housing 
funding to meet the GreenPoint Rated green building standard.c. 

Local governments: Seattle, Wash; 
Seattle has developed the SeaGreen Guidelines that provide a menu of 
green building options for developers to choose from when applying for 
city affordable housing funding; Compliance with SeaGreen is officially 
voluntary; however projects applying for funding must address whether 
or not elements of the guidelines are included in their development's 
sustainability plan submitted to the city when applying for affordable 
housing funding.[D]. 

Nonprofits: Enterprise Community Partners; 
Enterprise Community Partners has invested $555 million--in grants, 
loans, and LIHTC equity--marked for use over a 5-year period to build 
8,500 green affordable housing units across the country; Enterprise 
developed the Green Communities Criteria, which is the first national 
green building standard, to provide a clear and cost-effective 
framework of green building, and to support funding decisions. 

Nonprofits: Local Initiative Support Corporation (LISC); 
LISC's Green Development Center provides financial resources, technical 
assistance, partnership opportunities, and education to accelerate the 
use of green building practices in low- income communities; Through 
this national initiative several local LISC chapters have developed 
local green building programs focused on promoting green building in 
their communities; The Bay Area LISC chapter recently launched the 
Green Connections program, which provides a green loan fund to support 
the creation of green affordable housing. 

Nonprofits: Home Depot Foundation; 
The Home Depot Foundation invests millions of dollars each year in 
nonprofit organizations whose missions are to support the production 
and preservation of green affordable housing; In 2007, the foundation 
supported the production of 12,223 green affordable housing units. 

Nonprofits: National Housing Trust; State governments: 
National Housing Trust recently established the Green Affordable 
Housing Preservation Loan Fund to provide predevelopment and interim 
development loans to affordable housing developers seeking to 
incorporate green building practices in the rehabilitation of existing 
affordable housing. 

[A] The Evergreen Sustainable Development Criteria was developed by the 
Washington Department of Community, Trade and Economic Development, and 
is based on Green Communities, which was developed by Enterprise 
Community Partners. 

[B] Boston's green building zoning ordinance requires that applicable 
buildings meet a LEED certifiable standard. This means that buildings 
subject to this ordinance must be planned, designed, and constructed to 
achieve the level LEED certified under the rating point system, but the 
Boston Redevelopment Authority will review the LEED certifiability of 
projects under its jurisdiction. 

[C] GreenPoint Rated is a regional green building standard developed by 
the Build It Green organization for use in the state of California. 

[D] According to an official we spoke to, most developers understand 
that projects that incorporate elements of the SeaGreen guidelines are 
better positioned to complete for city funding. 

[End of table] 

[End of section] 

Appendix VI: Comments from the Department of Housing and Urban 
Development: 

U.S. Department Of Housing And Urban Development: 
The Deputy Secretary: 
Washington, DC 20410-0050: 
[hyperlink, http://www.hud.gov]: 
[hyperlink, http://www.espanol.hud.gov]: 

September 12, 2008: 

Mr. William B. Shear: 
Director, Financial Markets and Community Investment: 
U.S. Government Accountability Office: 
Washington, DC 20548: 

Dear Mr. Shear: 

Thank you for the opportunity to comment on the Government 
Accountability Office (GAO) draft report GAO-08-943, entitled "Green 
Affordable Housing: HUD Has Made Progress in Promoting Green Building, 
but Expanding Efforts Could Help Reduce Energy Costs and Benefit 
Tenants." 

The focus of this report was to review HUD's efforts to promote energy 
efficiency in its programs and the use of performance measures; assess 
the potential costs and long-term benefits of green building in HUD's 
affordable housing programs; and identify lessons that could be learned 
elsewhere that HUD could use to promote green building. 

The draft report finds that HUD has made progress in bringing energy 
efficiency to significant segments of its public or assisted housing 
stock, but recommends additional actions: that HUD require energy-
efficient products and appliances in public housing; work with the 
Department of Energy to implement updates to the building code for 
manufactured housing; consider developing a utility benchmarking tool 
for multifamily properties; and consider providing non-energy green 
building incentive points in some grant programs. HUD welcomes these 
recommendations; the Department will give serious consideration to 
their implementation with the resources that arc available to us. 

HUD previously provided extensive comments on the draft report. Our 
broader comments on green building in the affordable housing sector 
include the fact that GAO does not sufficiently distinguish among 
energy-related measures (which often pay for themselves) and non-energy 
green building practices (which may not), and among the different 
strategies that will be needed to expand green building in the wide 
array of HUD programs. GAO correctly identifies the issue of the "green 
premium," but does not provide recommendations on how to address these 
higher costs (through, for example, higher Total Development Cost 
limits), or on whether HUD should set standards of its own or defer to 
the growing number of state and local green initiatives that are noted 
in the report. 

The report also does not fully address staffing and resource issues, 
and the work that HUD has initiated, in part at the direction of 
Congress, on transit-oriented development as a key element of green 
building. The report also misstates the extent to which Congress has 
given HUD specific authority to require green building beyond energy 
efficiency. 

In addition to these general comments, our technical comments identify 
several areas in the draft report that HUD found to be inaccurate, 
ambiguous, or require further clarification. Activities of some offices 
were not sufficiently highlighted, and progress in some areas was 
overlooked. We also disagree with GAO's characterization of HUD's 
implementation of the Energy Policy Act's requirement for Energy Star 
products in public housing. HUD is of course committed to publishing a 
regulation on this matter; however, with 53 percent of all PHAs 
reporting that they are buying Energy Star, we are making progress in 
that area. HUD's complete comments will be posted at [hyperlink, 
http://www.hud.gov/energy]. 

Given the growing interest in Congress and in the affordable housing 
industry about this issue, HUD welcomes GAO's assessment of the 
potential for green building in federally assisted housing. We believe 
that we have made significant progress through the work of our Energy 
Task Force, primarily in the area of energy efficiency. The Energy Task 
Force is a unique Departmentwide effort that has significantly raised 
the awareness of this issue among HUD's customers and partners, as well 
as among HUD staff. We will shortly be submitting a progress report to 
Congress describing our accomplishments so far, as required under 
Section 154 of the Energy Policy Act of 2005. 

We are also pleased with the work that is underway at HUD to promote 
green building beyond energy efficiency, including: water conservation 
through energy performance contracting in public housing; training and 
capacity building in Indian country; HUD's first grant competition for 
green building, recently announced by the HOME Investment Partnerships 
program; and the Green Remodeling Initiative in the Mark-to-Market 
multifamily housing arena. 

There are also several important initiatives at the field office level: 
in Region 9, for example, a partnership has been developed to install 
solar energy in CDBG- and HOME-funded projects. Region 6 hosted a 
conference in Texas on the "next frontier" of greening affordable 
housing. Similar activities are to be found in other regions. We are 
also greening HUD's own Robert C. Weaver Headquarters building, with 
photovoltaic panels and a green roof. 

Please be assured that the Department takes both the discussion in your 
report and your recommendations very seriously. Energy costs are a 
critical element of housing affordability, and the building sector can 
play a critical role in addressing climate change. We will consider 
your findings carefully as we continue our efforts to reduce HUD's 
energy costs, and to address the interests of Congress and the 
affordable housing industry in green affordable housing. 

Sincerely, 

Signed by: 

Roy A. Bernardi: 

[End of section] 

Appendix VII: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

William B. Shear, (202) 512-8678 or shearw@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Andy Finkel (Assistant 
Director), Emily Chalmers, John Fisher, Jeremie Greer, John McGrail, 
Marc Molino, Luann Moy, and Andy Pauline made key contributions to this 
report. 

[End of section] 

Footnotes: 

[1] See Pub. L. 109-58, Section 154. 

[2] Housing finance agencies are state-chartered authorities 
established to help meet the affordable housing needs of residents of 
their states. They serve as lenders and resource providers. 

[3] LIHTC is an indirect federal subsidy used to finance the 
development of affordable rental housing for low-income households. 
LIHTC is an Internal Revenue Service program based on Section 42 of the 
Internal Revenue Code and was enacted by Congress in 1986 to provide 
the private market with an incentive to invest in affordable rental 
housing. 

[4] The International Residential Code is a stand-alone building code 
that provides minimum regulations for one-and two-family dwellings of 
three stories or less. The code covers all building, plumbing, 
mechanical, energy, and electrical systems. The International 
Residential Code provides both prescriptive (measures) and performance 
(energy modeling) approaches to determine compliance. 

[5] HUD provides funding to PHAs to operate and repair public housing 
units through both the operating fund and the capital fund. The 
operating fund provides annual subsidies to PHAs to make up the 
difference between the amounts collected in rent and the costs of 
operating the units. The capital fund provides grants to PHAs for the 
major repair and modernization of the units. 

[6] Under the 3-year rolling base policy, the utility component of a 
PHA's operating subsidy is based on the average utility consumption for 
the prior 3 years. Following utility conservation measures, this 3-year 
average will fall over time, but will not reflect the new, lower 
utility consumption level until 3 years have passed. For example, 1 
year following utility conservation measures, 2 of the 3 years included 
in the operating subsidy calculation will reflect the previous, higher 
level of utility consumption, and the 3-year average and operating 
subsidy will fall as 1 year included in the average will reflect lower 
utility use. But the PHA may retain some savings as the utility 
component of its operating subsidy will be based on a utility 
consumption level that exceeds its expected utility use. 

[7] Typically, an ESCO guarantees a certain level of consumption 
savings. According to HUD officials, several large PHAs have acted as 
their own ESCOs and HUD provides guidance to PHAs considering whether 
this option is appropriate for them. 

[8] For example, a PHA contracting with an ESCO will pay certain fees 
to the ESCO that could be avoided if the PHA identified and implemented 
the improvements on its own. 

[9] The field office must complete its review and issue its decision or 
required changes within 30 business days. If a revised submittal by the 
housing authority is required, the HUD field office has 15 business 
days after the receipt of the revised energy services agreement to 
review and issue a decision. 

[10] Each PHA has a certain number of properties for which it is 
responsible, and each of the properties has a certain number of units 
where tenants live. Under asset management, PHAs with 250 or more units 
will convert to a management approach that includes project-based 
budgeting and accounting, instead of budgeting and accounting at the 
PHA level. 

[11] LEED accreditation is for professionals who have demonstrated a 
thorough understanding of green building practices and principles and 
familiarity with LEED requirements, resources, and processes. 

[12] According to HUD officials, some ESCOs have determined that it is 
not financially feasible to work with PHAs with fewer units. HUD 
officials told us that smaller housing authorities generally lack the 
expertise to manage the execution of major energy improvement packages 
without the assistance of an ESCO. 

[13] In an aggregated energy performance contract, multiple public 
housing authorities agree to group their properties together in a 
single energy performance contract to achieve the scale necessary to 
make the project economically attractive to an ESCO. According to HUD 
officials, housing authorities may find it challenging to agree on the 
terms of the contract, including what improvements will be installed at 
which properties. 

[14] Owner distributions are those funds available to ownership after 
the payment of debt service and all defined property-related expenses. 

[15] The Home Energy Rating System inspection, which determines the 
cost of potential energy improvements and estimates energy savings, is 
a standard measurement of a home's energy efficiency. 

[16] HUD issues a management plan annually that includes some goals for 
agency programs. 

[17] The Energy Policy Act of 2005 also states that PHAs can purchase 
products and appliances that meet Federal Energy Management program 
guidelines. 

[18] The Manufactured Housing Consensus Committee is a statutory 
Federal Advisory Committee body charged with providing recommendations 
to the Secretary on the revision and interpretation of HUD's 
manufactured home construction and safety standards and related 
procedural and enforcement regulations. The Consensus Committee was 
also charged with developing proposed model installation standards for 
the manufactured housing industry. 

[19] Some manufacturers do build to an Energy Star standard. 

[20] HUD's fiscal years 2007-2008 Implementation Plan for its Energy 
Action Plan includes planned updates for the Energy Performance 
Contracting Handbook and the Multifamily Handbook. 

[21] William Bradshaw and others, "The Costs and Benefits of Green 
Affordable Housing," (2005), and Greg Kats, The Cost and Financial 
Benefits of Green Buildings: A Report to California's Sustainable 
Building Task Force, (October 2003). The study on the costs and 
benefits of affordable housing reported an added cost for 16 affordable 
housing properties across the country. The other study reported the 
added cost of green building for 33 LEED registered buildings in 
California. Due to the limitations of these studies, the results cannot 
be generalized to a broader population. Due to limited research on the 
costs and benefits of building green affordable housing, we also 
reviewed literature that focused on other building types, such as 
schools, office buildings, hospitals, and other commercial structures, 
in carrying out this portion of the analysis. For a description of how 
we selected the literature we reviewed, see appendix 1. 

[22] GAO, Energy Efficiency: Important Challenges Must Be Overcome to 
Realize Significant Opportunities for Gulf Coast Reconstruction, GAO-07-
654, (Washington, D.C.: June 26, 2007). 

[23] Certification is obtained after submitting an application 
documenting compliance with the requirements of the rating system as 
well as paying registration and certification fees. 

[24] LEED levels are Certified, Silver, Gold, and Platinum, with 
Certified being the lowest and Platinum the highest level of green 
building certification. 

[25] Kats, The Cost and Financial Benefits of Green Buildings: A Report 
to California's Sustainable Building Task Force. 

[26] Lisa Matthiessen and Peter Morris, Costing Green: A Comprehensive 
Cost Database and Budget Methodology, Davis Langdon, (July 2004). 

[27] Lisa Matthiessen and Peter Morris, Costing Green Revisited: 
Reexamination of the Feasibility and Cost Impact of Sustainable Design 
in the Light of Increased Market Adoption, Davis Langdon, (July 2007), 
p. 16. 

[28] Mattiessen and others, Costing Green: A Comprehensive Cost 
Database and Budget Methodology. This study analyzed the added green 
building cost of projects in five different climate types, and found 
that the cost varied by climate and level of green certification--from 
Platinum to Silver. According to the study, the cost variation can be 
explained by differences in the type of mechanical systems used in 
different climates. 

[29] Bradshaw, The Costs and Benefits of Green Affordable Housing. 

[30] Kats, The Cost and Financial Benefits of Green Buildings: A Report 
to California's Sustainable Building Task Force. This report assesses 
the cost and benefits of 33 LEED certified green buildings by different 
factors such as energy, water, emissions, and occupant health. 

[31] Kats, The Cost and Financial Benefits of Green Buildings: A Report 
to California's Sustainable Building Task Force. 

[32] Bradshaw, The Costs and Benefits of Green Affordable Housing. 

[33] Utility allowances are provided to building owners, who provide 
the funds to tenants of assisted multifamily and public housing when 
the tenant is responsible for paying the unit utility expenses. Tenants 
in these programs are required to pay 30 percent of their income toward 
their rental costs. Utility subsidies are provided to the owners of 
assisted multifamily housing and PHAs when they are responsible for the 
entire buildings utility expenses. In public housing, the subsidy is 
provided in the form of a payment to the PHA, and in assisted 
multifamily housing, the utility subsidy is a component of the rent 
charged to the tenant and HUD. 

[34] In properties that receive a utility allowance, HUD collects data 
on the number and size of the allowances provided to tenants in public 
and assisted multifamily housing. It also collects data on the utility 
expenses in public housing that it pays through utility subsidies. 

[35] All properties with FHA insured mortgages, with or without Section 
8 contracts, file audited financial statements. However, a number of 
noninsured properties with Section 8 contracts are not required to file 
financial statements. HUD does not have utility expenditure data for 
these properties. Also, the financial statement data received by HUD 
cover the entire property. For those properties that are partially 
subsidized, the data do not reflect what portion was paid by HUD and 
what portion by residents. In addition in the Section 8 program, 
residents pay 30 percent of their income toward their rent. The Section 
8 subsidy pays the remaining portion up to the total rent payment. 
Financial statement data do not reflect what portion of any expenditure 
was covered by Section 8 and what portion was covered by the resident's 
payment. The resident portion of the total rent revenues will be 
different in each property, as residents' incomes vary from resident to 
resident. 

[36] Portfolio Manager, which is administered through the Energy Star 
program, is an interactive energy management tool that allows you to 
track and assess energy and water consumption across your entire 
portfolio of commercial buildings. Users of the tool can rate their 
facilities' energy performance on a scale of 1-100 relative to similar 
buildings nationwide. The comparative analysis is based on the energy 
performance of buildings captured in the Commercial Building Energy 
Consumption Survey (CBECS), which is a national survey of buildings 
performed by the Department of Energy. 

[37] Oak Ridge Laboratory is a science and technology laboratory 
managed by DOE. Oak Ridge conducts basic and applied research and 
development to strengthen the nation's leadership to increase the 
availability of clean and abundant energy, restore and protect the 
environment, and contribute to national security. 

[38] Harvard University Graduate School of Design, Public Housing 
Operating Cost Study: Final Report, Cambridge, MA (June 2003) 

[39] The public housing benchmarking system was developed in 
partnership with the Oak Ridge National Laboratories through the DOE, 
EPA, and HUD Energy Star® memorandum of understanding. The model was 
developed using building characteristics and consumption data collected 
from 3,342 public housing properties and was found to predict at a high 
level the relationship between properties being compared using the 
model. According a HUD official the department did not bear much in the 
way of additional cost for developing the system. HUD simply provided 
data to DOE for use in developing this and another benchmarking system 
used by the New York State Energy Research and Development Authority in 
its green affordable housing program. 

[40] National Association of Home Builders (NAHB) is in the process of 
developing a new green building standard in coordination with the 
International Code Council and the American National Standards 
Institute. According to officials from NAHB, the certification costs of 
completing this standard will be much lower than those of LEED. These 
officials also stated that the standard will be more flexible that 
LEED, and be appropriate for use in affordable housing. Currently, NAHB 
publishes the NAHB Model Green Home Building Guidelines, and provides 
information on green building on its website. 

[41] Some HUD incentives that focus on nonenergy components of green 
building include the Market-to-Market Green Initiative and energy 
performance contracts. 

[42] James Tassos, Greener Policies, Smarter Plans: How States are 
Using the Low-Income Tax Credit To Advance Healthy, Efficient, and 
Environmentally Sound Homes, Enterprise Community Partners, (2007). 
This author has been monitoring the extent to which state housing 
finance agencies have incorporated green building practices into their 
LIHTC Qualified Allocation Plans. 

[43] There is no federal requirement that a state incorporate green 
building practices into its QAP. States that have either required or 
mandated green building practices have made the policy decision to do 
so independent of federal requirements. 

[44] In the summer of 2008, the City of Seattle retired its SeaGreen 
Program. In order to maintain consistency with the state affordable 
housing program, the city will adopt the Evergreen Sustainable 
Development Standard, administered by the Washington State Department 
of Community, Trade and Economic Development for its affordable housing 
programs. 

[45] Through this visit we spoke with government officials from Alameda 
County, the City of Oakland, and the City of San Francisco. 

[46] The International Code Council, a membership association, develops 
the codes used to construct residential and commercial buildings. The 
2003 International Energy Conservation Code provides energy 
conservation provisions for residential and commercial buildings. 

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