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HUD Issues Notice of Funding Availability for Energy and Green Retrofits to Section 202, Section 811 and Section 8 Housing

By Elizabeth Lintz and D. Hara Sherman
May 2009
People: David Abromowitz, Elizabeth Lintz, D. Hara Perkins

The Department of Housing and Urban Development (HUD) yesterday provided significant details on accessing $250 million of funding for grants or loans for energy efficiency and green retrofits to owners of HUD project-based Section 202, Section 811 and Section 8 projects (including USDA Section 515 projects with project-based Section 8). HUD will accept applications on a first come, first served basis, beginning on June 15, 2009. Below please find more details on the program, including information on owner incentives, eligible projects and eligible retrofits.

Through Notice H 09-02 issued May 13, 2009, HUD outlined four opportunities for owner incentives:

  1. GRP Pre-Development Incentive, at the closing, equal to the lesser of 1% of the estimated cost of the Green Retrofits or $10,000;
  2. GRP Efficiency Incentive, upon satisfactory completion of all Green Retrofits, up to the lesser of 3% of the estimated cost of the Green Retrofits or $30,000;
  3. Targeted Low-Income Jobs Creation Incentive, after completion of all Green Retrofits, up to $25,000;
  4. GRP Incentive Performance Fee, annually during the term of the Green Retrofit Program Use Agreement, equal to 3.0% of collected revenue annually, payable solely from Surplus Cash.

In general, eligible projects include the following (subject to certain restrictions, including, for example, projects whose debt has been restructured pursuant to the Markto-Market Green Initiative):

  1. Projects receiving Project-based Assistance pursuant to Section 202 of the Housing Act of 1959 (12 U.S.C. 17012), with at least 32 assisted units;
  2. Projects receiving Project-based Assistance pursuant to Section 811 of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 8013), with at least 8 assisted units.
  3. Projects receiving Project-based Assistance under Section 8 of the United States Housing Act of 1937 as amended (42 U.S.C. 1437f), with at least 72 assisted units or 20 assisted units in the case of projects assisted with USDA Section 515 loans.

Eligible retrofits must materially alter the efficiency of the project in one or more of the following manners:

  • Lower electric, heating fuel, or water consumption;
  • Lower emissions of chemicals thought to be harmful to humans;
  • Extend useful life;
  • Increase biodegradability;
  • Increase ease of recycling;
  • Lower use of raw materials or increase recycled content; or
  • Lower transportation costs of products delivered to the project.

One significant consideration for owners is the statutory requirement of committing to 15 years of affordability beyond any pre-existing affordability period, a feature that may deter some owners from participation in the program.

These funds were initially authorized by the American Recovery and Reinvestment Act, the stimulus bill signed
into law on February 17, 2009. Goulston & Storrs will be assisting owners interested in considering applying to this program in analyzing the benefits and burdens relevant to particular properties.

Elizabeth Lintz and Hara Sherman are associates in the affordable housing group and can be reached at elintz@goulstonstorrs.com and hsherman@goulstonstorrs.com.

For questions about the information contained in this advisory, please contact your usual Goulston & Storrs attorney or:

David M. Abromowitz

This advisory should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer concerning your situation and any specific legal questions you may have.

Pursuant to IRS Circular 230, please be advised that, this communication is not intended to be, was not written to be and cannot be used by any taxpayer for the purpose of (i) avoiding penalties under U.S. federal tax law or (ii) promoting, marketing or recommending to another taxpayer any transaction or matter addressed herein.

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