Affordable Housing and Energy Efficient Investments

1
Affordable Housing and Energy Efficient
Investments

• David Engel
• Director
• Affordable Housing Research Technology Division
• United States Department of Housing and Urban
  Development

2
Goal of Presentation

• Examine the economic and behavioral barriers to
  expanded housing energy investments in the United
  States
• Describe the various public and private efforts
  to encourage and integrate energy wise
  investments into the markets larger concern for
  maintaining housing affordability
• Context
• Housing in The United States Almost 70 own
  their homes and the rate increasing.
• U. S. Public Policies Encourage Homeownership
• Mortgage Interest Tax deduction
• Secondary mortgage markets
• Mortgage insurance
• Land Use Policies

3
New Housing In the U. S.

• Average New Home Relatively Efficient
• Most changes driven by building codes
• Limitation on upgrading codes further
• Todays New Home more efficient than 10 years ago
• Air infiltration barriers- home wraps
• Low-E glass
• Efficient air conditioning equipment
• Insulated foundations
• Much More Could be done!

4
First Cost Affordability Reigns

• First Cost Is The Primary Driver of American
  Housing Consumers
• Mortgage Underwriting Policies in U.S.
• Nature of Mortgage Business in U.S.
• Inexpensive Energy
• Life-Cycle Costing Irrelevant to Homeowners
• Homebuyer Decision Making
• Other variables more important schools, size,
  design, neighborhood, resale potential
• Alternative consumer purchases
• Temporary Nature of Homeownership
• Homes viewed as an appreciating asset
• Potential for resale
• Importance of market appraisals
• How important is energy viewed by resale market?

5
New Housing Market in U.S. Changing

• Growing Segment of Aware, Sophisticated Buyers
• Some Reasons
• General Public Education through Media
• Energy Star
• Building America
• Higher State Energy Codes
• Rebates and Incentives

• Another Approach-
• Partnership for Advancing Technology in Housing
• Accelerate rate of technological change in
  homebuilding

6
Energy Financing

• Energy Efficient Mortgages
• much discussed, little used
• Variations
• Changes to debt to income ratio
• Changes to loan limits
• No increase in down payments
• Increasing appraised value
• Including costs of energy ratings in mortgage
• Limited Applicability to New Housing
• Energy Efficiency Integrated into new Homes
• Difficult to separate
• Too complex for limited benefits
• Some Success in Existing Housing

7
The Challenge of Existing Housing

• The 100,000,000 existing units are the major
  challenge
• Consume 20 of all energy use in U.S.
• Most moderate and lower income families reside in
  older inefficient housing
• Energy Improvements to Existing Stock cannot be
  mandated in U.S.
• Limited to essential public health safety
  improvements

The poor cannot afford to improve while middle
upper income families have little incentive to
invest!
8
Assisting Lower Income Families

• Weatherization grants
• Department of Housing Urban Development
  Programs
• Block Grants to Localities
• 7 billion per year for housing including
  rehabilitation
• 135,000,000 homes rehabilitated a year with HUD
  assistance
• 5 million HUD assisted Renters
• HUD spends 4 billion a year on energy costs
• 1.2 million public housing units
• 1.8 million receive housing vouchers includes
  energy allowances
• Private market housing for lower income families
• Many own their homes
• Most owners of rental units are small
  entrepreneurs
• Ownership/rental split on utilities

9
Private Market Response to Energy Costs

• Lower cost improvements already made in most
  moderate, middle upper income housing
• Challenge is major capital investments- heating,
  air conditioning, envelope improvements and
  windows
• Americans spend 135 billion a year on renovation
  remodeling
• Energy only investments only 10 billion a year
• American priorities in Renovation Remodeling
• Room additions, new kitchens, new bathrooms
  (often impacts energy)
• 16.27 million windows replaced includes 13
  million windows as part of remodeling
• Consumers choose renovations that will impact
  resale value

10
How are energy improvements financed?
11
Developing Solutions for Existing Housing

• Problem
• Heavy Competition for consumers attention
  dollars
• Unsophisticated industry made up of 180,000 small
  contractors and 200,000 self employed
• Consumer skepticism regarding benefits of energy
  investments
• Lack of new technologies focused on existing
  housing

• Solution
• Working together with remodeling industry, PATH
  program has developed eight (8) strategies for
  change.

12
Strategies Increasing Energy Investments in
Existing Stock

• 1. Enable Remodelers And Rehabilitation
  Contractors To Effectively Deliver
  EnergyEfficient Solutions
• 2. Increase The Value Consumers Associate With
  Energy Efficiency
• 3.  Improve Building Envelop Retrofit
  Technologies
• 4.  Develop A Single Protocol For Renovation
  Contractors
• 5.   Motivate Contractors To Deliver Energy
  Efficient Solutions
• 6.   Build Contractor Credibility
• 7.   Provide Additional Consumer Incentives For
  Consumer Action
• 8.  Develop A Performance Monitoring System For
  Energy Consuming Equipment