[Senate Hearing 111-693]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-693

 
                  GREEN HOUSING FOR THE 21ST CENTURY:
     RETROFITTING THE PAST AND BUILDING AN ENERGY-EFFICIENT FUTURE

=======================================================================

                                HEARING

                               before the

                            SUBCOMMITTEE ON
           HOUSING, TRANSPORTATION, AND COMMUNITY DEVELOPMENT

                                 of the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                                   ON

          EXAMINING THE BUILDING OF AN ENERGY-EFFICIENT FUTURE

                               __________

                             JUNE 30, 2010

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs


      Available at: http: //www.access.gpo.gov /congress /senate/
                            senate05sh.html



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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

               CHRISTOPHER J. DODD, Connecticut, Chairman

TIM JOHNSON, South Dakota            RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island              ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York         JIM BUNNING, Kentucky
EVAN BAYH, Indiana                   MIKE CRAPO, Idaho
ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
DANIEL K. AKAKA, Hawaii              JIM DeMINT, South Carolina
SHERROD BROWN, Ohio                  DAVID VITTER, Louisiana
JON TESTER, Montana                  MIKE JOHANNS, Nebraska
HERB KOHL, Wisconsin                 KAY BAILEY HUTCHISON, Texas
MARK R. WARNER, Virginia             JUDD GREGG, New Hampshire
JEFF MERKLEY, Oregon
MICHAEL F. BENNET, Colorado

                    Edward Silverman, Staff Director

              William D. Duhnke, Republican Staff Director

                       Dawn Ratliff, Chief Clerk

                     William Fields, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                 ______

   Subcommittee on Housing, Transportation, and Community Development

                 ROBERT MENENDEZ, New Jersey, Chairman

           DAVID VITTER, Louisiana, Ranking Republican Member

TIM JOHNSON, South Dakota            KAY BAILEY HUTCHISON, Texas
JACK REED, Rhode Island              MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York         BOB CORKER, Tennessee
DANIEL K. AKAKA, Hawaii              JIM DeMINT, South Carolina
SHERROD BROWN, Ohio                  MIKE JOHANNS, Nebraska
JOHN TESTER, Montana                 JUDD GREGG, New Hampshire
HERB KOHL, Wisconsin
MARK R. WARNER, Virginia
JEFF MERKLEY, Oregon

                Michael Passante, Transit Staff Director

                                  (ii)
?

                            C O N T E N T S

                              ----------                              

                        WEDNESDAY, JUNE 30, 2010

                                                                   Page

Opening statement of Chairman Menendez...........................     1

                               WITNESSES

Sheldon Whitehouse, Senator from the State of Rhode Island.......     2
    Prepared statement...........................................    28
Ed Perlmutter, Representative in Congress from the State of 
  Colorado.......................................................     3
    Prepared statement...........................................    28
Ron Sims, Deputy Secretary, Department of Housing and Urban 
  Development....................................................     5
    Prepared statement...........................................    34
    Responses to written questions of:
        Senator Vitter...........................................    57
David Caldwell, Jr., Vice President, Caldwell and Johnson, Inc...    16
    Prepared statement...........................................    41
Trisha Miller, Director, Enterprise Green Communities, Enterprise 
  Community Partners, Inc........................................    18
    Prepared statement...........................................    49
Kenneth Gear, Executive Director, Leading Builders of America....    19
    Prepared statement...........................................    53

              Additional Material Supplied for the Record

Letter and comments from Stewards of Affordable Housing for the 
  Future.........................................................    58
Prepared statement of the American Institute of Architects.......    61
Prepared statement of Roger Platt, Senior Vice President, Global 
  Policy and Law, U.S. Green Building Council....................    68
Prepared statement of Leanne Tobias, Managing Principal, and 
  Martha Paschal, Managing Director, Malachite LLC...............    71

                                 (iii)


GREEN HOUSING FOR THE 21ST CENTURY: RETROFITTING THE PAST AND BUILDING 
                       AN ENERGY-EFFICIENT FUTURE

                              ----------                              


                        WEDNESDAY, JUNE 30, 2010

                                       U.S. Senate,
               Subcommittee on Housing, Transportation, and
                                     Community Development,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Subcommittee met at 10 a.m., in room SD-562, Dirksen 
Senate Office Building, Senator Robert Menendez (Chairman of 
the Subcommittee) presiding.

         OPENING STATEMENT OF CHAIRMAN ROBERT MENENDEZ

    Chairman Menendez. This hearing of the Subcommittee on 
Housing, Transportation, and Community Development will come to 
order. I look forward to hearing from my colleague, our House 
colleague in just a minute. I will start with an opening 
statement, and we will move to them.
    One of the great challenges we face as a society is how to 
build a sustainable energy future, one that can make us self-
sufficient as a Nation and reduce the devastating impacts of 
climate change. I believe that any strategy to address these 
challenges has to involve the buildings where we live.
    In the United States, buildings account for 72 percent of 
electricity consumption, 39 percent of energy use, 38 percent 
of all carbon dioxide emissions, 40 percent of raw materials 
used. That is 3 billion tons annually.
    Fortunately, in recent years there have been tremendous 
advances in green building technologies, and I see great 
potential to apply these technologies to our current and future 
homes. It is woefully inadequate that today only about 2 
percent of homes in America are being built according to green 
standards. The spread of green housing is not only imperative 
from an environmental standpoint, it can also produce real cost 
savings, particularly for Americans seeking to achieve their 
American dream and homeownership. That is why I see green 
housing as a win-win opportunity. It is good for our planet. It 
is good for homeowners. I can be good for our economy as well 
as our environment. It is good for the opportunity to create a 
vibrant green building industry, which means new jobs are being 
created, good green jobs.
    That is why I am delighted to be chairing today's hearing, 
``Green Housing for the 21st Century: Retrofitting the Past and 
Building an Energy-Efficient Future.'' The goal of today's 
hearing is to explore proposals to encourage energy-efficient 
home construction and retrofitting and, in particular, the 
Energy Efficiency in Housing Act, S. 1379, which I am proud to 
cosponsor with Senator Whitehouse.
    Over the course of this hearing, I look forward to asking 
questions and learning more about the state of green housing, 
the current market for green housing, and what we as a Congress 
can do to bring our Nation's housing stock in line with the 
energy-efficient technologies of the 21st century.
    We are very fortunate to have firsthand testimony from some 
of the best minds on how to make our homes green and energy 
efficient. Our first panel will feature my distinguished 
colleague Senator Sheldon Whitehouse from Rhode Island, who is 
the author of the Energy Efficiency in Housing Act, and we will 
also be hearing from our colleague Congressman Earl Perlmutter 
of Colorado, who is a sponsor of the House companion bill, the 
GREEN Act.
    Our second panel will feature the Honorable Ron Sims, 
Deputy Secretary, United States Department of Housing and Urban 
Development.
    And on our third panel, we will hear from Mr. Dave 
Caldwell, Vice President of Caldwell and Johnson, a 
homebuilding firm; and Ms. Trisha Miller, the Director of Green 
Communities at Enterprise Community Partners; and Mr. Kenneth 
Gear, Executive Director of Leading Builders of America. And I 
look forward to their testimony, particularly, in addition to 
what we are trying to do here, how we can incentivize the 
marketplace and look at mortgages that may move us in the right 
direction to incentivize green building as well.
    With that, my dear colleague and friend, Senator Sheldon 
Whitehouse.

  STATEMENT OF SHELDON WHITEHOUSE, SENATOR FROM THE STATE OF 
                          RHODE ISLAND

    Senator Whitehouse. Chairman Menendez, thank you for the 
opportunity to speak this morning and for holding this hearing 
to examine proposals to encourage energy efficiency in the 
housing sector, including my Energy Efficiency in Housing Act. 
I want to particularly thank my friend Representative Ed 
Perlmutter for leading the way on this crucial topic. He has 
succeeded in shepherding green housing legislation through the 
House and has been one of the leading champions of energy 
efficiency.
    I also want to acknowledge Dave Caldwell, on the third 
witness panel, who has led pioneering efforts in green building 
in Rhode Island and has traveled down to D.C. to share his 
experiences with the Committee.
    I hope that this hearing will make clear that energy-
efficient housing connects tackling climate change and reducing 
our dependence on foreign fossil fuels to cutting Government 
outlays and trimming household budgets, to renovation, design, 
and construction jobs that cannot be exported. Despite this 
promise, energy-efficient options in housing are not well 
understood by consumers, and homebuyers today often pass up 
green opportunities that are in their economic interest. Our 
challenge as legislators is to devise programs to inform 
consumers and jump-start our green housing economy.
    Representative Perlmutter's GREEN Act is the first 
comprehensive green housing bill to be introduced in Congress. 
Working with you, Chairman Menendez, and Senator Schumer, I 
drafted a companion to the GREEN Act and introduced it last 
June. Similar to Representative Perlmutter's bill, the Energy 
Efficiency in Housing Act would authorize programs and 
incentives to encourage green construction and retrofitting. 
The support of the home builders and the mortgage bankers shows 
that this is common-sense legislation.
    EEHA would energize the market for energy-efficient and 
location-efficient mortgages by directing the HUD Secretary to 
develop up-front incentives for homebuyers. As a result of 
lower monthly energy costs, green homeowners are slightly less 
likely to default on their mortgages over time. This lower 
credit risk justifies borrowing incentives such as waived fees 
and lower points and rates. Additionally, EEHA would create 
incentives in the secondary mortgage market, making it more 
profitable for lenders to sell these products.
    On the public housing side, EEHA would require the 
Secretary to develop incentives for energy efficiency for the 
housing programs that HUD oversees, designed so that the 
savings are shared between landlord and tenant. To help find 
the right balancing points, the bill would authorize a 50,000-
unit demonstration program for Section 8.
    As Members of this Subcommittee well know, housing programs 
often cut across layers of government. To help State and local 
governments experiment with novel and innovative green housing 
programs, EEHA would authorize a revolving loan fund. It would 
also create a grant program so that community development 
nonprofits can participate in and administer construction and 
retrofitting efforts.
    Mr. Chairman, I once again commend you and express my great 
personal appreciation to you for holding this hearing. With 
buildings accounting for between 40 percent and 50 percent of 
greenhouse gas emissions, green housing incentives offer 
environmental promise in addition to jobs and cost savings--the 
win-win you mentioned, Mr. Chairman.
    I thank you.
    Chairman Menendez. Thank you, Senator.
    Congressman Perlmutter.

STATEMENT OF ED PERLMUTTER, REPRESENTATIVE IN CONGRESS FROM THE 
                       STATE OF COLORADO

    Mr. Perlmutter. Senator Menendez, thank you for inviting me 
here to testify on green housing and energy efficiency. 
Renewable energy and energy efficiency have long been 
priorities of mine. We must find different ways to power our 
country and find ways to save energy wherever possible. 
Combined, our homes, businesses, schools, governments, and 
industries consume more than 70 percent of the natural gas and 
electricity used in the country.
    When I came to Congress in 2007, I was selected to serve on 
the House Financial Services Committee. Chairman Frank 
recognized the interest in energy efficiency among Committee 
Members and asked me to head the Energy Efficiency Task Force. 
The task force included Democrats and Republicans. We held a 
number of meetings to gather feedback. And as a result of this 
feedback, Congresswoman Judy Biggert and I introduced the Green 
Resources for Energy Efficient Neighborhoods Act, the GREEN 
Act. The GREEN Act initially passed as part of the 
comprehensive energy package in the 110th Congress and then 
again in the 111th Congress.
    I have worked with Senator Whitehouse since the beginning 
when we started the task force. He has introduced companion 
legislation, and I would like to thank him--I would like to 
take this opportunity to thank him for all his work and 
expertise on these matters. For the purposes of my testimony, I 
will refer to the GREEN Act and Senator Whitehouse's Energy 
Efficiency Housing Act of 2009 interchangeably.
    The legislation is an incentive-based bill and will help 
create jobs and save taxpayers money. According to an 
independent study by the American Institute of Architects, the 
GREEN Act would potentially create more than 140,000 jobs, and 
at this time, I would like to submit this study for the record.
    Chairman Menendez. Without objection.
    Mr. Perlmutter. HUD estimates it spends approximately $5 
billion on both direct and indirect energy costs, making energy 
one of HUD's biggest line items. This legislation establishes a 
demonstration program of 50,000 HUD units to show cost-
effectiveness and to confirm utility costs will go down. HUD 
estimates a conservative savings of just 5 percent would save 
taxpayers $1 billion over the next 5 years. Savings from energy 
efficiency will also help improve the quality of life for 
consumers while putting money back in their pockets.
    The legislation include energy-efficient and location-
efficient mortgage outreach, a critical component to fostering 
livable communities. A renewable energy systems leasing program 
will be developed, allowing consumers to take advantage of 
renewable energy without the up-front costs. Appraisal 
standards are updated to ensure that energy-efficient and 
renewable features are taken into account during the appraisal 
process, a necessary step toward properly incentivizing green 
housing.
    The provisions included in the act were developed in 
consultation with stakeholders and other industry experts. Many 
groups support this legislation, including the National 
Association of Home Builders, the National Multi-Housing 
Council, the Mortgage Bankers Association, the U.S. Green 
Building Council, Enterprise Community Partners, the American 
Planning Association, the American Institute of Architects, and 
individual companies such as LENNAR Ventures.
    Both the GREEN Act and Energy Efficiency in Housing Act are 
examples of the forward thinking we must do to encourage energy 
efficiency and move our Nation toward greater energy 
independence. These bills strike a balance by showing it is 
easy to be green, making energy-efficient practices more 
affordable, accessible, and achievable. Simply put, energy-
efficiency measures are, as the Chairman said, good for 
national security, good for the environment, and good for jobs 
and the taxpayers. For these reasons, I hope the bill 
introduced by Senator Whitehouse will be part of the energy 
conversation going forward.
    I look forward to working with you and with my colleague to 
move this legislation. Thank you again for the opportunity to 
speak.
    Chairman Menendez. Well, let me thank both of you for your 
leadership in this regard. I think that lays an excellent 
foundation for why this legislation makes a lot of sense. I 
have no doubt that it will be part of the energy portfolio that 
we are trying to pursue. With that, I thank you both and look 
forward to working with you to make this happen.
    Senator Whitehouse. Thank you, Mr. Chairman.
    Mr. Perlmutter. Thank you.
    Chairman Menendez. Our next witness is HUD's Deputy 
Secretary Ron Sims. I am going to ask the Secretary to come on 
up.
    Deputy Secretary Sims was unanimously confirmed, something 
that is rare here, by the U.S. Senate on May 6th of 2009 as 
Deputy Secretary for the Department of Housing and Urban 
Development. He is the second-most senior official at HUD. He 
is responsible for managing the Department's day-to-day 
operations, nearly a $40 billion annual operating budget and 
the agency's employees, and we appreciate you being here today 
to share HUD's views on the issue of the legislation that we 
just heard about.
    Mr. Secretary.

STATEMENT OF RON SIMS, DEPUTY SECRETARY, DEPARTMENT OF HOUSING 
                     AND URBAN DEVELOPMENT

    Mr. Sims. Good morning, Chairman Menendez, and also Senator 
Warner. It is a pleasure and honor to be here.
    I want to thank you for this incredible opportunity to 
testify on the Energy Efficiency in Housing Act of 2009. I want 
to commend you, as well as Senator Whitehouse, Senator Schumer, 
Senator Bennet, and Senator Merkley for your support for energy 
efficiency and green building. And I want to thank Congressman 
Perlmutter for his incredible work in the House. I have been 
working closely with him as well.
    I also want to thank you and Chairman Dodd for your work on 
the Livable Communities Act. The Livable Communities Act would 
permanently authorize HUD's Office of Sustainable Housing and 
Communities and solidify our partnership for sustainable 
communities with the U.S. Department of Transportation and EPA. 
We strongly support that legislation and intend to provide the 
Committee with technical comments in the near future.
    I am also pleased today to express support for Senate bill 
1379 as it impacts HUD's program and policies. This bill 
represents an important effort to address the high cost of 
heating, lighting, and cooling housing in the United States, 
especially with portable housing. We also support both the 
energy efficiency as well as the location efficiency of the 
build environment.
    I would let you know that our support for the bill is 
contingent on a number of technical amendments that would more 
closely align it with the House version as well as HUD--excuse 
me. I do not know why I am nervous--as well as HUD's new 
programs and policies.
    I will touch on a few areas where we believe correction or 
modification will help HUD implement this important legislation 
in the future and link it more closely with HUD's current 
initiatives.
    First, with regard to minimum standards, our understanding 
of the bill is that it gives the Secretary the discretion to 
apply minimum or enhanced energy and green standards rather 
than mandating them. There is a green premium for implementing 
new standards that HUD believes may be to raise the corporate--
accordingly.
    We also recommend reordering and amending the provision 
related to underwriting energy-efficient and location-efficient 
mortgages. We recommend allowing the proposed commission in the 
legislation to complete its work and to make its 
recommendations to FHA for consideration--creating new products 
without such guidelines. We also want to ensure that the 
definition of an energy-efficient mortgage works and that 
budget neutrality is applied to the FHA Mortgage Insurance 
Fund.
    I look forward to working with the Committee staff to 
address these issues and ensure that HUD can do proper due 
diligence on the feasibility of implementing the new program.
    I had to be really nervous not to push that button.
    As the former county executive of King County, Washington, 
where we developed one of the most cutting-edge green building 
and smart growth programs in the country, I bring to HUD a 
personal commitment of putting HUD-assisted properties at the 
forefront of creating a greener economy. Some believe green 
buildings is only affordable for higher incomes. I believe that 
we cannot afford not to build green.
    While everyone is hurt by the high energy costs, no one is 
more vulnerable to rising energy prices than low- and moderate-
income families. Large-scale initiatives such as the Enterprise 
Green Communities program show that properties achieving 20 to 
30 percent greener energy efficiency yield cost savings that 
accrue directly to low-income residents or are reinvested back 
into the property in which they live. HUD's own budget faces 
challenges because of skyrocketing energy costs. HUD spends $5 
billion on energy for our public housing and Section 8 
operations. A modest savings of 5 percent could generate a 
savings of $1 billion for taxpayers over the next 5 years.
    Sustainable green building has a clear connection to better 
health as well. In King County, we found that people living in 
the most walkable were less likely to be overweight and more 
likely to be physically active and that wide health disparities 
existed between low-income families and persons of color and 
the rest of the population in traditionally poor neighborhoods.
    But as we saw in the High Point public housing development 
in Seattle, building green can change the equation entirely. It 
became an economic engine in the community that everybody had 
given up on and once called ``the armpit of King County.'' 
Green building requires a new generation of professionals not 
simply ready to build these technologies but to install, 
repair, and maintain them--mechanics and electricians and 
plumbers and construction workers who will pioneer the wave of 
green technologies.
    For all of these reasons, Secretary Donovan and I are 
committed to making HUD a leader in green development. Nowhere 
is this commitment more evident than HUD's new strategic plan, 
which was published last month.
    One of HUD's strategic goals is to promote energy-efficient 
buildings and location-efficient mortgages and communities that 
are healthy, affordable, and diverse. That is why over the next 
2 years HUD aims to create 159,000 energy-efficient or green 
housing units through our Recovery Act initiatives and our 
ongoing programs.
    We have also invested significant Recovery Act funds in 
greening our housing stock. Our green retrofit program is 
helping to retrofit 20,000 federally assisted housing units. In 
public housing, we have financed over 35,000 energy retrofits. 
We also provided greening incentives with our Indian housing 
and our Neighborhood Stabilization Program.
    Looking beyond current programs and funding, we are 
currently implementing a new $50 million energy innovation 
fund. This fund will pilot various innovation strategies for 
financing cost savings and energy-efficient measures for both 
single- and multi-family--excuse me--in both the single- and 
multi-family sectors. We expect to deploy these funds later 
this year and will keep the Committee closely informed.
    We are also hard at work on a comprehensive energy action 
plan that will provide detailed reporting on energy consumption 
and expenditures in HUD-assisted housing and lay out a set of 
specific steps HUD will take over the next 2 years to 
dramatically increase the environmental performance of HUD-
assisted housing. We look forward to sharing the next vision 
with the Committee later this year.
    I believe that HUD's energy efficiency program initiatives 
are closely aligned with what Senate bill 1379 proposes. I hope 
we can work together in the future to align our strategies for 
achieving our shared goals.
    Thank you, and I look forward to answering any questions 
you may have.
    Chairman Menendez. Thank you, Mr. Secretary. And I am a 
little confused myself. I thought green normally means talk and 
red means don't, and it changes here. So you were fine.
    [Laughter.]
    Chairman Menendez. Let me start off with a round of 5 
minutes here.
    First, I know that FHA has been providing energy-efficient 
mortgages as part of a national program since 1995. Do you have 
any sense of how that has worked and what we can learn from it?
    Mr. Sims. The amount of mortgages that are in that program 
were not sufficient enough for us to determine what the market 
would do at a greater scale, so we are still working on it 
internally and with other agencies to see what the underlying 
data would be. That is why we are doing studies right now to 
determine how both location-efficient mortgages would work as 
well as energy-efficient mortgages would work.
    Chairman Menendez. Well, one of our other panelists in the 
next panel is going to advocate in their testimony for 
incorporating green incentives into mortgage calculations, 
which strikes me as a worthy idea.
    Do you have any models as to how that can be done? Is there 
any view that HUD has about that?
    Mr. Sims. There are projects throughout the country that 
have done that. HUD is trying to internally work and see how 
you would build that in, for instance, our mortgage 
instruments, our insurance instruments. And we just need more 
data. We are looking at--it has worked in some places and 
failed in others, and I think what we are concerned about is 
the integrity of our fund and then how literally it takes us to 
scale, whether using appraisers, whether using mortgage--the 
financial industry, whether it is trying to determine what 
consumer preference is, which is why we like the commission and 
why we are undertaking lot of studies right now. When this gets 
implemented, we want this really to be effective. We look 
forward to the commission system because that commission can 
handle all of these issues, and we look forward to that report 
that would come out of the commission that is set forth in the 
bill.
    Chairman Menendez. I think this is a worthwhile endeavor, 
and I want to commend it to the Department's attention. It 
seems to me that if we can incentivize as part of the mortgage 
calculation the move toward green energy and efficiency, we can 
use the private marketplace as a way in which we can accelerate 
the pace of energy efficiency.
    Let me ask you, in your testimony you describe a new $50 
million energy innovation fund to pilot or test various 
strategies. Have you had the opportunity to see some of the 
most innovative strategies that show promise?
    Mr. Sims. The Notice of Funding Availability is going to be 
going out early this fall, and then we will be seeing some of--
--
    Chairman Menendez. That is your first round?
    Mr. Sims. That is our first round. And then we will be able 
to explore, obviously, the collective genius out there in 
America and their responses to our----
    Chairman Menendez. And then finally, HUD began its Green 
Initiative 3 years ago, which was a voluntary nationwide pilot 
initiative to encourage owners and purchasers of affordable 
multifamily properties to rehabilitate and operate their 
properties using sustainable green building principles. You 
write in your testimony that that led to the rehabilitation of 
approximately 2,700 units. What is your plan for continuing 
moving that in the future?
    Mr. Sims. We are creating a much more vigorous culture of 
commitment. Our goal is to--that is why we put it in the 
strategic plan. That is how we are going to measure our own 
performance as an agency, and we are measuring employee 
performance as well. It has----
    Chairman Menendez. Is the culture matched by any resources?
    Mr. Sims. The culture is matched--we have--we are applying 
across all of our programs on the green building side. We think 
it is really important. We realize that there are savings to us 
as a granting agency and there are savings to the people in 
that housing in terms of their own income.
    Chairman Menendez. Thank you. I have to go to an Energy 
markup briefly to offer an amendment. I would ask you, Senator 
Tester, if you are willing to chair for the balance.
    Senator Tester. Your wish is whatever I can do to help you 
out, Mr. Chairman.
    Chairman Menendez. I tell you, you are the man.
    Senator Warner is next, and we will call upon him, and then 
Senator Tester. Thank you very much.
    Senator Warner. Well, thank you, Mr. Chairman, and let me 
start by thanking you and Senator Whitehouse and the others who 
have been involved in this effort. Also, Secretary Sims, it is 
great to see you again and thank you for what you are doing at 
HUD.
    I wanted to give a quick statement here and then get to a 
question point. I am supportive of what Senator Whitehouse and 
Senator Menendez are trying to do in this overall green housing 
initiative. There is another piece of this whole mix that I 
know the Administration has been supportive of as well that I 
have been very involved in on the retrofitting of homes, what 
we are calling the Home Star Program. President Obama has 
spoken on that, and we also are trying to see if we can get 
that included in whether a larger energy bill or perhaps even 
in a small business or some of the other legislation that is 
moving forward.
    As you are probably aware, that has got broad bipartisan 
support. It would be up to a 50-percent match using private 
sector distribution networks like the Loew's and Home Depots of 
the world to do the kind of energy efficiency that can be done 
either by a contractor or by a homeowner on their own.
    I would like you to speak for a moment about within your 
not just new green building initiatives but within the 
retrofitting piece of what HUD is doing, what kind of 
experience you have had, obviously, with, as you describe, some 
of the examples in your old job in King County, taking 
communities that are usually a little more poverty-ridden, a 
little more challenging. But could you speak for a moment to 
HUD's retrofit activities already around this energy--around 
the green energy space?
    Mr. Sims. When I was testifying earlier about how we used 
our Recovery Act funds, much of that was recovery retrofit and 
weatherization, and I think at that time I was talking about 
the number of homes. I think we had 28,000 properties that were 
assisted housing, another 39,000. So we are a believer as an 
agency in the retrofit of properties, and we have seen, for 
instance, in Nashville the use of geothermal systems for 
heating. So we have been seeing a lot of innovation as we apply 
these funds, as we have coordinated ourselves with the 
Department of Energy as well on new investments. But I think it 
is--our experience, I think we would say, have been positive 
answers, and it has been incredibly positive, rewarding. That 
is why it is in our strategic plan, and that is why we have 
done such intensive work right now trying to figure out how we 
scale it up over a lot more of properties.
    Senator Warner. And this may not be your area, since I 
think on the--well, I am very optimistic and hopeful about the 
Home Star Initiative. My sense was, at least from some of the 
public press, and I think about in my own State in Virginia, 
some of the Recovery funds that were used in the weatherization 
program, it has gotten some mixed reviews in terms of the 
spend-out, the hiring-up process. You may not be able to speak 
to this at this moment, but I would love to see some more 
current data on the status of the Recovery Act weatherization 
programs, because my concern is, you know, one of the good 
things, I think, about the Home Star Initiative is it appeared 
to be less bureaucratic than perhaps the classic weatherization 
programs that have been run through--I think about our old 
LIHEAP programs and others. But can you get me that data if you 
cannot speak to it right now?
    Mr. Sims. I can, yes.
    Senator Warner. All right. One last point, and my time 
remains but--and this is more--again, a question you may not 
have a full answer for. But we all know the value of green 
building. We all know the value of retrofitting. We can make 
the business case. What seems to be that we have not cracked 
the code on yet is if we are going to achieve the savings that 
I think we can point out on episodic instances, and if we can, 
as the Chairman was talking about, trying to get this incentive 
into the mortgage--get it into the base in terms of rental on 
Section 8 or a homeowner making a decision, we ought to be able 
to finance this. And I know there are communities--I think 
Senator Merkley from Oregon has talked about some of the things 
they have done in Portland. But is HUD looking at various 
financing models out there so that we could actually maybe use 
seed public monies, but if we create an appropriate baseline in 
terms of what normal energy consumption would be and we can 
demonstrate that the green building construction or the 
retrofit can actually deliver savings, there ought to be a way 
in partnership with the utilities--as we move toward renewable 
power standards and renewable utility standards that we should 
be able to finance this through public--through actually 
private financing rather than simply rely on public grant 
programs.
    My sense is from the Chairman's earlier questions, you are 
looking at trying to get these modeling right. Do you want to 
speak to this whole notion of how we might be able to do more 
of a public-private financing on these efforts going forward?
    Mr. Sims. For the insurance that we provide through FHA, 
our issue is to make sure in the--we have an obligation to make 
sure that our fund remains--has reduced risk, and we have been 
asked to do that. We are also, at the same time, trying to 
determine how we adjust what we do with the market, because we 
don't want to take ourselves out of that market, either. So we 
are trying to look at how do you stimulate the private sector 
market to begin to look at energy efficient tools and location 
efficient tools, which is why I think we are doing such an--we 
want to make--we are trying to perfect--by working with the 
private sector, just how would we attract you to properties and 
use instruments that--basically where we could calculate energy 
efficiency, but how do you do that. We have both EPA and the 
Department of Energy with two tools that they are working with, 
and those have gone in the field on an experimental basis, as 
well.
    So there is a great deal of work and we are trying to 
shepherd and integrate that work into what we can do at HUD at 
trying to scale it up very significantly, the use of energy 
efficient mortgages or location efficient mortgages. I am not 
answering your question because of the fact that there is just 
a lot of churning, trying to get the right data so that we can 
say to the market, whether it is our insurance estimates or the 
private market, these work.
    Senator Warner. And again, my time is up, but I would just 
think that we should be able to get data that shows, here is 
what a home's energy costs would be without energy efficiency, 
whether in the construction or in the retrofit, and there ought 
to be an ability to have some of that to monetize that shared 
savings in the financing tool and find a way to really create, 
I think, a very, very valuable financing, private sector 
financing piece on sharing the savings with the homeowner or 
with the renter. And again, I would encourage the Department to 
look at those models.
    Thank you, Mr. Chairman.
    Senator Tester. You bet. I want to thank you, Senator 
Warner, for your questions. I also want to thank Deputy 
Secretary Sims for being here.
    I have got a few questions here, some pretty basic, 
actually. There are different levels of green, and I would 
assume that HUD--is there a certain level that you try to 
achieve as you push out programs?
    Mr. Sims. We use a--there is an Enterprise Green Community 
Standard is the one we are using at the present time.
    Senator Tester. And it compares building costs with 
savings? Is that what it does?
    Mr. Sims. Yes.
    Senator Tester. Is there a certain percentage you are 
trying to achieve?
    Mr. Sims. Twenty to 30 percent is what we have been able to 
accomplish so far.
    Senator Tester. OK. And that 20 to 30 percent, and I am 
just trying to get myself up to speed, the 20 to 30 percent is 
based on the amount of energy used, the amount of CO2 that is 
produced, the amount of build material that is used? Is all of 
the above? Is it measured by all of the above?
    Mr. Sims. It is pure energy use.
    Senator Tester. Pure energy use? OK. And so are there 
standards that are set up--say I am building a brand spanking 
new house and I want to build it green and save 30 percent. Are 
there standards that you use as far as the construction of that 
house, whether you use two-by-six walls or two-by-four walls or 
the number of windows and all that stuff? I am just trying to 
get my arms around what the definition of green is, and I 
understand the energy use, but if I am building a house and I 
want to say to myself, I want to achieve 30 percent minimum. If 
I get more than that, it is great. Are there standards that HUD 
looks at? When you are doing public housing, for example, and 
you want to achieve that, is there a place you go for those 
standards?
    Mr. Sims. There are no--most of the standards that we have 
to build to are local building codes.
    Senator Tester. Got you.
    Mr. Sims. What there are is a great deal of literature out 
there talking about how you can achieve efficiency. It may be 
the source of energy use. For example, if you use geothermal, 
that creates efficiencies.
    Senator Tester. Got you.
    Mr. Sims. Double-pane windows, we know, work. I saw a 
system in Hawaii, which is a very expensive place for energy 
consumption, where they were using pressurized devices. So I 
think there isn't a specific set of standards that are out. 
There is a lot of literature. There is a lot of work being 
done, a lot of engineering design, whether it is material use, 
whether it is the flow of temperatures in your homes----
    Senator Tester. Got you. And it----
    Mr. Sims. ----appliances you use.
    Senator Tester. And it may be beyond the purview of HUD to 
disseminate that information. That is probably done by the DOE 
or a Department in there.
    I want to talk a little bit about rural versus urban.
    Mr. Sims. Yes.
    Senator Tester. It is an issue that, whether we are talking 
about housing, health care, whatever it might be, there are 
different challenges out there. What do you see as the 
challenge in providing green housing from a HUD perspective in 
rural America versus urban America, and there are challenges on 
both ends of that.
    Mr. Sims. We just have begun to explore that. We have been 
meeting with the Rural Policy Institute to actually get a 
better appreciation and understanding of both rural housing and 
then rural activity centers or small cities in rural areas to 
see how the housing would look, designed, and as soon as we can 
provide--we know that with any structure, we can get those 
efficiencies, no matter where they are at. The issue is how do 
we finance those? Is it going to be by grant, utility savings? 
Are there opportunities present in rural areas that are not 
present in urban areas? For instance, can you augment your 
energy source with wind, with deeper wells?
    Senator Tester. Yes.
    Mr. Sims. So we are trying to--that is why, and not to 
avoid the question, why we are doing so much homework now----
    Senator Tester. Yes.
    Mr. Sims. ----because it isn't a single answer. The issue 
is how would we, as a Federal agency, and along with our 
partners, USDA, approach rural areas, how would we do the urban 
areas, and we are trying to work through that now.
    Senator Tester. Right. Well, along those lines, I will just 
tell you that I think there is--all of Montana is rural, all 
right. But in the more urban centers of a rural State, I 
honestly think we are going to see some out-migration into real 
frontier areas. We are already starting to hear words of it, or 
thoughts of it, because housing, land costs are less and there 
are quality of life issues that people want to take in. And so 
the urban versus the rural/frontier areas, I think are going to 
become more of an issue as we move forward.
    A last question before I turn to Senator Reed. Is there any 
coordinated efforts between you, speaking of rural, HUD, and 
outfits like the USDA Rural Housing, given that they deal with 
rural? Are you able to cut those silos down and work across 
those lines? Has that been approached yet?
    Mr. Sims. Senator Tester, yes, it has been.
    Senator Tester. Oh, good.
    Mr. Sims. We had a meeting with their staffs. They are 
convening and we are creating work groups, including with our 
Sustainability Office working very closely, because our 
Sustainability Office is the one pushing green housing.
    Senator Tester. Very good.
    Mr. Sims. That is why I was saying earlier we are merging 
our interests.
    Senator Tester. Kudos to you on that. I think you get more 
synergy, a better program the more you can work together to get 
on the same sheet.
    With that, Senator Reed.
    Senator Reed. Well, thank you very much, Mr. Chairman, and 
thank you, Mr. Secretary.
    Just a quick question, and it follows on to the discussion 
with Senator Warner. One of the aspects of the Recovery Act 
that seemed to go extremely well is the public housing use of 
funds for weatherization. First, do you have statistics showing 
what they did, and importantly, how much they will be saving 
over the course of the next several years, because there is 
nothing better to argue for programs like this if you can say 
that this has saved housing authorities significant monies.
    Mr. Sims. We have so far done 39,000 units. Our hope is to 
go up to 159,000 units. The program has worked incredibly well. 
The local housing authorities who we are working with have been 
talking about their energy savings. We are now going back and 
getting all that data and collecting that data so that we can 
actually quantify it. We still believe it is going to be in the 
range of 20 to 30 percent savings per unit.
    Senator Reed. Once you get that quantified data, and again, 
this echoes what Senator Warner was talking about, it would 
seem that you could use those savings to amortize loans to 
further complement your efforts so that we could move very 
aggressively and perhaps move to increase your goal even more 
than it is now. Is that what you are planning to do?
    Mr. Sims. That is what we are going to try to do, but we 
have to do that in coordination with our housing authorities 
who are the grant recipient agencies, and I think many of them 
are doing that, as well, looking at how do you lower the cost 
of your tenants and then how do you grab any savings you have--
for instance, in Nashville, which I remember walking through 
their program with them, they believe the savings are so 
significant that they can put their units into an export into 
the utility as a generator, which would be--and they would 
accrue the revenues from the sale of that because of the 
efficiencies they have gained so far.
    Senator Reed. The ARRA money will run out.
    Mr. Sims. Yes.
    Senator Reed. How are you going to keep the momentum going? 
Since this is something that seems to be a win-win in so many 
different ways, lowering costs of Public Housing Authorities, 
which they need to save every nickel they can, lowering 
consumption of energy, employing people to go in and do this 
work, which can be done by Americans in America, how are we 
going to keep this going?
    Mr. Sims. We are building it into our grants, so that if 
you are going to be a recipient of any of our grants on the 
housing side, we expect to see energy efficient homes.
    Senator Reed. Just a final point, which is the less 
successful part of this, from my perspective, was the 
weatherization of private residences because of many factors, 
but one was licensing and qualifying the workers. There was 
some confusion. Again, this seems to be such a win-win. Where 
are we on that? Are you making progress? Have we resolved 
things?
    Mr. Sims. We are making progress. It is a multi-agency task 
on how do you qualify people, how do you train people, how do 
you license them, how do you get them into the homes, but there 
has been an incredible effort to do that, whether it is 
targeting people who we have in our public housing under 
Section 3 who we want trained and moving into that field, 
whether it is now coordinating with the community colleges that 
have accredited training programs, whether it is working with 
the unions who can certify. So there is a pretty substantial 
effort right now to create what we call the qualified labor 
force to be able to go ahead and do those homes.
    The reason why it is so important is because we find out 
that people who hold the mortgage instruments and people who 
insure them want to know who is doing the work so that they can 
certify the value of the work done and determine through 
various modeling the efficiencies gained.
    Senator Reed. Well, thank you, Mr. Secretary. I just think 
these are programs that have so much further potential and 
benefit that we have to get them right in terms of deploying 
them effectively. And then once the Recovery Act money runs 
out, we have to make a good case here in a tough environment 
for additional funding. The facts, the figures, the savings, 
the work, the people that are employed, all that is going to be 
absolutely vital to us and we are counting on you providing it.
    Mr. Sims. Thank you, Senator. We have been at this at the 
Federal level seemingly less than a year and we are--there are 
some quarters where we might be considered to be irreverent in 
our approach. But our goal is to say that it is important to 
have energy efficiency because that is going to be a source 
both of energy in the future, jobs in the future, lower cost 
savings to the people in those homes, and we think it is a win-
win-win-win. It is trying to move what I always call the 
substantial processes within the Federal Government to get 
there. It requires a lot of work, a lot of lawyering, a lot of 
economists, a lot of road changes, and we are very, very 
focused on that.
    HUD as an institution, as a Department, we believe in 
green. We believe in green building. We believe in energy 
efficiency and we have built it into our strategic plan, which 
we will measure our employees, our offices, and our own 
performance, and we adopted that policy. And we are also saying 
that it has to be a policy that lifts all boats. It cannot be 
you can get one performance out of the homes of the affluent. 
That is really, really easy. Our issue is making sure that 
middle class and lower-income people can also win. So we are 
trying to take this to scale.
    But when we come back here, we want to be able to say that 
we took it to scale and it worked because we were very 
exhaustive and very thorough in our preparation, which is why 
we have commissioned so many studies to get so much data to 
find what really, really works. We don't want to chase a good 
idea. We want to chase success, which is why we are being 
thoughtful, but we are working at a very high speed to 
accomplish it.
    Senator Reed. Thank you.
    Mr. Sims. Thank you, Senator.
    Senator Tester. Thank you, Senator Reed, and I want to 
thank you, Deputy Secretary Sims, for being here. We are going 
to move to the next panel, but I will just say this. This is 
the low-hanging fruit. It is a win-win-win-win situation, and 
with some minor costs up front, increased costs up front, you 
are right, it will pay back for years and years and years and 
years and years. So the work you do is critically important, 
especially for the middle class and the poor folks in our 
economy. We wish you the success in the world and we offer you 
our support as you move forward. So thank you.
    Mr. Sims. Thank you, Senator Tester. When I was younger, I 
actually worked in your State. I was working for the U.S. 
Forest Service in Eureka, Montana, and I have a friend that 
went to Montana State, another one that went to the University 
of Montana.
    Senator Tester. That is pretty darn nice country up there.
    Mr. Sims. It is beautiful country.
    Senator Tester. You were there. All right.
    Mr. Sims. Thank you.
    Senator Tester. Thank you. Thank you, Deputy Secretary.
    Our next panel, and if they would come up, I will kind of 
announce. Mr. Dave Caldwell, Ms. Trisha Miller, and Mr. Kenneth 
Gear. I will make the introductions as we go forth.
    Dave Caldwell is Vice President of Caldwell and Johnson, a 
North Kingstown, Rhode Island-based home builder. Mr. Caldwell 
holds a LEED Accredited Professional designation, the Certified 
Green Professional designation, is a green verifier for the 
National Association of Home Builders Green Building Program, 
and is an instructor for the Certified Green Professional 
Program through the NAHB University of Housing. He serves as a 
Director of the Rhode Island Builders Association--he is a busy 
guy--and is active in the Rhode Island Chapter of the U.S. 
Green Building Council.
    From 1998 to 2006, he served as a commissioned officer in 
the United States Marine Corps. We appreciate that. And he is a 
veteran of Operation Iraqi Freedom. It is great to have you 
here, Dave.
    Ms. Trisha Miller serves as Deputy Director of the Green 
Communities Initiative at Enterprise Community Partners, a 
national nonprofit that is the leading provider of capital and 
expertise for affordable housing and community development. Her 
work focuses on leveraging private and public investments in 
green affordable housing development and sustainable building 
practices across the country.
    She manages the Green Communities National Grant Program, 
which provides over $1 million annually for planning and 
construction of green affordable housing. We appreciate your 
work and it is good to have you here, Trisha.
    Kenneth Gear is Executive Director of Leading Builders of 
America, a trade association of the Nation's largest home 
builders that builds approximately one-third of all new homes 
in the United States. Prior to joining Leading Builders of 
America, Mr. Gear was Vice President of--I hope I pronounce 
this right--Pulte Homes, the largest home builder in the 
country, and served on their Energy Committee.
    We absolutely appreciate you being here, Mr. Gear, and all 
three of you. We look forward to your testimony and the 
questions that will follow thereafter. Your entire testimony 
will be in the record, and we will start with you, Mr. 
Caldwell.

STATEMENT OF DAVID CALDWELL, Jr., VICE PRESIDENT, CALDWELL AND 
                         JOHNSON, INC.

    Mr. Caldwell. Good morning, Mr. Chairman, Members of the 
Committee. Thank you for offering me the opportunity to speak 
on behalf of the merits of green housing and in particular the 
Energy Efficiency in Housing Act of 2009. My name is Dave 
Caldwell, Junior. I am a second-generation home builder from a 
small family owned construction company in Rhode Island and a 
recent Marine Corps veteran of Operation Iraqi Freedom.
    Recently, our company completed the first Department of 
Energy Builders Challenge Home in Rhode Island, which is a 
complete gut remodel of a foreclosed and abandoned home built 
in 1952. There is the finished product. For an additional 
$5,000 in construction costs, we were able to more than double 
the energy efficiency of the house. The house was built 
entirely on speculation, three bedrooms, two-and-a-half baths, 
1,300 square feet. It sold for $265,000, which is about 15 
percent below the median in North Kingstown. It was a single 
mom, a friend of the family, who bought it with two daughters. 
She is a school teacher and enjoys living there, happy to show 
the place off if you want to stop by.
    Interestingly enough, we had a lot of press and we had a 
lot of people very interested in the concept of buying a home 
like that. We had an open house. We had overwhelming response. 
We had about 200 people through there in the course of 2 days.
    The principal value proposition is that extra $5,000 in 
construction costs, if spent to double the energy efficiency, 
amortized over 30 years on her mortgage, is about a dollar a 
day. The documented energy savings by the Department of Energy, 
which is this next sheet here that the DOE certified, it is 
about two dollars a day. Assuming that mortgage stays fixed for 
30 years, and I think it will with the low rates, that gap is 
going to increase substantially as the cost of energy rises. 
Once again, the homeowner will receive approximately double the 
value in energy savings that the green features of the home 
will cost over time. I think that is a return on investment 
that should appeal to everybody.
    In Rhode Island, there appears to be significant demand for 
this type of home, but neither the mortgage industry nor the 
appraisal community is at this time willing to assign any 
additional value to homes built to greener energy efficient 
standards. It makes appraisals and financing very difficult for 
that little bit of green premium, particularly those applying 
for FHA mortgages with low down payments.
    Not one person who has seen this house has disagreed with 
the value proposition for the homeowner created by its 
increased energy efficiency. However, the overwhelming focus of 
the financial community, the real estate community, and the 
appraisal community is purely that extra $5,000 figure for the 
cost involved, not the operational savings and value for the 
homeowner that has been created.
    Presently, I have a customer who is designing an energy 
efficient custom home. When he went to the bank seeking 
financing for the loan, which he is well qualified for, he 
explained all the attributes of the green housing, the 
photovoltaics, the energy efficiency, the bank basically said, 
we don't care about any of that. It is just added expense--
literally. I talked to the mortgage originator, who I know, a 
very competent person and a very good bank. They don't think it 
matters. They assigned no value to that.
    I am frequently asked why more houses are not being built 
similar to the green home we constructed, and I like to use 
this analogy when I talk to customers. Customers purchasing a 
car, when they see two cars on a car lot that look identical in 
every respect, like the picture there, and they don't know 
anything else except the fact that one car costs 2 percent more 
than the other, they are going to make a decision based on cost 
and pick the cheaper car. But if you tell them the car that 
costs 2 percent more gets double the gas mileage, intuitively, 
everybody is going to assume right off the bat that that is the 
better bargain, and the customer understands that. It is that 
easy. It is that basic.
    Today, consumers are provided with considerably more 
information when they purchase a car, a box of cereal, or a 
cell phone than they are when they purchase a home, which is 
usually the most significant and major purchase they are ever 
going to make. As such, I am very much in favor of the 
incentives for green housing, specifically the ones in the 
Energy Efficiency in Housing Act, S. 1379. I have met no one, 
and I mean no one, who does not believe that energy efficiency 
in housing is not a great idea. I have met no one who would not 
be willing to spend a dollar a day to save two dollars. It can 
be done, and I think it should be done. There is no reason not 
to. I don't know why anyone would build a new house any other 
way. I really don't.
    The question, then, is why we are not doing this. I think 
the incentives and guidance of the Energy Efficiency in Housing 
Act will be a tremendous help to both homeowners and small 
businesses in facilitating the shift toward more sustainable 
and efficient housing stock. This is an outstanding example 
where Federal leadership can synthesize a true win-win 
situation for businesses and homeowners.
    Thank you again for the opportunity to testify and I am 
happy to answer any questions.
    Senator Tester. Thank you, Mr. Caldwell, and we will have 
some.
    Trisha Miller, you are up next.

    STATEMENT OF TRISHA MILLER, DIRECTOR, ENTERPRISE GREEN 
        COMMUNITIES, ENTERPRISE COMMUNITY PARTNERS, INC.

    Ms. Miller. Thank you, Chairman and Members of the 
Committee, for the opportunity to testify on the Energy 
Efficiency in Housing Act introduced by Senator Whitehouse. I 
am Trisha Miller, Director of Green Communities at Enterprise 
Community Partners. Enterprise is a national nonprofit 
organization with the mission to see that all low-income people 
in the United States have the opportunity for affordable 
housing.
    Since 1982, we have invested over $10 billion in States, 
including Montana and New Jersey, New York and Louisiana, to 
create over 270,000 units of affordable housing. Through our 
Green Communities Initiative, Enterprise provides funds and 
expertise to enable developers to build and maintain housing 
that is healthier, more energy efficient, and better for the 
environment without compromising affordability. Our Green 
Communities criteria, which you heard Deputy Ron Sims discuss 
earlier, is the first national framework for environmentally 
sustainable homes.
    Mr. Chairman, now is the time for Federal leadership on 
green housing. The Government has an essential role to play in 
linking the benefits of an emerging green economy with low-
income individuals and their communities. Green development 
offers a cost effective way to address our housing challenges 
and the rising costs of energy, water, and transportation.
    Despite recent declines in home prices, the Nation faces a 
huge shortfall of decent, affordable housing. Nationwide, an 
estimated 55 million Americans are living in overcrowded or 
substandard housing. Green, affordable housing gives us the 
ability to reverse this trend.
    The Energy Efficiency in Housing Act and the Green Act 
represent a major step toward that goal and we commend Senator 
Whitehouse and Representative Perlmutter for their commitment 
and leadership in introducing these bills, which Enterprise 
enthusiastically supports.
    National legislation would have positive impacts on the 
housing market and especially the affordable housing sector. 
Mr. Chairman, housing and transportation costs make up the 
largest share of our household budgets and quickly force low-
income families in the untenable choice between life's most 
basic necessities. A low-income household will pay four times 
as much of their monthly household income as the average 
American to keep apace with the rising utility costs.
    There are roughly 25 million Americans with annual incomes 
of $25,000 or less in the country. For these families and 
individuals, the daily realities of rising housing, energy, and 
transportation costs are intertwined and they are simply 
crushing.
    Not surprisingly, high utility costs force low-income 
families to make desperate tradeoffs. A survey of households 
that receive Federal Home Energy Assistance during a 5-year 
period found that 47 percent of those surveyed has to miss--
went without medical care, and 25 percent missed a monthly 
payment on rent or toward their mortgage. Twenty percent in the 
survey went without food for at least 1 day in order to keep 
apace with these rising costs. And these are not mere 
statistics. They are real families who continue to live on the 
edge.
    The Energy Efficiency in Housing Act signals a 
comprehensive approach to green housing that will bolster 
community and environmental benefits and save families money on 
utility bills without imposing significant costs on the Federal 
Government.
    There is also emerging evidence that green homes are 
healthier homes. A targeted study recently assessed the health 
impact on asthmatic children who moved into health public 
housing in Seattle's High Point community. After just 1 year, 
the results were staggering. Children showed a 60 percent 
increase in symptom-free days and a 67 percent reduction in 
their trips to the emergency room or other clinical care 
facilities.
    The Energy Efficiency in Housing Act can not only improve 
health outcomes, it can protect our natural resources and fight 
climate change. Just imagine if we could rehab the 25 million 
units of homes that house our lowest-income citizens. Using 
EPA's equivalency calculator, that would translate into savings 
of 60 million tons of carbon dioxide removed from the 
atmosphere, ten million cars taken off the road, or nearly 
400,000 acres of forest preserved each year.
    One of the hallmarks of this bill is that it would provide 
new Federal resources for green housing through incentives to 
publicly financed and assisted housing developments on an 
unprecedented scale. The bill also provides resources to enable 
private developers to achieve green goals cost effectively.
    One especially important provision would provide funds to 
strengthen the capacity of community-based organizations in 
green development. The bill would also spur green public 
housing by requiring that all HOPE VI construction comply with 
the mandatory aspects of our Green Communities Criteria.
    Mr. Chairman, this isn't just about the environment. It 
isn't just about housing. And it isn't just about healthy 
living. It is about families who are struggling to find jobs, 
to keep the lights on, and to continue to make their monthly 
payments. This is a critical step and we urge Congress to enact 
the Energy Efficiency in Housing Act.
    Thank you, and I look forward to the opportunity to take 
some questions.
    Senator Tester. Well, thanks for your testimony, Trisha. I 
appreciate it, and it is a no-brainer when you think about it, 
no pun intended.
    Mr. Gear, you are up.

STATEMENT OF KENNETH GEAR, EXECUTIVE DIRECTOR, LEADING BUILDERS 
                           OF AMERICA

    Mr. Gear. Thank you, Senator Tester. My name is Ken Gear. I 
am Executive Director of Leading Builders of America. We are 
relatively newly formed association representing 16 of the 
Nation's largest homebuilding companies. In 2009, our members 
sold approximately one-third of all new homes sold in the 
country.
    LBA member companies are building green homes every day 
throughout the country and have been active participants in 
voluntary energy efficiency programs like Energy Star, The 
Builders Challenge, and Environments for Living.
    We are not made up of sort of niche green builders; rather, 
we are mainstream builders who all have a variety of different 
business models, but who are all committed to building an 
energy-efficient future.
    Our members are on the front lines of this effort and 
recognize the important role that housing can play in reducing 
energy consumption in the United States.
    We have jointly developed a plan along with the Institute 
for Market Transformation with significant input and support 
from the Alliance to Save Energy and the Natural Resources 
Defense Council, and we thank you for the opportunity to share 
our collective thoughts today.
    We commend Senator Whitehouse as the primary sponsor of the 
Energy Efficiency in Housing Act, and we are pleased to see 
that that bill recognizes the need to help homeowners finance 
the incremental up-front costs associated with purchasing 
highly efficient new homes by providing energy-efficient 
mortgages and appraisal enhancements.
    We have a few suggestions to further this objective so that 
energy-efficient mortgages can be universally available in the 
marketplace, which is critical to its success.
    We propose to provide Federal mortgage agencies with the 
tools and direction necessary to improve the accuracy of 
mortgage underwriting by accounting for energy costs associated 
with operating the home for all new mortgage loans.
    With a better, more granular assessment of whether the 
homeowner can manage the cost of hospital, Federal mortgage 
programs will produce better quality loans for better informed 
borrowers. It will lead to more efficient homes being built and 
a reduced risk of mortgage default and will more accurately 
account for whether the borrower can afford the cost of 
homeownership or not.
    The policy can be implemented in a manner that will not 
reduce the availability of credit or increase the cost of 
credit, and over time the people should make energy-efficient 
homes more affordable which will result in increased consumer 
demand and more green jobs.
    One of the first steps in the underwriting process for any 
loan is calculating the cost of ownership. This analysis 
typically involves summing the total of annual expenses for 
principal, interest, taxes, and insurance premiums. 
Conspicuously absent from this calculation is the anticipated 
annual energy cost for operating the home, and that cost is 
actually larger on average than taxes and insurance.
    We suggest adding an ``E'' for Energy to be added to the 
PITI calculation for all federally backed mortgages, and this 
would have two immediate and substantial benefits. First, the 
quality of mortgage underwriting would improve with the 
addition of energy in factoring the cost of homeownership. And, 
second, the change would encourage consumers to buy more 
energy-efficient homes by allowing energy savings over the life 
of the home to be used to offset the up-front cost.
    We would urge the Senate to include these changes in any 
bill before any proposed energy mandates would go into effect, 
and there are a few pending in the energy bills that are 
pending out there. Our analysis shows that a 30-percent 
mandated increase in energy efficiency would cost the typical 
new home approximately--would increase the cost of a new home 
by approximately $5,000, and at a 50-percent level, it goes up 
to $15,000, and that varies significantly by climate zone. So 
unless we have a strong energy-efficient mortgage program in 
place and available throughout the country, the mandates will 
cause homebuyers to be unable to afford or obtain financing to 
cover the extra up-front cost, making them less likely to 
purchase the more efficient home.
    For this plan to work, we must adopt an accurate and 
universally understood method of measuring and valuing energy 
efficiency. Today buyers and builders typically realize no 
value, as Mr. Caldwell said, for including energy efficiency 
features in a home, even though they cost significantly more. 
We propose a rather simple solution by using a Home Energy 
Rating System, or HERS rating, which is a well-established and 
universally accepted energy efficiency standard.
    Using a HERS system to measure the efficiency of the home 
allows one to determine the expected energy usage of the home 
without placing a burden on home appraisers to place subjective 
values on energy-efficient features. The HERS system will give 
you an estimate of the expected monthly energy savings based 
upon a performance test of the home done by a third-party, 
certified energy rater. The net present value of those monthly 
savings can then be factored into the underwriting process to 
help finance the additional up-front costs. And for homes that 
have not been rated, an average energy cost as determined by 
DOE would be the default for underwriting purposes. So the 
system would not penalize unrated or presumably less efficient 
homes. It would just provide a benefit to more efficient homes.
    So, in conclusion, I think I would just leave you with a 
prospective homebuyer interested in energy efficiency should be 
facing a win-win situation. An energy-efficient home is good 
for the environment, and it will save money, and the incentives 
and the changes that we are proposing would make energy-
efficient homes and features affordable and it would allow 
buyers to finance them.
    So, with that, I will look forward to your questions.
    Senator Tester. Well, thank you, Mr. Gear. I appreciate 
your testimony also as with the two preceding participants.
    I really do not know where to start, so we will start with 
a question for both Mr. Caldwell and Mr. Gear. It deals with an 
issue that you were just talking about, Ken, about prospective 
homebuyers, and almost without exception, when somebody is 
going to buy a house and they can get the financing for it--the 
house is already done, it is already buttoned up, they cannot 
see what is behind the sheetrock, they cannot see what is 
behind the siding, they can see if it is double-pane or triple-
pane windows or whatever it might be there--how--and like every 
one of you said, everybody wants to save some bucks. The 
example that you gave, Mr. Caldwell, five thousand bucks up 
front, $2, DOE, $2 a day, that is 21 grand. I mean, that is a 
pretty good return on investment. So we want it, but we want to 
make sure we get it. How does the homebuyer know that when the 
place is buttoned up, it is done, it looks beautiful, it is 
painted well, it has got a nice yard, but what is under the 
skin is what is really important, how does the homebuyer know 
that? Are there agencies out there that you certify with right 
now? Because it is all voluntary at this point, correct?
    Mr. Gear. It is all voluntary, and right now there are 
energy raters that can actually go in and do that.
    Senator Tester. Who are they?
    Mr. Gear. There are various--that is the HERS rater I was 
talking about. There are different agencies and companies that 
go out for----
    Senator Tester. So I have got a 1,500-square-foot home, and 
I want to have it HERS rated. What State are you from, Mr. 
Gear?
    Mr. Gear. Virginia.
    Senator Tester. Virginia? How much would it cost additional 
for that?
    Mr. Gear. It is roughly $300.
    Senator Tester. Three hundred bucks?
    Mr. Gear. Yes.
    Senator Tester. Is it based on square footage or just it is 
about 300 bucks----
    Mr. Gear. No. They physically test the home. It is roughly 
300. It varies a little bit.
    Senator Tester. OK. And then they will come back and tell 
you what the savings is on that?
    Mr. Gear. Correct.
    Senator Tester. OK. Mr. Caldwell, would you address that as 
far as, you know--and is HERS used a lot? In what percentage of 
the homes are they used? Or is there a different method? Go 
ahead.
    Mr. Caldwell. In Rhode Island, which is my State, there is 
a nonprofit called Conservation Services Group funded by the 
local utility. That will do a baseline analysis for free.
    Senator Tester. Good.
    Mr. Caldwell. There is also a nonprofit called Rhode 
Islanders Saving Energy. You can call them. They will come to 
your house for free, change some light bulbs. Beyond that, you 
will spend a little bit more to evaluate the building 
performance test of the house through a recognized national 
standard through DOE. But it basically involves a series of 
performance metrics. You will probably hear the words ``Blower 
Door'' test. They will try to figure out where the leaks come 
behind the sheetrock. They use thermal imaging cameras that 
will look behind the wall. That will tell you where your heat 
loss is. It is a pretty neat tool.
    So the tools are all there, and it is not that complicated, 
and the software packages are there--it is called ResNet--that 
they use to come up with this document right here.
    Senator Tester. Well, good. Trisha, do you want to respond 
to that at all?
    Ms. Miller. Sure. We tend to see projects that are single-
family and under four stories use the HERS index, and that is 
benchmarked against the Green Communities Criteria for projects 
of that scale. I also just wanted to cross-reference Energy 
Star, which allows you to go through a full certification, and 
the Energy Star certification requirements, guidelines, are 
also incorporated in the Energy Efficiency in Housing Act. So 
we see an opportunity to really take what we have learned 
across the country and get to scale in the affordable housing 
sector using HERS and then also using ASHRAE for larger-scale 
projects, multifamily, high-rise.
    Senator Tester. OK. I am not a banker, but if I was a 
banker and somebody came in to me and said we are doing these 
energy savings and there was documentation that this was 
actually going to save you some dough--might have the builder 
with me, might have somebody from one of those agencies you 
talked about, Mr. Caldwell--I would think it would be a no-
brainer to give them the extra dough.
    What do we have to do to break through that, you know, it 
is just additional cost and we do not care?
    Mr. Caldwell. I am not a banker, either, so I am not 
particularly qualified to answer that, but I can tell you this: 
From a pure human perspective, FHA does have energy-efficient 
mortgage programs on the books. They are good. The banks will 
not use them for the following reason: that it is a lot more 
work for the underwriter and the appraiser to make the same 
commission. They are all directly endorsed, the lending 
institutions. When someone gets an FHA mortgage, they do not go 
talk to FHA. They go to the bank or the loan company. I have 
had that discussion with them. They say this is too much work, 
just put them in a regular loan, they are qualified, or, you 
know, we will make something else work. That is kind of it.
    So I do not know the answer to that, but some of the 
incentives with mortgage insurances, rate reductions, fee 
reductions, things like that, and, again, the data to get this 
thing rolling, I think you would be OK.
    Senator Tester. It would just seem to me that it makes just 
too much sense to say--you know. The other side of the coin 
is--and I was wondering, and I will get back to you in a 
second, Trish, but either Mr. Gear or Mr. Caldwell, what--when 
your builders are building a house or you are building a house, 
Mr. Caldwell, there is opportunity to save money, too, in 
building costs. I mean, you know, if you are in Montana, do not 
put that window on the north side of the house. You know, put 
that money into insulation somewhere else, and you have killed 
two birds with one stone.
    Are those the kind of things you talk about or that the 
certifiers talk about with you? And you have said--I mean, you 
build a large percentage of the homes in this country.
    Mr. Gear. Correct. Yes, those are sort of the easy, low-
hanging fruit, if you will. When you want to get to even higher 
levels of efficiency, it requires extra features in the home, 
you know, HVAC systems or air-conditioning systems that use 
lower efficiency. So when you get into those costs and the 
appraisals do not recognize that extra money you put in, 
therefore the banks will not finance them, it creates a 
disincentive to go that extra mile.
    Senator Tester. Let me ask you, does the White House bill 
take care of the appraisal problem?
    Mr. Gear. We would like to see them go a little bit 
further, but, yes, it appears--it is on point for the issue. We 
have a little few tweaks, but, yes, it addresses the issue.
    Senator Tester. OK. Mr. Caldwell, do you have any further--
OK. Good enough.
    Trish, I want to ask you about rural versus urban because I 
am a rural guy. Is there a difference in challenges out there 
between rural and urban when it comes to green building? And if 
there are, what are they?
    Ms. Miller. Sure. That is a terrific question, and we have 
a rural and Native American initiative and enterprise that I 
work closely with to address some of those very challenges.
    Senator Tester. And housing is a huge issue.
    Ms. Miller. Exactly. So you have--I think when you raised 
the question of how do you find a HERS rater in Montana, just 
getting the right technical assistance and support onsite for 
projects can be a real challenge in more isolated rural 
communities. But we have seen--in Montana we work with a 
nonprofit called Homeward that has built over three affordable 
housing developments using the Green Communities Criteria. They 
have made the case that this can be done.
    Senator Tester. And do great work, by the way.
    Ms. Miller. Terrific work. So we are following the example 
of what rural developers are able to achieve using the Green 
Communities Criteria and incorporating, you know, their 
guidance and lessons learned as we provide more technical 
support through our Green Communities network of TA providers. 
And I think one of the tremendous assets of this bill is that 
it addresses targeted capacity-building grants for projects in 
rural communities that could take advantage of some of the 
expertise we have learned in the industry for the last 5 years.
    Senator Tester. OK, good. Well, I want to thank all three 
of you for being here. I very much appreciate your 
presentations and appreciate your work. It is good, it is very, 
very good work, and we have just to figure out ways to help you 
make it work even better.
    With that, I am going to turn the gavel back to the 
Chairman, Senator Menendez.
    Chairman Menendez [presiding]. Thank you, Senator Tester, 
and thank you for chairing for the period of time.
    I did not get to hear your testimony, but I read it, so let 
me pursue it. Mr. Gear, some of the members of your 
organization, the Leading Builders, include some of the largest 
home developers in the Nation. And the home construction 
industry suffered through some of the most difficult times in 
the recession, and the sector still has a large unemployment 
rate, about 20 percent.
    Would the enactment of green housing initiatives such as 
those that we have discussed today, the GREEN Act and the 
Energy Efficiency in Housing Act, help to stimulate home 
construction, do you believe?
    Mr. Gear. Yes, there is definitely a pent-up demand out 
there for green homes, and what the bill would do, it would 
allow homebuyers the opportunity to help finance a greener 
home. And if the home is greener, it is going to mean there is 
more features in the home which will require putting people 
back to work to install them and get those features installed 
in the homes. So, yes, it would definitely be a boost to an 
industry that, you are right, is hurting right now.
    Chairman Menendez. Now, part of what your testimony talks 
about, it incorporates--seeking to incorporate green 
initiatives into mortgage calculations, which strikes me as a 
worthy idea. Are there any models for how this can be done?
    Mr. Gear. Fannie and Freddie, I believe it was Fannie Mae 
had a model that they had a few years ago that actually was--
the architecture was there, and it worked quite well. The 
reason it did not get to scale was because, as Mr. Caldwell 
said, it was a program that required a little bit more work 
from the banks and the underwriters. And at the time, credit 
was free flowing in the economy, and nobody needed a green 
mortgage. Today they do, which is why we think it is so 
important that this not be a pilot program, that it be to scale 
available to all consumers.
    Chairman Menendez. So what do you think are some of the 
practical obstacles to implementing that?
    Mr. Gear. Well, I think, you know, our analysis has shown 
that it would require certainly a software upgrade to the 
underwriting systems that FHA and Fannie and Freddie use, 
essentially just adding sort of a line on there, on the 
analysis to show so you can input what the monthly savings 
would be, the net present value of the monthly savings, and 
that would allow the borrower increased borrowing capacity to 
finance the energy-efficient features.
    So we do not think it would be too much work to do that, to 
implement it and get it up to speed within 12 months.
    Chairman Menendez. Ms. Miller, your enterprise provides 
financing for affordable housing. What are the unique 
challenges that affordable housing faces in terms of achieving 
energy efficiency?
    Ms. Miller. One of the challenges that we find affordable 
housing developers face in the market is going green for the 
first time, so making that early transition to using the Green 
Communities Criteria or equivalent green rating systems. And we 
have been providing technical expertise and support through the 
forms of predevelopment loans and grants to help affordable 
housing developers address some of those challenges, just 
thinking differently about everything from the building 
envelope to active systems incorporating renewable energy or 
getting to--in Green Communities Criteria we have a 15-percent 
above code minimum requirement that they can achieve at very 
low cost, but it requires a new approach to design, and the 
integrated design process is something that we have been 
advocating for and provide charrette grants to allow the 
development team to come together and think about what are the 
cost-effective means to achieving those energy efficiency goals 
and have seen tremendous success with that, starting early in 
the design process to reach those targets.
    Chairman Menendez. You talk about the challenges sometimes 
that lower-income people have between paying their utility 
bills and dealing with medical care or food. You have invested 
about $700 million----
    Ms. Miller. We have.
    Chairman Menendez. ----to create green affordable homes in 
32 States. Have you been able to quantify a difference in 
people's lives as a result of it?
    Ms. Miller. We have been able to quantify the direct 
pocketbook savings that low-income renters and homeowners 
benefit from as a result of meeting the Green Communities 
Criteria. We have seen a 20- to 30-percent savings in terms of 
lower utility bills from energy efficiency upgrades and water 
conservation measures. I referenced earlier the Seattle High 
Point project where we able to commission a study to quantify 
the health impacts which are often intangible or harder to get 
hard numbers on, and we found that for children with 
respiratory ailments a dramatic reduction in terms of symptom 
days and trips to the emergency room. So we continue to look at 
both the pocketbook savings and the health benefits that are 
achievable for low-income families.
    Chairman Menendez. Thank you.
    Mr. Caldwell, I understand from your testimony that a mere 
$5,000 in construction costs on a home that is sold for 
$265,000 is able to double the energy efficiency of the house.
    Mr. Caldwell. That is correct.
    Chairman Menendez. That is a 2-percent increase in cost. 
That should seem an enormous attraction to anyone if they are 
just doing the math.
    Mr. Caldwell. True. I brought a few props with me. I am 
glad you asked. But this is basically how you do it: a little 
bit of exterior rigid insulation on the outside of the house, a 
little bit of--this is a water-based foam. You can eat it. I do 
not recommend it, but that was part of the project pitch from 
the salesman. I made him eat a little bit, so I can testify 
that that is not harmful foam. But it is called Icynene. It is 
a water-based foam.
    To make a long story short----
    Chairman Menendez. We will get you out for lunch time so do 
not get overeager.
    [Laughter.]
    Mr. Caldwell. But that is pretty much it right there. That 
is about a thousand bucks extra to install this on the house, 
and it is about 2,500 bucks to use this instead of fiberglass. 
And that is pretty much 90 percent of it right there.
    But as Ms. Miller said, you have to start with a design. 
You have to think a little differently. You have got to rethink 
the entire process. But if you do that--and we continue to move 
forward with a few more projects in the pipeline as to how to 
make the houses more efficient and also make them less 
expensive. This is our business model, so this is not just a 
pure pie in the sky, theoretical concept to me. This is the 
actual way we are focusing our business right now, is to how to 
continue to build a few more of these. We have got two more 
breaking ground this summer that are going to be built to the 
same house but built a little differently. We are using a 
different methodology. This is literally, you know, how I make 
my paycheck by doing this type of stuff. So I have an extreme 
vested interest in making sure this runs well, especially to my 
Dad, who is writing the checks, you know, watching me quite 
closely.
    So that in a nutshell, very briefly, is how you would do 
that.
    Chairman Menendez. So is that attracting buyers for you?
    Mr. Caldwell. Absolutely. If I had 20 of these houses, I 
would have sold all 20 of them. No joke. Once the buyer hears 
that, it does not take a genius to figure out that this is a 
good deal, if it is in all other respects a nice home, well 
built, nice location, and all those other things.
    Chairman Menendez. Well, thank you all very much for your 
testimony. I think you have helped us move forward on making 
the case for energy-efficient housing and what are the benefits 
that would be derived, environmentally certainly but also in 
terms of jobs and cost savings for Americans that are on tight 
budgets. So I hope we will mark up and pass the Energy 
Efficiency in Housing Act here in the Senate as a good step in 
the right direction. We appreciate your testimony.
    We are going to keep the record open for 2 days. Should any 
Members have any questions of any of our witnesses, they will 
be able to do so. And with that, this hearing is adjourned. 
Thank you very much--I am sorry. I take it back. We are going 
to have 1 week for our Members to submit questions. So if you 
get those, we would urge you to answer them as soon as you can 
so we can close the record and be able to hopefully move 
forward.
    With that, the hearing is adjourned.
    [Whereupon, at 11:20 a.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]

            PREPARED STATEMENT OF SENATOR SHELDON WHITEHOUSE

    Chairman Menendez and Members of the Committee, I thank you for the 
opportunity to speak this morning and for holding a hearing to examine 
proposals to encourage energy efficiency in the housing sector, 
including my Energy Efficiency in Housing Act. I also want to thank 
Representative Perlmutter for leading the way on this crucial topic. He 
has succeeded in shepherding green housing legislation through the 
House and has been one of the leading champions of energy efficiency.
    I also want to acknowledge Dave Caldwell, on the third witness 
panel, who has led pioneering efforts in green building in Rhode 
Island, and has travelled down to D.C. to share his experiences with 
us.
    I hope that this hearing will make clear that energy-efficient 
housing connects tackling climate change and reducing our dependence on 
foreign fossil fuels to cutting Government outlays and trimming 
household budgets, to renovation, design, and construction jobs that 
can't be exported. Despite this promise, energy efficient options in 
housing are not well understood by consumers, and homebuyers today 
often pass up green opportunities that are in their economic interest. 
Our challenge as legislators is to devise programs to inform consumers 
and jumpstart the green housing economy.
    Representative Perlmutter's G.R.E.E.N. Act, is the first 
comprehensive green housing bill to be introduced in Congress. Working 
with Chairman Menendez and Senator Schumer, I drafted a companion to 
the G.R.E.E.N. Act and introduced it last June. Similar to 
Representative Perlmutter's bill, the Energy Efficiency in Housing Act 
would authorize programs and incentives to encourage green construction 
and retrofitting.
    EEHA would energize the market for energy efficient and location 
efficient mortgages by directing the HUD Secretary to develop upfront 
incentives for homebuyers. As a result of lower monthly energy costs, 
green homeowners are slightly less likely to default on their mortgage 
over time. This lower credit risk justifies borrowing incentives such 
as waived fees and lower points and rates. Additionally, EEHA would 
create incentives in the secondary mortgage market, making it more 
profitable for lenders to sell these products.
    On the public housing side, EEHA would require the Secretary to 
develop incentives for energy efficiency for the housing programs that 
HUD oversees, designed so that savings are shared between landlord and 
tenant. To help find the right balancing points, the bill would 
authorize a 50,000-unit demonstration program for Section 8.
    As Members of this Subcommittee well know, housing programs often 
cut across layers of government. To help State and local governments 
experiment with novel and innovative green housing programs, EEHA would 
authorize a revolving loan fund. It would also create a grant program 
so that community development nonprofits can participate in and 
administer construction and retrofitting efforts.
    Mr. Chairman, I once again commend you for holding this hearing. 
With buildings accounting for between 40 percent and 50 percent of 
greenhouse gas emissions, green housing incentives offer environmental 
promise in addition to jobs and cost savings.
    Unfortunately, I need to leave to return to the confirmation 
hearing of Elena Kagan. My staff will monitor all comments and 
suggestions raised today and I will consider them in refining and 
advancing my bill. I look forward to continuing our work on green 
housing legislation. Thank you.
                                 ______
                                 
           PREPARED STATEMENT OF REPRESENTATIVE ED PERLMUTTER

    Thank you Chairman Menendez, Ranking Member Vitter, and Members of 
the Subcommittee, for inviting me here to testify on green housing and 
energy efficiency. Renewable energy and energy efficiency have long 
been a priority of mine. We must find different ways to power our 
country and find ways to save energy where possible. Our Nation's 
building stock is one area in particular where it is important we focus 
our efforts. Combined, our homes, businesses, schools, governments and 
industries consume more than 70 percent of the natural gas and 
electricity used in the country.
    When I came to Congress in 2007, I was selected to serve on the 
House Financial Services Committee. I proposed ways to increase green 
housing and energy efficiency during the Committee's consideration of 
several bills. Chairman Frank recognized the interest among Committee 
Members and asked me to head the Energy Efficiency Task Force. The task 
force included Democrats and Republicans. We held a number of meetings 
to gather feedback on best practices and ways to increase energy 
efficiency. As a result of the input the task force received, 
Congresswoman Judy Biggert and I introduced the Green Resources for 
Energy Efficient Neighborhoods Act (GREEN Act). The GREEN Act initially 
passed as part of the comprehensive House energy package in the 110th 
Congress and then again in the 111th Congress.
    Senator Sheldon Whitehouse introduced companion legislation last 
year. I am proud to work with Senator Whitehouse as someone who shares 
the commitment to renewable energy and energy efficiency. I would like 
to take the opportunity to thank him for all of his work and expertise 
on these matters. For the purposes of my testimony, I will refer to the 
GREEN Act and Senator Whitehouse's Energy Efficiency Housing Act of 
2009 interchangeably.
    The legislation is an incentive-based bill and will help create 
jobs and save taxpayers money. According to an independent study by the 
American Institute of Architects, the GREEN Act would potentially 
create more than 140,000 jobs. HUD estimates it spends approximately $5 
billion on both direct and indirect energy costs, making energy one of 
HUD's biggest line items. This legislation establishes a demonstration 
program of 50,000 HUD units to show cost-effectiveness and to confirm 
utility costs will go down. HUD believes this is an area where 
significant cost savings can be recognized and estimates a conservative 
savings of just 5 percent would save taxpayers $1 billion over the next 
5 years. Savings from energy efficiency will also help improve the 
quality of life for consumers, while putting money back in their 
pockets and giving them greater control over their disposable income.
    Energy efficient and location efficient mortgage outreach, which is 
a critical component to fostering livable communities is included. A 
renewable energy systems leasing program will be developed, allowing 
consumers to take advantage of renewable energy without the up-front 
costs. Appraisal standards are updated to ensure that energy efficient 
and renewable features are taken into account during the appraisal 
process, a necessary step towards properly incentivizing green housing.
    The provisions included in the GREEN Act were developed in 
consultation with stakeholders and other industry experts. Many groups 
support this legislation including the National Association of Home 
Builders, the National Multi-Housing Council, the Mortgage Bankers 
Association, the U.S. Green Building Council, Enterprise Community 
Partners, American Planning Association, American Institute of 
Architects and individual companies such as LENNAR Ventures to name a 
few.
    Both the GREEN Act and Energy Efficient Housing Act are examples of 
the forward-thinking we must do to encourage energy efficiency and move 
our Nation towards greater energy independence. These bills strike a 
balance by showing it is easy to be green, making energy efficient 
practices more affordable, accessible and achievable. Simply put, 
energy efficiency measures are good for national security, good for the 
environment and good for jobs. For these reasons, I hope the bill 
introduced by Senator Whitehouse will be part of the conversation going 
forward on comprehensive energy reform.
    I look forward to working with you to move this legislation. Thank 
you again for this opportunity, I am happy to take any questions.

Attachment









                     PREPARED STATEMENT OF RON SIMS
     Deputy Secretary, Department of Housing and Urban Development
                             June 30, 2010

    Good morning Chairman Menendez, Ranking Member Vitter, 
distinguished Members of the Subcommittee. Thank you for the 
opportunity to testify on behalf of the Department today on S. 1379, 
the Energy Efficiency in Housing Act of 2009. I want to commend you, as 
well as Senators Whitehouse and Schumer, for your support for energy 
efficiency and green building throughout HUD's programs and in the 
affordable housing sector at large. I also want to take this 
opportunity to commend Chairman Dodd on S. 1619, the Livable 
Communities Act--which in many ways complements Senator Whitehouse's 
efforts through the bill we are considering today.
    I am here today to provide support for the bill as it impacts HUD's 
programs and policies, contingent on amending certain provisions of the 
legislation. Before coming to HUD I was County Executive in King 
County, Washington for a dozen years, where we developed one of the 
most cutting edge green building and smart growth programs in the 
country. As you know, with strong support from this Committee, HUD has 
created a new Office of Sustainable Housing and Communities and 
Secretary Donovan has asked me to oversee that office. In that capacity 
I am responsible for synchronizing our efforts with other departments 
and agencies and implementing HUD's green building and energy 
efficiency initiatives as we bring some of the best local ideas for 
building strong, sustainable communities to the national stage.
    So I have a strong interest in the outcome of this legislation. 
That's why we have worked closely with Congressman Perlmutter and the 
House Financial Services Committee on H.R. 2366, on the House 
counterpart to this bill and, at the same time, HUD has begun to 
implement a series of initiatives that are very much aligned with the 
goals and objectives of this legislation.
    I am pleased to report that HUD has made some significant steps to 
further our commitment to improving the energy efficiency of the 5 
million HUD-subsidized affordable housing units and incorporating 
energy efficiency standards throughout the various HUD programs. HUD's 
FY2010 budget proposal, our new Strategic Plan and newly formed 
partnerships with the Departments of Transportation and Energy and the 
Environmental Protection Agency reflect HUD's commitment to increasing 
and promoting energy efficiency.
    Nowhere is this commitment more evident than in HUD's new FY2010-
FY2015 Strategic Plan, which we published last month. Indeed, one of 
the five strategic goals of the 6-year plan is to ``promote energy 
efficient buildings and location-efficient communities that are 
healthy, affordable and diverse.'' \1\
---------------------------------------------------------------------------
     \1\ U.S. Department of Housing and Urban Development, Strategic 
Plan, FY2010-2015.
---------------------------------------------------------------------------
    Specific strategies included in the Strategic Plan to support this 
goal are to: (i) Support and promote an energy efficient, green and 
healthy housing market by retrofitting existing housing; (ii) Support 
energy efficiency in new construction projects; (iii) Improve home 
energy labeling and high-performing upgrades that reduce the carbon 
footprint of non-HUD supported residential buildings; and (iv) Reduce 
energy consumption and incorporate green buildings in the design and 
operation of HUD-supported affordable housing.
    In support of this goal, over the next 2 years, the Department has 
set a goal of 159,000 energy efficient retrofits or green housing units 
through our Recovery Act initiatives, as well as through our ongoing 
programs.
    In addition, HUD is hard at work on a comprehensive Energy Action 
Plan that will provide detailed reporting on energy consumption and 
expenditures in HUD-assisted housing and lay out a set of specific 
steps HUD will take over the next 2 years to dramatically increase the 
energy efficiency and broader environmental performance of HUD-assisted 
housing. This Plan is required of us every 2 years under the Energy 
Policy Act of 2005 and we look forward to sharing the next version with 
the Committee later this year.
    Greening HUD's stock of public and assisted housing supports four 
sound public policy principles. First, it's sound fiscal policy. HUD's 
budget is directly impacted by utility costs. HUD spends an estimated 
$5 billion annually on energy, either directly in the form of the 
public housing operating subsidy or indirectly through utility 
allowances and Section 8 contracts in assisted multifamily housing. 
This is an area where significant cost savings are possible. For 
example, a modest savings of just 5 percent per year could generate a 
savings of $1 billion over the next 5 years.
    The overall cost of utilities in public housing (including water 
and sewer charges) in 2006 totaled $1.85 billion, including an 
estimated $421 million that was spent through utility allowances on 
tenant-paid utilities. Utility costs have also been steadily increasing 
in assisted housing. Between 2000 and 2005, average owner-paid utility 
costs increased by 28 percent. In addition, HUD spent an estimated $3.2 
billion on project- and tenant-based utility allowances in 2007. \2\ 
Between 1998 and 2007, the average tenant-based Section 8 utility 
allowance per resident has increased by 67 percent. \3\
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     \2\ U.S. Department of Housing and Urban Development, Energy 
Progress Report to Congress, November 2008.
     \3\ Utility allowances increased from an average of $996 per year 
in 1998 to $1,467 per year in 2007.
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    Second, energy efficiency and green building play a crucial role in 
housing affordability. Some are concerned that green building adds to 
the cost of housing. I do not subscribe to that view: I believe that we 
can't afford not to build green. Research increasingly shows that all 
types of affordable housing can be built or rehabilitated to rigorous 
green standards at minor additional cost, and often without the need 
for capital investment. Secretary Donovan and I are committed to making 
HUD a leader in green development precisely because of the benefits it 
will provide to people across the economic spectrum and lower-income 
families in particular. These kinds of investments are essential to 
creating the new generation of professionals--from mechanics and 
plumbers, to architects, energy auditors, and factory workers building 
solar panels and wind turbines--we need to design, install, and 
maintain the first wave of green technologies and unlock the clean 
energy economy.
    As we dispel the notion that green building will mean higher costs 
for low income families we must recognize, while everyone is hurt by 
high energy costs, no one is more vulnerable to rising energy prices 
than low- and moderate-income families. Higher energy costs often 
result in cutting back on other critical needs, such as medicine and 
food.
    Large scale green initiatives such as the Enterprise Green 
Communities program show that properties achieving 20 to 30 percent 
greater energy efficiency yield cost savings that accrue directly to 
low-income residents, or are reinvested back into the property in which 
they live.
    Third, sustainable, green building has a clear connection to better 
health as well. Right now we can predict morbidity rates and life 
expectancy by zip code. In King County, we did a study called 
HealthScape, which looked specifically at how the built environment and 
the transportation system impacts public health and climate change. \4\ 
What we found was that while people living in the most walkable areas 
of the county were less likely to be overweight and more likely to be 
physically active, in pockets of the county with lower-income and high 
concentrations of minority populations wide health disparities existed.
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     \4\ Whitney, Sheryl Verlaine, ``Seeking Sustainable and Inclusive 
Communities: A King County Case Study'', April 2010.
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    But as we saw in the High Point public housing development in 
Seattle, a commitment to building green can be a big part of overcoming 
these disparities. In addition to walkability, by adding green features 
specifically designed to reduce asthma triggers, the number of asthma-
free days increased, and mold--which is an important asthma trigger, 
especially in children--was effectively controlled.
    Finally, greening our buildings will have a positive impact on our 
environment. As the American people are well aware, transportation 
accounts for a third of all greenhouse gas emissions. But most people 
would be surprised to learn that buildings account for even more--
almost 40 percent--of our emissions. About half--20 percent of all 
carbon emissions--are from heating, lighting and cooling our homes. \5\ 
As many of the Nation's Mayors, some 1,042 at last count, have 
recognized through their commitments to the 2030 Building Challenge, 
significant improvements in the energy efficiency of our building stock 
will yield big gains on the carbon reduction front as well. We believe 
that the Federal Government should be--and can be--a leader, rather 
than a follower in reducing the impact of housing on global warming and 
climate change.
---------------------------------------------------------------------------
     \5\ Department of Energy, 2008 Building Energy Data Book.. 
Buildings account for 38 percent of carbon emissions, residential 
buildings account for 20 percent.
---------------------------------------------------------------------------
    Studies have already found a significant return on efficiency 
investments. A study of energy savings in single-family homes through 
the Department of Energy's Weatherization Assistance Program from 1993 
to 2005 found that the program achieved savings of 23 percent in gas-
heated single-family detached homes. \6\
---------------------------------------------------------------------------
     \6\ Schweitzer, Martin, ``Estimating the National Effects of U.S. 
DOE's Weatherization Assistance Program With State Level Data: A Meta 
Evaluation 1993-2005'', Oak Ridge National Laboratory, September 2005.
---------------------------------------------------------------------------
    This and other studies point to significant savings resulting from 
energy improvements. For example, through some 200 Energy Performance 
Contracts in public housing, HUD estimates a cost savings of 
approximately $100 million per year for an investment of $571 million, 
with an average investment of less than $4,000 per unit.
    So there should be no doubt that lower energy costs in federally 
subsidized housing are critical to the overall health of the portfolio, 
and to the welfare of the residents. It is clear that greening 
buildings will have dramatic benefits for low and moderate income 
households by reducing their energy costs, improving their health, and 
increasing economic opportunities. Green building is not only the key 
to making all our neighborhoods better--it is essential to building the 
kind of stronger communities America needs to meet the challenges of 
the 21st century.
    The Energy Efficiency in Housing Act will enable HUD to be a more 
effective partner in this effort. The bill is wide ranging and 
comprehensive, and in totality represents an important effort to 
address the high cost of heating, lighting, and cooling federally 
financed, assisted or insured housing. With suggested modifications 
that we will be happy to provide the Committee, we are generally in 
support of the key provisions of the bill as they impact HUD policies 
and programs.
    The bill includes a number of provisions for piloting or 
demonstrating energy efficiency in federally assisted or insured 
multifamily housing, a sector which, due to the .split incentive. 
between residents and owners faces particular challenges in 
incentivizing energy investment, along with limitations on accessing 
energy performance contracts that have so been used with some success 
in public housing. There are also sections related to energy efficiency 
in mortgage underwriting, incorporating green standards in the HOPE VI 
program and stronger energy efficiency requirements for rural housing.
    The bill also provides for a competitive grant program to fund 
local community organizations in low-income communities. The bill also 
requires HUD to play a financing role in residential renewable energy 
leasing. This would be an area outside of HUD's current expertise, and 
the prescriptive terms and potentially risky nature of such financing 
could ultimately lead to higher costs, or lower participation if high 
fees are required to offset costs. We look forward to working with you 
on technical amendments to the bill to clarify this issue. Two 
provisions in the bill involve public housing, the first applies the 
Green Communities standard to HOPE VI, the second requires an annual 
report to Congress. In addition, there are several provisions of the 
bill that fall outside HUD's jurisdiction.
    Our support is contingent on a number of amendments to the bill 
that we would like to share with the Committee in order to more closely 
align the bill with the House version of the bill, as well as with 
HUD's current practices and procedures. The bill also contains 
provisions that are inconsistent with the Federal Credit Reform Act, 
and Federal credit policies; such provisions would lead to less 
efficient or effective use of Federal credit assistance to achieve 
policy goals and could be costly. Let me touch on a few areas where we 
believe corrections or modifications will be needed.
    First, with regard to minimum standards, our understanding of the 
bill is that it gives the Secretary the discretion to apply minimum or 
enhanced energy and green standards as cited in Section 3 
(Definitions). The only programs for which these standards are required 
are for certain demonstration or pilot programs specified in the 
legislation. The Committee may want to consider providing the Secretary 
with the discretion to apply these standards to other programs. The 
primary challenge will be that recipients of HUD funds in those States 
who have not yet adopted the minimum standard (the 2009 International 
Energy Conservation Code) would need to familiarize themselves with the 
higher code requirements. In addition, even though the application of 
these standards is discretionary, the definition of HUD ``assisted 
programs'' that are covered by these standards should exclude loan 
insurance and loan guarantee programs, consistent with the definitions 
in the most recent House version of the bill. It would also be helpful 
if the bill simply cited the specific programs in the bill to which 
these definitions apply.
    Second, if there is a ``green premium'' associated with 
implementing these standards, HUD may need to raise Total Development 
Cost (TDC) limits accordingly; however it should be clear that any 
increases in front-end development costs would be offset by lower 
operating costs, and that energy efficient construction doesn't always 
require additional costs.
    Third, we recommend re-ordering and amending the provisions of the 
legislation related to energy efficient (and location efficient) 
mortgage underwriting. Section 11 creates a Commission to study and 
make recommendations for the creation of model energy efficiency 
mortgage products and underwriting standards, while Section 10 would 
have the FHA developing methods for considering the impact of utility 
cost savings in underwriting standards, separate from and prior to the 
Commission's proposals. HUD recommends reversing these two sections to 
allow the Commission to complete its work, submit its recommendations 
and FHA to consider those recommendations, instead of FHA creating new 
products without such guidance. We will be happy to provide the 
Committee with detailed technical suggestions to achieve this end.
    We also recommend several improvements to Section 5, which requires 
the Secretary to establish ``budget neutral incentives for encouraging 
lenders to make, and homebuyers and homeowners to participate in, 
energy efficient mortgages and location efficient mortgages.'' \7\ The 
key words here should be ``budget neutral.'' The bill should explicitly 
specify that budget neutrality applies to the FHA Mutual Mortgage 
Insurance (MMI) Fund and other FHA funds when considering these 
incentives. In addition, this section requires the Secretary to 
``consider the lower risk of default on energy efficient and location 
efficient mortgages'' compared to other mortgages; we recommend that 
this lower risk should be contingent on HUD's analysis and 
determination that these mortgages do lower the risk of delinquencies 
or default. This section also establishes a new definition of an energy 
efficient mortgage for FHA which may be problematic, in that projected 
or modeled energy savings are not always realized in practice--and may 
create confusion with current FHA energy efficient mortgages, which are 
defined differently. Finally, we suggest that this section of the bill 
also be implemented in conjunction with the Commission's work as 
described in Section 11 of the bill, rather than requiring the 
Secretary to act before the Commission has submitted its 
recommendations.
---------------------------------------------------------------------------
     \7\ Section 5, Incentives for Energy Efficient Mortgages and 
Location Efficient Mortgages. (Note that this provision is not included 
in the House version of the bill).
---------------------------------------------------------------------------
    In the multifamily arena, Section 6 requires HUD to develop 
incentives to increase the energy efficiency of FHA-insured multifamily 
housing--such as a discount on premiums, loan limit increases for 
energy efficiency improvements, or reductions in required owner 
contributions--but does not establish clear parameters for these 
incentives or require budget neutrality. This section would be improved 
by providing permissive authority for HUD to create incentives, rather 
than requiring them, and by including a more limited set of incentive 
authorities that do not provide blanket waivers of the core statutory 
loan limits and underwriting requirements that apply to all other 
multifamily loans.
    We look forward to working with the Committee staff to address 
these and other suggested modifications to the bill. These include, for 
example, technical amendments for consistency with the Federal Credit 
Reform Act, possible improvements to the design of multifamily housing 
pilot programs; more manageable timelines for issuing regulations; 
amendments to Sections 19 and 21 in order to ensure consistency with 
Federal credit program policy; and ensuring that HUD has the ability to 
do proper due diligence on the financial and operational feasibility of 
implementing new programs in new areas of activity, such as solar 
leasing (Section 21).
    I'd like now to take a few moments to highlight the progress we 
have made over the past 18 months in moving this agenda forward and to 
illustrate what HUD is already doing in these areas. The Department's 
successful Mark to Market (M2M) Green Initiative, initiated in 2007, 
continues to provide property owners who have entered the Mark to 
Market Program enhanced incentives and credits for .going green.. To 
date, the program has led to the green rehabilitation of some 27 
properties with approximately 2,700 units. HUD requires a green 
physical condition assessment, an energy audit and an integrated pest 
management inspection, in order to identify energy and water saving and 
other measures that improve indoor air quality and benefit the 
environment.
    The Green Initiative is voluntary; to incentivize owners, HUD 
offers to reduce the required contribution from the owner from 20 
percent to just 3 percent, and also increase the incentive performance 
fee, which is paid annually upon meeting required conditions. Owners 
agree to green the property for the life of the use agreement 
(generally 30 years) and to develop and maintain a green Operations and 
Maintenance Plan.
Recovery Act Investments
    Building on the success of this initiative, HUD has targeted funds 
appropriated by Congress through the American Recovery and 
Revitalization Act of 2009 to further its commitment to energy 
efficiency.
    Approximately $250 million has been made available for energy 
efficient and green retrofits in assisted multifamily housing. 210 
project applications have been accepted, with approximately 20,000 
units. The first award under the Green Retrofit Program went to a New 
York project, the West 135th St. Apartments in Harlem, New York, a 198-
unit, 10 building, Section 8 assisted property developed by Jonathan 
Rose Companies. Energy efficient improvements will include Energy Star 
refrigerators, replacement of 32 old boilers with 10 high-efficiency 
boilers, rooftop solar photovoltaic panels, formaldehyde-free kitchen 
cabinets, recycled-material kitchen counters, Energy Star ceiling fans, 
compact fluorescent lamp (CFL) fixtures and bulbs, double-pane argon-
filled low emissivity (low-e) windows, insulated exterior doors, low-
flow fixtures, shower heads and toilets, linoleum flooring to replace 
vinyl tile, wood floor installations using Forest Stewardship Council 
(FSC)-certified wood, and nontoxic paints, adhesives, and sealants 
throughout.
    Public housing has also received a significant boost in additional 
resources to green their housing stock. Housing authorities received an 
additional $4 billion over the past year through the Recovery Act in 
the Capital Fund for energy efficiency, green and other upgrades--$3 
billion in formula grants, and $1 billion in competitive funds. Of the 
total amount, $300 million has been made available through competition 
for high-performing green projects that meet Enterprise Green 
Communities standards; 36 awards were made to public housing 
authorities for 1,400 new green units. Eighteen of these projects will 
be utilizing photovoltaic panels, another 8 projects will install 
geothermal heating and cooling and one project will be utilizing either 
photovoltaic panels or wind turbines.
    Another $300 million has funded high performing energy retrofit 
projects that achieve 20-40 percent in energy savings. 134 housing 
authorities received awards for a total of 222 energy retrofit projects 
with 35,000 units. As part of these awards, 31 projects plan to 
retrofit units with photovoltaic panels and 13 projects with geothermal 
heating and cooling systems.
    Additional funds have been made available for green building 
through the competitive portion of the Native American Housing Block 
Grant program, as well as through the second round of the Neighborhood 
Stabilization Program, both of which have strong incentives for 
improving the energy efficiency of buildings.
Beyond the Recovery Act
    Beyond these Recovery Act investments, HUD is implementing a number 
of strategies for green affordable housing. In public housing, we 
continue to offer incentives to Public Housing Authorities to work with 
third party Energy Services Companies (ESCOs) to finance and implement 
energy upgrades in their buildings through Energy Performance 
Contracts, and are in the process of establishing the Office of Field 
Operations (OFO) Energy Center to assist housing authorities to manage 
and implement these contracts.
    HUD's Office of Community Planning and Development has implemented 
several initiatives to promote green and energy efficient practices 
through the HOME program. CPD awarded recaptured HOME funds to expand 
the supply of energy-efficient and environmentally friendly affordable 
low-income housing. Ten $250,000 awards have been made. Additionally, 
the HOME program developed a Model Guide and training curriculum for 
Participating Jurisdictions and Community Housing Development 
Organizations (CHDOs) on energy efficient and green building.
    HUD's Office of Healthy Homes and Lead Hazard Control is working 
with DOE and the Environmental Protection Agency (EPA) to develop a 
home assessment procedure that can be used to identify priority 
residential health hazards in conjunction with an energy audit. The 
Office is also funding healthy homes demonstration projects to pilot 
this integrated housing assessment and intervention approach, and 
supporting research to improve our understanding of the potential 
benefits of green rehabilitation on indoor environmental quality and 
resident health. In FY2009 the Office competitively awarded $2.4 
million to fund four cooperative agreements to study health aspects of 
low-income green housing in Arizona, Minnesota, New York, and Ohio, 
respectively. The Office continues to partner in the Centers for 
Disease Control and Prevention's National Center for Environmental 
Health to conduct additional research on the health benefits of green 
rehabilitation and maintenance practices in low-income housing.
Multifamily Weatherization
    HUD has also formed a partnership with the Department of Energy 
(DOE) to coordinate investment of Recovery Act funds. The partnership 
includes a commitment to develop a common set of guidelines and 
specifications for retrofitting public housing as well as privately 
owned, federally subsidized rental properties.
    A highlight of our partnership is a Memorandum of Understanding 
signed by the two agencies aimed at eliminating duplicative income 
verification requirements for DOE's weatherization program, which 
received $5 billion in ARRA funding. Using available information, HUD 
has provided DOE with lists of nearly 7,000 public housing properties 
(with 936,000 households) where all of the buildings meet income 
eligibility requirements for DOE's weatherization program. In addition, 
HUD has identified more than 10,000 other federally assisted properties 
(567,000 households) that meet in the income eligibility requirements. 
Together, these qualified properties account for 1.5 million assisted 
households that meet at least one of the eligibility criteria required 
under the DOE weatherization program. HUD has also begun establishing a 
process for collecting additional information that we believe will 
enable us to certify many more assisted buildings as meeting the income 
eligibility requirement.
    HUD has undertaken a series of training sessions with its regional 
and field office network to ready field management, multifamily and 
public housing program staff to help support the successful 
implementation of the weatherization program. To date over 300 HUD 
staff have been briefed on the weatherization program, including recent 
rule changes and HUD's published list of qualified properties.
    This partnership is yielding results on the ground. A number of 
States have begun to target weatherization assistance for multifamily 
rental housing. The Rhode Island Office of Energy Resources, has 
allocated $7 million (roughly one third of their ARRA funding) to 
buildings with multiple units. The State of Colorado allocated $11 
million for multifamily weatherization program. In Pennsylvania, the 
State added the Pennsylvania Housing Finance Agency (PHFA) as an 
additional sub grantee to serve multifamily units statewide. PHFA is 
partnering with the State weatherization agency to support existing 
preservation through its ``smart rehab program'' with $20 million in 
ARRA funding. Florida, Michigan, Texas, California are also initiating 
multifamily weatherization programs, in addition to States like New 
York that have historically committed weatherization funds to 
multifamily housing.
New Initiatives
    Looking beyond current programs and funding, we are in the process 
of implementing a new $50 million Energy Innovation Fund. This Fund, 
administered by FHA, will pilot or test various strategies for 
financing cost-saving (and energy-efficient) measures in both the 
single family and multifamily sectors. We expect to deploy these funds 
in innovative financing initiatives later this year and will keep the 
Committee closely informed.
    In addition, we are exploring options for utilizing HUD's existing 
regulatory authority to encourage owners of HUD-assisted properties to 
make green improvements as they rehabilitate and refinance their 
properties.
Sustainable Communities Initiative
    I'd like to take a moment to focus on an increasingly important 
element of green building, in addition to energy efficiency: the 
location efficiency of the property. Most green building programs 
provide additional points for housing that is located at or near 
transit, or provides access to close-in or walkable amenities and 
services. On average, Americans spend more than half of their incomes 
(52 percent) on housing and transportation.
    That is why HUD joined with the Department of Transportation and 
EPA to create an unprecedented Partnership for Sustainable Communities 
that, for the first time, brings our agencies together to speak with 
one voice on housing, transportation, and environmental policy. That's 
also why we think Senator Dodd's Livable Communities Act, is so 
important, and is complementary to S. 1379. Sustainable development 
must include both the energy efficiency of the building itself as well 
as the location of that building, and the extent to which there is good 
access to transportation, services and amenities. The Livable 
Communities Act would permanently authorize the Office of Sustainable 
Housing and Communities at HUD and solidify our partnership with DOT 
and EPA. We are strongly supportive of this legislation and intend to 
provide the Committee with technical comments in the near future.
    This month we published a key product of the Partnership's work--a 
Notice of Funds Availability (NOFA) for $140 million in Sustainable 
Communities Initiative funding to enable local communities and 
metropolitan areas to plan and implement comprehensive sustainable 
development.
    The Sustainable Communities Initiative includes $100 million for 
Regional Planning Grants that will encourage metropolitan regions to 
develop integrated housing, land use, and transportation plans. The 
goal of this initiative is not just to develop plans--it is to 
articulate a vision for growth tailored to specific metropolitan 
markets that Federal housing, transportation, and other Federal 
investments can support. Funding to these metropolitan regions will be 
used to support the development of integrated, state-of-the-art 
regional development plans that use the latest data and most 
sophisticated analytic, modeling, and mapping tools available.
    Earlier this year, we issued an Advanced Notice and Request for 
Comment for the program, inviting feedback through a new online 
``Wiki'' accessible via HUD's Web site and through an extensive 
listening tour around the country. We wanted communities to tell us 
what works for them, what isn't working, and how we can use this 
program to help them build sustainably. Just as importantly, we hoped 
to send a very important signal that we in the Obama administration are 
serious about being the kind of partner that listens and learns.
    And the response exceeded even our expectations. We received over 
900 written comments, met with over 1,000 stakeholders in seven 
listening sessions, and staged webcasts that touched thousands more. 
The feedback we received was overwhelmingly positive as well--from 
mayors and other officials of both small and large communities, to 
business leaders in growing regions, to governors of States that have 
been hit hard economically.
    If there was one common theme we heard it was that while community 
after community is ready to embrace new kinds of sustainable 
practices--and that the Federal role can't be about dictating what they 
can or can't do, but rather offering them the resources and tools to 
help them realize their own visions for achieving the outcomes we all 
want and more and more are insisting on.
    Complementing this regional planning investment will be our $40 
million Community Challenge Planning Grant program targeted to local 
communities. HUD has also issued a NOFA for this program--in 
conjunction with DOT's NOFA for its $35 million ``TIGER II'' planning 
grant program. Where DOT's program will fund planning activities that 
relate directly to a future transportation capital investment, HUD's 
program will fund land-use related planning activities that would be 
linked to a future transportation investment--modernizing the building 
codes, zoning laws and other barriers communities face to sustainable 
development.
Greening America's Homes Through the Transformation of Rental 
        Assistance
    I would also like to explain how HUD's Transformation of Rental 
Assistance initiative, including its green physical needs assessment, 
advances the Administration's sustainability agenda. TRA would to 
reform America's public housing system and transform the way the 
Federal Government provides rental assistance to more than 4.5 million 
of our most vulnerable families.
    But let me also explain to you how TRA would spur our Clean Energy 
Economy. As this Committee knows, every property has a lifecycle, and 
when a property has reached the end of its useful life, the owner has 
to figure out how to replace it or it will be lost. TRA will allow 
properties to establish .reserves for replacement,. which will help 
preserve millions of units as they reach the end of their normal life's 
course. This is important because it is more sustainable to preserve 
and rehabilitate existing housing than to build anew.
    The first condition for conversion to TRA is ``Promoting the 
rehabilitation, energy-efficiency, and long-term financial and physical 
sustainability of properties.'' In addition, TRA would require the 
property to undergo a ``green'' physical condition assessment--an 
analysis to show what exactly would need to be done to a property to 
green it.
    The main reason for PHA's to convert to TRA is to generate the 
capital needed to rehab a building. The capital comes in a form of a 
mortgage of sorts. When lenders underwrite these investments and look 
at planned future uses/income, TRA will require the cost of the 
property rehabilitation to include rebuilding green. Our estimate is 
that between $20.7 billion and $28.9 billion will be borrowed in these 
``mortgages'' and spent on retrofits that must be green. These 
investments will go a long way to improving buildings as well 
stimulating markets and products, such as green mortgage and 
underwriting standards and building materials.
    Finally, today, 1.2 million public housing units provide low-income 
families a permanently affordable place to live. The units are often 
built more densely than surrounding housing. Tomorrow, 1.2 million or 
more TRA units will be in the same locations, with the same target 
population. In other words, Mr. Chairman, we know exactly where to 
target infrastructure that promotes sustainability--transit, being the 
most obvious.
    Mr. Chair and Members of the Committee, I hope this overview of HUD 
programs and initiatives addresses the opportunities and challenges 
that we are facing as we address green building and energy efficiency 
in HUD-assisted properties. We are still in the process of reviewing 
the particulars of S. 1379 and will be happy to provide you with more 
detailed comments once that review is complete.
    Thank you again for the opportunity to appear before the Committee 
today.
                                 ______
                                 
               PREPARED STATEMENT OF DAVID CALDWELL, Jr.
        Vice President, On Behalf of Caldwell and Johnson, Inc.
                             June 30, 2010

    Good Morning Mr. Chairman and Members of the Committee, thank you 
for offering me the opportunity to speak on behalf of the merits of 
green housing, and, in particular, on the Energy Efficiency in Housing 
Act of 2009. My name is David Caldwell, Jr., a second generation home 
builder from a small family owned construction company in Rhode Island 
and a recent Marine Corps veteran of Operation Iraqi Freedom.
    Recently, our company completed the first Department of Energy 
Builder's Challenge House in Rhode Island, which was a complete gut 
remodel of a foreclosed and abandoned home originally built in 1952. 
(See picture.) For an additional $5,000 in construction costs, we were 
able to more than double the energy efficiency of the house. The house, 
built entirely on speculation, has 3 bedrooms, 2.5 baths, just under 
1300 square feet, and sold for $265,000 to a single mother who is a 
school teacher with two daughters. We had multiple offers over the 
asking price of $259,900 in a matter of 5 days, and had approximately 
200 people visit two open houses at the property. Suffice to say, the 
response to this house was somewhat overwhelming.
    The principle value proposition is that the additional $5,000 in 
construction costs spent to double the energy efficiency of the house, 
when amortized over 30 years at present rates, equals about $1 per day. 
The energy savings for the house, at 2010 rates, equals approximately 
$2 per day. Over time, assuming a fixed rate mortgage, if the price of 
energy increases, this gap will likely increase substantially. Once 
again, the homeowner will receive approximately double the value in 
energy savings that the green features of the home will cost over time. 
That's a return on investment that should appeal to everyone.
    Though in Rhode Island there appears to be significant demand for 
this type of home, neither the mortgage industry nor the appraisal 
community is at this time willing to assign any additional value to 
homes built to green or energy efficient standards, making appraisals 
and financing very difficult, particularly for those applying for FHA 
mortgages with low down payments.
    Not one person who has seen this house has disagreed with the value 
proposition for the homeowner created by its increased energy 
efficiency. However, the overwhelming focus of the financial community, 
the real estate community, and the appraisal community is the extra 
cost involved, not the operational savings and value to the homeowner 
that has been created. Presently, I have a customer who is designing an 
energy efficient custom green home. When he went to the bank seeking 
financing for a construction loan, he explained all the attributes of 
the green house, including a photovoltaic system to provide enough 
electricity for the entire house, but the bank literally said, ``we 
don't care about that energy efficiency stuff, it's just added expense. 
It does not matter for the mortgage and the appraisal.''
    I am frequently asked why more houses are not being built similar 
to the green home we constructed. I am fond of using this analogy: If a 
customer is purchasing a car, and sees two cars that look identical in 
all respects on the car lot, but knows nothing other than the fact that 
the first car costs 2 percent more than the second car, he or she will 
pick the less expensive model. If told that the first car gets over 
double the gas mileage of the second car, the customer will probably 
reason that the first car is definitely the better value, even though 
it costs 2 percent more money to purchase.
    Today, consumers are provided with considerably more information 
when they purchase a car, box of cereal or cell phone than they are 
when they purchase a home, which is usually by far the most expensive 
purchase that most people make.
    As such, I am very much in favor of the incentives for green 
housing, including the ones in the Energy Efficiency in Housing Act. I 
have met no one who does not believe that energy efficiency in housing 
is not a great idea. I have met no one who would not be willing to 
spend a dollar a day to save two dollars. It can be done, and should be 
done--I do not know why anyone would build a new house any other way, 
it does not make sense to me. The question, then, at this time, is why 
we are not collectively building in this fashion. I believe that the 
incentives and guidance of the Energy Efficiency in Housing Act will be 
a tremendous help to both homeowners and small businesses in 
facilitating the shift towards more sustainable and efficient housing 
stock. This is an outstanding example where Federal leadership can 
synthesize a true win-win situation for business and homeowners. Thank 
you again for the opportunity to testify and I am happy to answer any 
questions.















                  PREPARED STATEMENT OF TRISHA MILLER
Director, Green Communities, On Behalf of Enterprise Community Partners
                             June 30, 2010
Introduction
    Chairman Menendez, Ranking Member Vitter, and Members of the 
Subcommittee on Housing, Transportation, and Community Development, I 
thank you for this opportunity to testify on the Energy Efficiency in 
Housing Act. I am Trisha Miller, Director of Green Communities at 
Enterprise Community Partners (Enterprise).
    Enterprise is a national nonprofit organization whose mission is to 
see that all low-income people in the United States have the 
opportunity for fit and affordable housing and to move up and out of 
poverty into the mainstream of American life. Enterprise provides 
financing and expertise to community-based organizations for affordable 
housing development and other community revitalization activities 
throughout the United States. Since 1982, Enterprise has invested more 
than $10 billion to create more than 270,000 affordable homes and 
strengthen hundreds of communities across the country. Enterprise also 
works closely on a bipartisan basis with policymakers at all levels of 
government to develop solutions to low-income community needs.
    Mr. Chairman, now is the time for Federal leadership on green 
housing. The Federal Government has an important role to play in 
linking the benefits of the emerging green economy to low-income 
families and communities. Green development--energy efficient, healthy 
and environmentally responsible development--offers job opportunities 
and cost effective ways to address housing affordability challenges and 
rising energy, water and transportation costs, all of which 
disproportionately affect low-income people.
    Despite recent declines in home prices, the Nation faces a huge 
shortfall of decent, affordable housing. Currently, there is not a 
single county in the United States where an individual earning minimum 
wage can afford to rent a market-rate apartment, according to the 
National Low Income Housing Coalition. Nationwide, an estimated 55 
million Americans live in unaffordable, overcrowded, or substandard 
housing.
    Green development offers proven, cost effective ways to address 
current and longstanding housing, energy and transportation challenges. 
The practice of greening affordable housing gives us the ability to 
support and deliver healthy communities. Indeed, we can harness energy 
efficiency and renewable sources of energy that will lower our carbon 
dependency and build thriving communities.
    Enterprise's Green Communities initiative leverages financing and 
expertise to enable developers to build, rehabilitate, and maintain 
housing that is energy efficient and better for the environment--
without compromising affordability. Over the last 5 years, Enterprise 
has supported the development of over 17,000 homes built according to 
Enterprise's Green Communities Criteria, the first national framework 
for environmentally sustainable affordable homes. The Criteria were 
developed in collaboration with and endorsed by a number of leading 
environmental, energy, green building, affordable housing, and public 
health organizations.
    To date, Enterprise has invested more than $700 million to create 
green affordable homes in 32 States. We have trained over 5,000 housing 
professionals and helped more than 20 States and cities implement 
greener housing policies. All State housing finance agencies have 
adopted portions of the Enterprise Green Communities Criteria as part 
of their scoring systems for awarding allocations of low-income housing 
tax credits.
    Enterprise's vision is for all affordable housing both new and 
existing in the United States to be energy efficient and 
environmentally sustainable. Partnerships with housing providers and 
public agencies have led us toward innovations in green building and 
provided an incubator to test green methods, materials and their impact 
on communities and energy performance. Federal leadership can take this 
progress to scale. The Energy Efficiency in Housing Act represents a 
major step towards that goal. We commend Senator Whitehouse for his 
commitment and leadership in introducing the bill, which Enterprise 
enthusiastically supports. Both this legislation and the GREEN Act in 
the House represent a national commitment that would have substantial 
positive impacts in the housing market, especially the affordable 
housing sector.
The Case for Green Affordable Housing
    Mr. Chairman, housing and transportation costs make up the largest 
share of our household budgets and quickly force low-incomes families 
into an untenable choice between life's most basic necessities. Indeed, 
too many families must make the difficult choice between paying the 
rent and putting food on the table. According to a Low Income Housing 
Energy Assistance Program study, a low-income household pays 4 times as 
much of their monthly household income on utility payments as an 
average U.S. household. There are roughly 25 million very low-income 
households with annual incomes of $25,000 or less in the country. 
Roughly two-thirds of these households are renters and one-third are 
homeowners. For these families and individuals, the daily realities of 
rising energy, housing and transportation costs are intertwined.
    Home energy costs have increased much faster than incomes for very 
low-income households in recent years, rising 33 percent since 1998. 
Not surprisingly, high utility bills force many very-low income 
households to make desperate tradeoffs. A survey of households that 
received Federal home energy assistance during a 5-year period found 
that 47 percent went without medical care, 25 percent failed to fully 
pay their rent or mortgage and 20 percent went without food for at 
least one day as a result of home energy costs.
    In addition, low-income and minority communities are more likely to 
live in worse environmental conditions and experience greater rates of 
disease, limited access to health care, and other health disparities. 
Studies have shown that negative aspects of the built environment tend 
to magnify these disparities. Housing conditions in particular are 
important factors influencing health. Specific housing hazards include 
exposure to allergens that may cause or worsen asthma, lead-based paint 
hazards, mold, and excess moisture and indoor air quality.
    A study by the Center for Housing Policy (CHP; the research 
affiliate of the National Housing Conference) found that transportation 
costs are also rising, especially for very low-income families. CHP 
also found that families earning $20,000 to $50,000 spend nearly half 
their incomes on housing and transportation costs combined because they 
must drive away from job centers to where they qualify for housing that 
they can afford. Again, low-income families are stretched too thin.
    In summary, housing, environmental, health and transportation 
challenges are inextricably linked for millions of very low-income 
households. We can make progress on all these issues simultaneously and 
lock in long-term benefits by making a renewed commitment to greening 
housing that is affordable to people with low-incomes. We can build 
smarter, with less of an environmental impact and with development 
patterns that inspire people and create choices in terms of access to 
jobs, schools, open space, and healthy living environments. And, most 
importantly, we can help all Americans find homes they can afford and 
feel proud to live in.
Consumer and Environmental Benefits of Green Housing
    The Energy Efficiency in Housing Act signals a comprehensive 
approach to green housing that would bolster community and 
environmental benefits without imposing significant costs. Green 
housing can generate pocketbook savings for low-income families and 
create healthier living environments. When we launched Enterprise Green 
Communities in 2004, we set out to prove that for less than a 5 percent 
premium on total development costs, green buildings would return 
significant benefits to low-income residents through increased energy 
savings, water conservation, and a healthier living environment.
    We engaged in an extensive and rigorous data collection effort to 
analyze the costs of meeting Green Communities Criteria and assess the 
associated financial benefits resulting from reduced energy and water 
utility costs over the life of the home. From a strictly financial 
standpoint, the projected ``lifetime'' utility cost savings, averaging 
$4,851 per dwelling unit (discounted to today's dollars) are sufficient 
to repay the average $4,524 per-unit cost of complying with the 
Criteria. The average cost per dwelling unit to incorporate the energy 
and water criteria was $1,917, returning $4,851 in predicted lifetime 
utility cost savings. In other words, the energy and water conservation 
measures not only paid for themselves but also produced another $2,900 
in projected lifetime savings per unit.
    Enterprise's experience through the Green Communities initiative 
indicates that new and existing properties that achieve 20-30 percent 
greater energy efficiency generate substantial cost savings from lower 
energy and water usage--hundreds of dollars per unit on an annual 
basis. This is consistent with other research on improving energy 
efficiency. For example, the Department of Energy reports that Energy 
Star-qualified single-family homes delivered $200-$400 in annual 
savings compared to conventional homes, with potentially substantial 
additional savings on maintenance. \1\
---------------------------------------------------------------------------
     \1\ See, www.energystar.gov/index.cfm?c=new_homes.nh_benefits.
---------------------------------------------------------------------------
    In addition, studies of home weatherization and retrofit programs 
captured consumer benefits beyond lower energy and water costs, 
including greater comfort, convenience, health, safety and noise 
reduction. These ``nonenergy benefits'' have been broadly estimated by 
the American Council for an Energy-Efficient Economy to be worth 50 
percent-300 percent of annual household energy bill savings. \2\
---------------------------------------------------------------------------
     \2\ Jennifer Thorne Amman, ``Valuation of Non-Energy Benefits to 
Determine Cost-Effectiveness of Whole House Retrofits Programs: A 
Literature Review'', American Council for an Energy-Efficient Economy 
(May 2006).
---------------------------------------------------------------------------
    There is also mounting evidence that green homes are healthier. A 
targeted scientific study recently assessed the health impact on 
asthmatic children who moved into healthy green public housing at 
Seattle Housing Authority's High Point community. Asthma is the sixth-
ranking chronic condition in Washington State and one of the leading 
chronic illnesses of children across the country. The homes in this 
study all met healthy housing criteria. After just 1 year, the results 
were staggering. The outcome for the asthmatic children living in these 
homes showed a 60 percent increase in symptom-free days and a 67 
percent reduction in the use of urgent clinical care. That finding is 
particularly significant when you consider that the children in low-
income communities are twice as likely to suffer from asthma and one in 
four emergency room visits nationwide is asthma related.
    It comes down to a basic principle: green investments in housing 
have the potential to improve resident health and reduce the cost of 
health care. A great example of measurable health outcomes associated 
with green housing can be seen in the Southwest MN Housing 
Partnership's redevelopment of Viking Terrace in Worthington, 
Minnesota. The green rehabilitation of 60 apartments for people with 
low incomes addressed core contributors to an unhealthy living 
environment by meeting Enterprise's Green Communities Criteria. The 
National Center for Healthy Housing conducted a health assessment of 
the development and found improvements in health and safety across the 
board. One resident, Abang Ojullu, spoke of the lasting impact these 
health measures had on her and her children. For 2 years, Abang made 
the hour-long drive to Sioux Falls once a month so her daughter, 
Ananaya, could see a specialist for her severe asthma. But, 6 months 
after moving into the renovated Viking Terrace Apartments, Ananaya did 
not get sick once, nor did any of her five other children, though in 
the past each had bouts of asthma. As Rebecca Morley, executive 
director of the National Center for Healthy Housing, noted, ``instead 
of paying for medical care that could have been avoided, occupants in 
Green Communities will be able to keep more of their income and avoid 
the suffering and loss associated with poor health.''
    Currently, the Mount Sinai Department of Preventive Medicine is 
conducting a study investigating the effects of green housing on 
respiratory health of families in Melrose Commons V, a 63-unit housing 
property in the South Bronx. This work will focus on documenting 
respiratory benefits of residents after moving into an environment with 
improved ventilation and built with green building materials.
    The Energy Efficiency in Housing Act can help improve health 
outcomes, while protecting our natural resources and fighting climate 
change. Residential units consume 22 percent of the Nation's energy and 
cause 20 percent of our greenhouse gas emissions. \3\ The 25 million 
units that are home to our lowest income citizens are almost one-
quarter of all residential units in the country. Most of these units 
were built before 1980 and many were poorly constructed. Just imagine 
if we could rehab and retrofit all of those units. That would translate 
into annual carbon emissions reductions utilizing EPA's equivalency 
calculator of either: 60 million tons carbon dioxide (CO2), 10 million 
cars off the road, or nearly 400,000 acres of forests preserved.
---------------------------------------------------------------------------
     \3\ ``Income, Energy Efficiency and Emissions: The Critical 
Relationship'', Energy Programs Consortium (February 26, 2008).
---------------------------------------------------------------------------
    Increasing energy efficiency in housing would address one of the 
most significant contributors of greenhouse gas emissions--the built 
environment. One recent analysis suggest that the 34 million households 
eligible for Federal home energy assistance generated 276 million tons 
of carbon dioxide emissions, 27.5 percent of total emissions from 
residential units overall. \4\ Another study found that weatherizing 
12,000 homes in Ohio avoided more than 100,000 pounds of sulfur dioxide 
and 24,000 tons of carbon dioxide, while cutting average utility costs 
for low-income homeowners by an average of several hundred dollars per 
year. \5\
---------------------------------------------------------------------------
     \4\ Ibid.
     \5\ ``Testimony of Dan W. Reicher, Director, Climate Change and 
Energy Initiatives, Before the Senate Committee on Finance'', 
Google.org (February 27, 2007).
---------------------------------------------------------------------------
    The Minnesota Green Communities program has concluded that once 
green affordable housing projects receiving State funding through 2008 
are built, the reduction in emissions will be almost five million fewer 
pounds of CO2 released each year--the equivalent of the CO2 footprint 
of 90 to 100 average households. The Energy Efficiency in Housing Act 
will amplify these outcomes, and improve health and housing conditions 
for vulnerable communities.
Costs and Benefits of Increasing Our National Stock of Green Housing
    In creating Green Communities, Enterprise sought to show that all 
affordable housing--new construction and rehabilitations, home 
ownership as well as rental, large urban developments, and small rural 
projects--could be green within the budgets and capacity of the typical 
affordable housing developer. Enterprise has demonstrated that green 
affordable developments can be created for little if any higher 
development costs than conventional projects that do not offer the same 
benefits. And Enterprise has demonstrated the many additional benefits 
of green affordable development.
    Enterprise's Green Communities portfolio represents virtually every 
form of housing in every type of climate in every kind of community in 
the country:

    New rental construction for seniors in Ewing, New Jersey;

    Single family homeownership in Blacksburg, Virginia;

    Urban infill redevelopment in New Orleans;

    Rental preservation in New York City;

    Farmworker housing in Independence, Oregon;

    Family housing in Billings, Montana;

    Public housing revitalization in Cleveland;

    Single family rehabilitation in Columbus;

    Green design with Native American communities in Wisconsin;

    Transit oriented development in Austin, Texas.

    Enterprise's extensive evaluation efforts have generated data that 
show we can create highly sustainable homes for low-income families 
such as these for only marginally higher development first costs--2 
percent over total development costs--and those first costs can come 
down with experience. Critically, our evaluation suggests that most of 
the marginally higher costs are attributable to measures that generate 
financial savings, such as energy and water efficiency features, or 
enable developments integrate systems and thinking during the early 
design phase which has been shown to lower life cycle costs and enhance 
environmental performance in buildings.
    Of course, there are examples of green developments that cost more 
than conventional developments, just as there are many nongreen 
developments that go over budget. The point is that we can no longer 
allow the lowest common denominator to constrain Federal leadership in 
the face of the overwhelming body of experience and proven benefits of 
green housing.
Role of Legislation
    The Energy Efficiency in Housing Act authorizes HUD to apply 
minimum standards and bonus incentives for meeting energy efficiency 
and green development requirements. The minimum energy efficiency 
standards establish clear thresholds based on the International Energy 
Conservation Code (IECC) and the American Society of Heating, 
Refrigerating and Air-Conditioning Engineers (ASHRAE). It would also 
raise the bar on building and environmental performance by encouraging 
new and rehabilitated development to meet more comprehensive criteria 
that include improved indoor air quality, reduced water use, lower 
environmental impact on the surrounding site, and greater access to 
transit. The bill addresses this issue by providing ``additional 
credit'' for developments that incorporated comprehensive green 
building standards, including Enterprise's Green Communities Criteria 
and the USGBC's LEED rating systems.
    One of the hallmarks of Sen. Whitehouse's bill is that it would 
provide new Federal resources for green housing through incentives to 
publicly financed and assisted housing developments on an unprecedented 
national scale. These funds generally would support the incremental 
costs of energy efficiency improvements. The bill also would provide 
critical resources to build capacity and provide technical assistance 
to enable developments to achieve green goals cost effectively. One 
especially important provision would provide funds to strengthen the 
capacity of community-based organizations in green development (Section 
20). Finally, the bill would also spur green public housing by 
requiring all new HOPE VI construction to comply with the mandatory 
aspects of the Green Communities criteria (Section 15).
    In addition to Federal leadership and public investment to 
transform green affordable housing, capital and innovation must come 
from mainstream financial institutions to make major progress, and 
targeted Federal incentives have an important role to play. The bill 
facilitates private-sector participation by offering mortgage 
incentives to reward energy and location efficient mortgages (Sections 
5, 6, and 10). It would also stimulate innovation in multifamily green 
affordable housing by creating a competitive Energy Efficiency and 
Conservation Demonstration Program to green affordable homes for low-
income people (Section 7).
    Finally, the bill recognizes the critical importance of consumer 
awareness. Through a Federal public education and outreach campaign on 
the availability and advantages of energy-efficient mortgages (Section 
11), and Green Banking Centers that provide information on energy 
saving improvements and related funding sources and financial products 
(Section 22), consumers will make informed choices and increase demand 
for green affordable housing.
Conclusion
    Enterprise commends the Subcommittee for convening this hearing at 
a time when we must take bold action to support communities around the 
country struggling to keep pace with housing and energy demands. We 
must green affordable housing, because the benefits for the most 
vulnerable among us are too important and the environmental risks too 
great. The Energy Efficiency in Housing Act presents an opportunity to 
meet this challenge by connecting critical Federal housing programs 
with innovative financing strategies that will stimulate renewable and 
energy efficient technologies and create healthier communities. 
Together, we can build green housing and create a sustainable future. 
This bill would be a groundbreaking step in the right direction. We 
look forward to working with you to pass this bill this year.
    Thank you again for the opportunity to appear before you, and I am 
happy to answer any questions.
                                 ______
                                 
                   PREPARED STATEMENT OF KENNETH GEAR
            Executive Director, Leading Builders of America
                             June 30, 2010

    Thank you for the opportunity to express the views of Leading 
Builders of America (LBA) regarding ``Green Housing for the 21st 
Century: Retrofitting the Past and Building An Energy-Efficient 
Future.''
    LBA commends Chairman Menendez and Ranking Member Vitter for 
focusing on this critical issue.
    Leading Builders of America is a newly formed trade group 
representing 16 of the Nation's largest homebuilding companies. In 
2009, our members sold more than 99,000 homes in 34 States accounting 
for 27 percent of the new homes sold in the U.S.
    LBA member companies are building green houses every day throughout 
the country and are active participants in voluntary energy efficiency 
programs like Energy Star, The Builders Challenge, and Environments for 
Living.
    LBA member companies are committed to building an energy-efficient 
future. They are on the front lines of this effort and recognize the 
important role that housing can play in reducing energy consumption in 
the United States.
    A prospective homebuyer looking at an energy efficient home should 
be facing a win-win situation. An energy efficient home is good for the 
environment and the homebuyer will enjoy reduced energy costs. However, 
while the homebuyer may value the energy efficient features of the new 
home, the current mortgage underwriting and appraisal process does not, 
and this serves as a disincentive. LBA believes that providing tools to 
help homebuyers pay for energy efficiency features and ensuring that 
those features are properly valued in appraisals must be at the heart 
of any legislation aimed at reducing energy consumption in homes.
    LBA commends Senators Whitehouse, Bennet, Bingaman, Menendez, 
Merkley, Schumer, and Udall, sponsors of S. 1379, the Energy Efficiency 
in Housing Act of 2009, for recognizing the need to help homebuyers pay 
the incremental costs associated with purchasing energy efficient new 
homes.
    S. 1379 calls for the refinement and expansion of Energy Efficient 
Mortgages, or ``EEM's.'' We fully support this effort and look forward 
to working with the bill sponsors and members of this Committee to 
strengthen the concept so that it can be implemented on a timeline that 
is in sync with the anticipated imposition of new energy efficient 
mandates for new homes. Along with the Alliance to Save Energy (ASE) 
and the Institute for Market Transformation (IMT), we are concerned 
that a delay in implementing a robust energy efficient mortgage 
proposal would be counterproductive and would have the perverse effect 
of actually creating a disincentive for homebuyers to buy energy 
efficient homes.
    LBA's analysis shows that a 30 percent mandated increase in 
efficiency would increase the cost of the typical new home by more 
$5,000; and at a 50 percent level cost would increase by an average of 
$15,000. These costs vary significantly depending on climate zone. 
Unless a strong energy efficient mortgage program is in place and 
universally available, homebuyers will be unable to obtain financing to 
cover the increased up front costs, making them more likely to purchase 
a less efficient home that does not have those incremental costs.
    LBA believes that the effectiveness of any energy efficient 
mortgage program is closely linked to reforms in the appraisal process 
to ensure that the value of energy saving features are consistently and 
accurately reflected in the value of a home, and we have a proposal, 
based on the well-established Home Energy Rating System (HERS), that 
would do just that.
    As Congress looks at mandates to increase energy efficiency 
standards for new homes, there is an opportunity to make modest changes 
to the mortgage underwriting and appraisal process that will give 
homebuyers meaningful tools needed to help pay for energy efficiency 
features and make the increased energy efficiency standards a success. 
LBA looks forward to working with the Committee and the bill sponsors 
to accomplish the goal of building an energy-efficient future.
Outdated Underwriting and Appraisal Standards Discourage Energy 
        Efficiency
    One of the first steps in the mortgage underwriting process is 
calculating the cost of homeownership. This analysis typically involves 
summing the total annual expenses for principal and interest and 
property tax and insurance premiums. This calculation is commonly 
called PITI and has been used by the mortgage industry for over 60 
years. Conspicuously absent from this calculation is the anticipated 
annual energy cost for operating the home.
    In our view, the current cost of homeownership test creates an 
incomplete picture of the actual costs associated with owning and 
operating a home. To illustrate this point, a recent analysis conducted 
by the Institute for Market Transformation (IMT) found that average 
energy costs exceed both insurance and property taxes. The failure to 
account for energy costs in mortgage underwriting is a significant 
deficiency that must be addressed to improve the quality of 
underwriting and provide an accurate picture of repayment risk.
    Failing to account for energy costs in the underwriting process 
also has the unintended effect of discouraging consumers from 
purchasing energy efficient homes. Since energy costs are not factored 
into mortgage underwriting it stands to reason that energy savings 
cannot be factored in either. The result is that today's homebuyer 
cannot use energy savings to help offset the incremental cost 
associated with purchasing a home.
    Of equal concern are current residential appraisal standards which 
do not provide for a consistent and accurate way to value energy saving 
features in a home. The result is that homeowners and homebuilders are 
discouraged from installing energy saving features since they will not 
be considered in the appraisal. Similarly, homebuyers are discouraged 
from buying homes that have energy saving features since those features 
are not considered in an appraisal and as a result cannot be financed 
in a mortgage.
    Our conclusions are that any effort to increase energy efficiency 
in homes will not succeed unless the problems described above are 
addressed at a systemic level.
The Power of E
    Since January, LBA has been working to develop a more robust and 
universally available approach for making energy efficiency affordable 
to consumers and ensuring that energy saving features are accurately 
and consistently valued in appraisals. We have partnered with The 
Alliance to Save Energy (ASE) and the Institute for Market 
Transformation (IMT) to develop specific proposal to accomplish these 
goals. Our plan has two components:
    Update and Improve the Accuracy of Mortgage Underwriting. Mortgage 
underwriting criteria must be updated to include energy in the cost of 
ownership test. A PITI+E test would have two immediate and dramatic 
impacts in the marketplace. First, the quality of mortgage underwriting 
would improve with the addition of energy in factoring the cost of 
homeownership. Second, this change would encourage consumers to buy 
energy efficient homes by allowing energy savings to be used to offset 
the increased up-front cost of an energy efficient home.
    This goal could be accomplished simply by using the HERS Index, a 
well-established and universally accepted energy efficiency standard. 
Using it will enable us to reach our goals of building an energy 
efficient future faster than waiting for another system to be 
developed. An equivalent rating system is also an option; however, 
developing an entirely new system could take considerable time and even 
more time to be understood and rolled out in the marketplace. This 
would delay efforts to encourage consumers to buy energy efficient 
homes.
    Unlike proposals to measure other operating costs, a HERS energy 
assessment provides quantifiable data and is well-established and 
understood. HERS raters would provide their data (a ``score'' of 1-100) 
which could be used by appraisers.
    Create a Uniform System for Valuing Energy Saving Features. 
Homebuyers, builders, appraisers and mortgage underwriters need a 
uniform methodology for accurately and consistently calculating the 
value of energy saving features in a home. This can be accomplished 
relatively simply by basing value on the amount of money the homeowner 
can expect to save through reduced energy costs over the life of the 
mortgage discounted to the current net present value. This methodology 
was devised a number of years ago by Fannie Mae as a cornerstone of 
their original Energy Efficient Mortgage Pilot Program.
    The Fannie Mae pilot program never really took off, in part because 
at the time, credit was relatively easy to obtain, and as a result, 
there was not a real demand for the program. Tightening credit markets 
combined with growing foreclosures and a growing need to reduce energy 
consumption have changed marketplace dynamics.
    Implement a Comprehensive Solution Now. Congress is considering 
sweeping energy legislation that could include efficiency mandates for 
new homes. These changes will increase the cost of new homes and in 
turn make them less attractive to homebuyers. However, if the mortgage 
and appraisal reforms described above are included in the same 
legislation, the added cost of energy saving features would be fully 
offset and appropriately valued in appraisals. In our view mortgage and 
appraisal reforms must be part of any legislation that mandates 
increased energy efficiency in new homes.
    The Federal Government is currently in a unique position to drive 
these much needed changes through the highly fractured home building, 
mortgage and appraisal industries. The vast majority of new mortgages 
today are either insured or owned by the Federal Government. Requiring 
that these loans consider energy costs in the underwriting process and 
accurately value energy saving features would dramatically accelerate 
the supply of and demand for energy efficient new homes.
    Thank you for taking our thoughts into consideration.
Attachment
           APPENDIX: SUMMARY OF REQUIRED LEGISLATIVE CHANGES
   Updating Federal Mortgage Programs To Encourage Energy Efficiency
Public Policy Goals
    Reduce the amount of energy that is consumed by homes. Encourage 
the development of energy efficient building technologies, materials 
and components. Facilitate the growth of ``green jobs'' in the 
residential construction and remodeling sector.
Summary of Legislative Objectives
  1.  Update underwriting standards for federally insured mortgages to 
        accurately reflect energy costs. Ensure that demonstrable 
        operating savings are factored into underwriting to offset the 
        incremental expense of making homes more energy efficient.

  2.  Adjust appraisal standards for federally insured mortgages to 
        accurately reflect the added incremental value of energy 
        efficiency.
Detailed Discussion--Mortgage Underwriting Standards
    ``Covered Agencies'' are defined as Federal agencies and federally 
chartered entities.
    ``Federal Insurance'' is defined as insurance provided by Federal 
agencies and federally chartered entities.
    Direct the Administration to develop enhanced energy efficiency 
underwriting criteria for all federally insured mortgages as follows:

    Any mortgage underwriting system that is used to originate 
        a federally insured mortgage must take into consideration 
        energy costs in determining the portion of gross income that 
        can be used to service mortgage debt.

    To facilitate this consideration, mortgage underwriting 
        platforms must include a line item for ``estimated annual 
        energy costs.''

    Annual energy operating costs shall be determined using one 
        of two methods. A default annual estimated energy cost shall be 
        calculated for each home and shall be based on the size of the 
        home and on the most current version of the Energy Information 
        Administration's Residential Energy Consumption Survey. The 
        default annual estimated energy cost shall be used when an 
        energy efficiency report is not provided.

    An energy efficiency report may be supplied by the buyer or 
        seller. Such a report shall be prepared by a qualified third-
        party and include an estimate of annual energy costs specific 
        to the home being purchased. If an energy efficiency report is 
        provided, it shall be used as the basis for estimating annual 
        energy costs.

    The criteria for calculating the cost of homeownership, 
        (principal, interest, taxes, and insurance) shall be expanded 
        to include energy costs. Qualifying income ratios shall be 
        adjusted accordingly. If an energy efficiency report is 
        provided, it shall be used as the basis for estimating annual 
        energy costs. In consultation with DOE, EPA, and Covered 
        Agencies, the Department of Housing and Urban Development (HUD) 
        shall study the feasibility of adding water costs and location-
        based transportation costs to mortgage underwriting 
        calculations. HUD shall report back to Congress within 18 
        months of enactment. Covered agencies shall fully cooperate in 
        this analysis.
Safeguards and Limitations
    Any Federal mortgage insurance program subject to this act 
        shall be prohibited from modifying other underwriting criteria 
        so as to negate any benefit that results from the use of 
        enhanced energy efficiency underwriting criteria.

    Covered Agencies are prohibited from imposing greater buy 
        back requirements or credit overlays on loans that utilize 
        enhanced energy efficiency underwriting criteria.

    Covered Agencies are prohibited from adding additional 
        private mortgage insurance premiums for loans that utilize 
        enhanced energy efficiency underwriting criteria.

    Enhanced energy efficiency underwriting criteria may be 
        used for both new and resale homes and shall be available for 
        all housing types that would normally qualify for Federal 
        insurance.
Detailed Discussion--Appraisal Standards
    Direct the Administration to develop enhanced energy efficiency 
appraisal guidelines for all federally insured mortgages as follows:

    Appraisals used to underwrite federally insured mortgages 
        must include a line item that quantifies annual energy costs.

    An energy efficiency report prepared by a qualified third-
        party may be supplied by the buyer or seller. Such a report 
        shall include an estimate of annual energy costs specific to 
        the home being purchased. If an energy efficiency report is 
        provided, it shall be used as the basis for estimating annual 
        energy costs.
        RESPONSES TO WRITTEN QUESTIONS OF SENATOR VITTER
                         FROM RON SIMS

Q.1. It was stated that utility costs within HUD's budget were 
an area where ``significant cost savings are possible.'' While 
you gave very specific information regarding the increasing 
costs of utilities, the methods for achieving these savings 
were vague at best. What ``greening'' methods will be employed 
to achieve these savings?

A.1. Answer not received by time of publication.

Q.2. The Energy Efficiency in Housing Act of 2009 would require 
the Department of Housing and Urban Development to develop 
mortgage incentives for homebuyers--such as waived fees and 
lower interest rates--to finance purchases of energy efficient 
homes and home improvements. Many people believe affordable 
housing goals and government mandated subprime lending played a 
major role in the financial crisis. Would it be considered 
unwise to increase such loose lending practices at a time when 
we are still uncertain of their effects?

A.2. Answer not received by time of publication.

Q.3. This legislation we are discussing today amends the United 
States Housing Act of 1937 to prohibit the Secretary from 
making a site revitalization grant unless the applicant's 
proposed revitalization plan meets specified Green Developments 
requirements. Yet these standards can be a broad as ``criteria 
as the Secretary determines to be appropriate,'' going as far 
as requiring ``improved indoor and outdoor environmental 
quality through . . . acoustics.'' Should it be the 
Government's responsibility to ensure that new housing projects 
sound pleasant to its residents? And how do the acoustics of a 
home impact its sustainability or green qualities?

A.3. Answer not received by time of publication.

Q.4. A major focus of your testimony was that green housing 
would provide health benefits. However, the only example you 
cited was that buildings with less mold that may help decrease 
asthma symptoms. What are the tangible plans for improving 
health of citizens through green building projects?

A.4. Answer not received by time of publication.

              Additional Material Supplied for the Record

 LETTER AND COMMENTS FROM STEWARDS OF AFFORDABLE HOUSING FOR THE FUTURE



    Stewards of Affordable Housing for the Future (SAHF) is a nonprofit 
organization consisting of nine social enterprise nonprofit Members 
which own and operate over 85,000 affordable rental homes in 50 States, 
the District of Columbia, Puerto Rico and the Virgin Islands. SAHF 
Members utilize annual operating budgets over $400 million. As 
nationally focused nonprofits, SAHF Members possess expertise in 
developing, financing, and operating affordable housing across the 
country. Energy efficiency in multifamily rental buildings is a 
critical issue to both HUD and our members. By SAHF's calculations, 
hundreds of millions of dollars are spent unnecessarily each year on 
energy which could be conserved with cost-effective energy efficiency 
renovations. Unfortunately, market, regulatory, and subsidy constraints 
have deterred the necessary investment, and only modest sums from the 
American Recovery and Reinvestment Act (ARRA) have been invested in 
retrofitting affordable rental housing.
    We thank you for the opportunity to comment on the Energy 
Efficiency in Housing Act of 2009. This Act represents an important set 
of steps toward a solution to this national problem, and SAHF is proud 
to support it. We are particularly pleased by the inclusion of Section 
7 in the Act, the ``energy efficiency and conservation demonstration 
program,'' which would enhance the energy efficiency of 50,000 
federally assisted units through a targeted, leveraged subsidy. This 
program would help alleviate barriers that currently make energy 
efficiency renovation unnecessarily difficult in multifamily buildings.
The Pressing Need for Action
    Tens of billions of dollars are spent each year paying utility 
bills in multifamily residential buildings. Significant economic 
savings--easily hundreds of millions of dollars each year--could be 
realized by making simple, cost-effective renovations to increase the 
efficiency of energy use in these buildings. These renovations, coupled 
with green building practices that call new construction up to the 
highest standards of modern design and technology, would save money, 
have important health and environmental benefits, and contribute to the 
long-term effort to combat global climate change. SAHF supports the 
mission of greening new construction. Targeting existing buildings is 
also critical because a substantial portion of the buildings of the 
future have already been built: over 50 percent of the residential 
structures that will be in use in the year 2030 are standing today. 
Assisting existing rental buildings is critical because nearly two-
thirds of very-low income households--those who need relief from rising 
utility prices the most--live in rental units. This problem is not just 
economic, but environmental: energy use in buildings accounts for 
approximately one-third of energy-related global greenhouse gas 
emissions, and 20.5 percent of carbon emissions in the United States 
are due to current residential energy use.
    HUD alone spends more than $5 billion a year on direct and indirect 
subsidy of utility bills for multifamily housing. In addition, tenant 
utility payments and the utility bills of properties assisted under the 
Low Income Housing Tax Credit program (not paid by HUD) add billions of 
dollars to the utility bill for federally assisted housing. HUD's 
Energy Action Plan estimated that reducing energy bills by just 5 
percent would save the department $200 million annually, and analysts 
believe savings of 25 percent or more may be possible.
    Addressing these costs and inefficiencies requires investment, and 
fortunately most major energy efficiency renovations are projected to 
pay for themselves in 3 to 10 years by saving an amount in energy costs 
equal to or greater than their price. However, because nearly all 
multifamily projects have existing loans, taking out new loans to pay 
for energy efficiency improvements generally requires agreements 
between the new lender and the existing lender to ensure all parties 
are protected in the case of default or foreclosure. For loans of a few 
hundred thousand dollars, legal fees related to negotiations between 
creditors, or simply the cost of drafting complex legal documents, 
would quickly consume an unacceptable share of the savings energy 
efficiency improvements could produce. Adding the delay and 
restrictions inherent in a closely regulated context puts these loans 
even further beyond the reach of federally assisted buildings.
    Private capital also has other reasons to be hesitant. First, many 
multifamily buildings that could realize substantial energy efficiency 
savings have not been analyzed by an engineer to identify which 
improvements are most needed: this information cost artificially limits 
demand in the market. Second, no large, representative multifamily 
portfolio has tested these projections and established a proven 
investment model for the industry. Although some small portfolios and 
individual buildings have experienced dramatic energy savings, doubts 
remain about the applicability of these results to all types of 
buildings in varying climates across the country.
    Finally, in federally assisted buildings, rents and utility 
payments are typically set by formula. While owners of market-rate 
multifamily buildings can pass the initial cost of energy- and cost-
saving improvements to consumers, owners of federally assisted 
buildings face split incentives. When residents pay utilities, these 
owners stand to receive no help paying for the initial cost of 
improvements, yet future economic benefits would be realized only by 
residents. When owners pay utilities, residents have no incentive to 
conserve energy. As a result, the common practice has been to build for 
low initial cost rather than minimizing energy costs over the 
building's lifetime. These split incentives have led to lower 
efficiencies and higher costs than necessary throughout the HUD-
assisted portfolio.
SAHF Strongly Supports the Energy Efficiency in Housing Act of 2009
    SAHF is proud to support the Energy Efficiency in Housing Act. The 
Act will focus important Federal attention and resources on making 
neighborhoods, and the built spaces that give them structure, better 
places to live. SAHF also continues to strongly support this Act's 
companion in the House, H.R. 2336--the GREEN Act. SAHF has worked with 
members and staff in the House since the GREEN Act's introduction in 
2009 to ensure that the legislation meets its stated project goals and 
is happy to provide similar support to the Energy Efficiency in Housing 
Act. SAHF is pleased that both the GREEN Act and the Energy Efficiency 
in Housing Act promote bold steps to promote energy efficiency and 
conservation in American buildings.
    In particular, SAHF strongly supports the energy efficiency and 
conservation demonstration program for existing multifamily affordable 
housing projects, embodied currently in Section 7 of the Act. This 
demonstration program will prove the benefits that reasonable energy 
efficiency improvements can have from financial, environmental, health, 
and energy security perspectives. When these investments begin to pay 
back their own cost, we know this program will lead to the 
identification of many more than the initial 50,000 units of affordable 
housing in which similar progress can be made. A wide application of 
the energy difference could have significant impacts on the Federal 
Government's utility costs, reduce costs for preservation owners and 
tenants, and move the Nation forward in energy independence and climate 
security.
    Furthermore, SAHF supports paragraph (i) of Section 7, which would 
authorize appropriations for the demonstration program. We support 
including an authorization for each year the program operates, at the 
$50 million level. We also support the reporting requirements of 
paragraph (g) of Section 7.
    SAHF supports the Act's changes to Fannie Mae and Freddie Mac: 
granting additional credit for meeting the standards set forth in 
Section 8, granting authority to introduce additional liquidity to the 
issuance of Energy-Efficient Mortgages (EEMs), and creating mandates to 
promote EEM and Location-Efficient Mortgage use. SAHF also supports 
granting Community Reinvestment Act credit for energy efficient 
mortgages and green building efforts, collecting related information 
under the Home Mortgage Disclosure Act, and the establishment of Green 
Banking Centers.
    SAHF also supports the concept of an energy loan designed to 
enhance energy efficiency and conservation in different federally 
assisted projects, with financial benefits shared by the project owner. 
These programs will help address the problem of split incentives which 
I mentioned above.
    SAHF is supportive of increased sustainability in HOPE VI 
development delineated in the bill. SAHF also supports the measures 
designed to increase funding for rural housing, to encourage greater 
involvement from financial players, and to enhance the ability of the 
Federal Government to study and administer efforts to bring energy 
efficiency to the American home, whatever its form.
    SAHF recognizes the critical long-term importance of acknowledging 
energy efficiency improvements in appraisals. We strongly support 
Section 16 of the Act, and hope that the appraisal industry will adopt 
the concept more widely as an important change that would more 
accurately reflect properties' value. The incentive to install energy 
efficiency improvements is substantially reduced as long as appraisals 
fail to reflect the value to future owners of energy efficiency 
improvements and consequent energy savings.
    At properties across the portfolio of SAHF's Members, SAHF's energy 
efficiency initiatives and other similar efforts raise the awareness of 
local staff and residents to the importance of energy efficiency 
measures and the potential for substantial savings. Education and 
outreach--whether to building staff, HUD development partners, or 
lenders--are essential elements of a plan which will make effective and 
lasting steps toward energy efficiency and greener neighborhoods. SAHF 
supports the related provisions of the Act.
    Finally, SAHF is supportive of the concept embodied in the proposed 
revolving loan fund set forth in Section 19 of the Act. Providing 
additional money to finance renewable energy and energy efficiency 
improvements in single-family and multifamily residences is clearly an 
issue of national importance with economic, energy, and environmental 
benefits. Providing greater flexibility in financing and overcoming 
barriers posed by information inefficiencies and administrative costs 
is an appropriate role for Federal, State, and local governments.
    Thank you again for the opportunity to make these comments.
                                 ______
                                 
       PREPARED STATEMENT OF THE AMERICAN INSTITUTE OF ARCHITECTS

Introduction
    The American Institute of Architects (AIA) strongly supports the 
Energy Efficiency in Housing Act (EEHA) (S. 1379). This landmark 
legislation will promote energy efficiency in our Nation's residential 
building sector, providing direct benefits to the environment, our 
economy, and especially to the millions of Americans who are struggling 
to cope with rising energy prices. In addition, this legislation would 
create as many as 84,500 jobs in the design and construction sector in 
the first year alone, helping to accelerate the economic recovery.
Buildings and Energy Use
    The Department of Energy's 2007 Building Energy Data Book reveals 
that the building sector accounts for 39 percent of total U.S. energy 
consumption, more than both the transportation and industry sectors. 
\1\ According to the Department of Energy's Energy Information 
Administration, buildings and their construction are responsible for 
nearly half of all greenhouse gas emissions produced in the U.S. every 
year. The same study found that buildings are responsible for 71 
percent of U.S. electricity consumption and that buildings in the 
United States alone account for 9.8 percent of carbon dioxide emissions 
worldwide. \2\
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     \1\ http://buildingsdatabook.eere.energy.gov/docs/1.1.3.pdf
     \2\ http://buildingsdatabook.eere.energy.gov/docs/3.1.1.pdf
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    In fact, according to the Department of Energy, U.S. buildings 
account for nearly the same amount of carbon emissions as all sectors 
of the economies of Japan, France, and the United Kingdom combined. \3\ 
Therefore, if we in the United States want to be serious about energy 
reductions, buildings must become a significant part of the discussion.
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     \3\ http://buildingsdatabook.eere.energy.gov/docs/3.1.1.pdf
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    The data shows that the building sector is only going to become 
more critical to the discussion. Annual U.S. energy consumption is 
projected to increase by 32 percent over the next 25 years. \4\ The AIA 
believes strongly that now is the time to act to reverse this course 
and start making significant reductions in the amount of fossil-fuel 
generated energy our Nation consumes through its buildings.
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     \4\ http://www.eia.doe.gov/oiaf/ieo/pdf/ieoreftab_1.pdf 
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    Over the next 30 years, the character of the built environment will 
change dramatically. Currently, U.S. building stock sits at 300 billion 
square feet. Experts predict that between now and 2035, 52 billion 
square feet will be demolished, 150 billion square feet will be 
remodeled, and another 150 billion square feet will be newly 
constructed. Because buildings are such a major producer of greenhouse 
gases, the AIA believes that if Congress and our Nation want to reduce 
greenhouse gas emissions, addressing energy consumption in the next 
generation of buildings is a vital endeavor.
    To reduce energy consumption in the building sector, the AIA 
believes that architects must advocate for the sustainable use of our 
Earth's resources through their work for clients. To support this 
principle, in 2005 the AIA adopted a position stating that all new 
buildings and major renovations to existing buildings be designed to 
meet an immediate 50 percent reduction in fossil fuel-generated energy 
(compared to a 2003 baseline) and that at 5 year intervals, that 
reduction target be increased by at least 10 percent until new and 
renovated buildings achieve carbon neutrality in 2030.
    Architects across the country have embraced this principle and are 
currently utilizing design practices that integrate built and natural 
systems that enhance both the design quality and environmental 
performance of the built environment. But in order to truly 
revolutionize the way our Nation designs buildings, the public sector, 
especially the Federal Government, must also play a role. Federal 
Government agencies, programs and sponsored enterprises have a major 
impact on the residential building sector. Through a combination of 
regulation and incentives, we can achieve the goals of greatly reducing 
fossil fuel generated energy and improving energy efficiency 
nationwide.
    In the past, the AIA has worked with Congress to address energy use 
in Federal buildings. The 2007 Energy Independence and Security Act 
(P.L. 110-140) included a provision mandating that all new and 
significantly renovated Federal buildings meet strict energy-use 
requirements. The new energy targets required of Federal buildings will 
demonstrate to the private sector that the Federal Government is 
leading by example. It will help spur the development of new materials, 
construction techniques, and technologies to make buildings more energy 
efficient. And it will help show that significant energy reductions are 
both practical and cost-effective.
The Green Benefits of EEHA
    The legislation (S. 1379) under consideration by this Committee is 
by far the most comprehensive attempt to promote energy efficiency at 
the residential level to emerge from the current Congress. The AIA 
strongly supports this legislation as it will set new energy efficiency 
standards for new residences and existing homes under the jurisdiction 
of the Department of Housing and Urban Development (HUD).
    The legislation requires the new or renovated structures to comply 
with the most widely accepted energy standards currently in existence. 
By requiring residences to be designed and constructed in accordance to 
the American Society of Heating, Refrigerating, and Air Conditioning 
Engineers (ASHRAE) Standard 90.1 and the International Energy 
Conservation Code (IECC), the legislation rightfully prescribes energy 
efficiency standards that were developed under open, consensus-based 
process. And by offering additional credit to projects that achieve 
even greater energy efficiency, measured by the Leadership in Energy 
and Environmental Design (LEED) Gold Standard, the national Green 
Communities criteria checklist for residential construction, and the 
Green Globes assessment and rating system, the legislation truly 
incentivizes green design and construction in the most practically 
applicable manner.
    Establishing new energy standards for HUD-supported residences is a 
prudent and effective strategy to ensure that the benefits of energy 
efficiency reach the Americans who truly need them. Energy costs are 
soaring across the country, and many citizens are being pushed to the 
financial limit by skyrocketing utility bills. Designing and 
constructing energy efficient homes, complete with energy efficient 
appliances, as well as heating, air conditioning, and lighting systems, 
will provide an immediate financial benefit to homeowners and renters 
through reduced utility costs.
    The demonstration program authorized by the bill will highlight 
this by showing the effectiveness of providing Federal assistance for 
energy efficiency measures for multifamily housing. Increasing energy 
efficiency and decreasing utility bills will provide direct benefits to 
the economy as well as the intrinsic advantages that reduced energy 
consumption offers our natural environment.
    While establishing new energy standards for some residences will 
make great strides toward promoting residential energy efficiency, it 
is only one part of the overall strategy to achieve economy-wide energy 
savings. In order to truly bring about meaningful changes in 
individual, corporate, and institutional behavior (relating to energy 
use), a multifaceted approach is necessary. EEHA rightfully 
acknowledges this and includes important policy ideas that will promote 
energy efficiency by providing incentives to lenders and financial 
institutions to provide lower interest loans and other benefits to 
consumers who build, buy, or remodel their homes, and to businesses to 
improve their energy efficiency.
    Specifically, the bill will promote the use of Energy Efficient and 
Location Efficient Mortgages (EEMs and LEMs). EEMs are effective 
financial tools that provide incentives to homeowners to purchase 
energy efficient homes or renovate existing homes to make them more 
energy efficient. As owners of energy efficient homes will pay 
significantly less in monthly utility bills due to reduced energy use, 
EEMs allow borrowers to qualify for a higher mortgage limit because the 
homeowners will spend less on monthly energy costs and decreased energy 
costs increase the security of the mortgage. LEMs, meanwhile, are 
directed toward borrowers who live in high-density areas near transit 
and will likely have reduced transportation costs. Those who qualify 
for LEMs will face reduced monthly transportation costs, allowing 
borrowers to qualify for higher mortgages. EEMs and LEMs are currently 
offered by many lenders across the country, but in order for them to 
truly expand across the economy, the Federal Government must play a 
role.
    The AIA strongly supports policies that will promote the use and 
availability of EEMs and LEMs. We are therefore especially pleased by 
provisions in this bill that will result in more EEMs and LEMs in the 
marketplace. This bill requires both Fannie Mae and Freddie Mac to 
increase their commitment to EEMs and LEMs and creates a public 
awareness, education, and outreach campaign to inform and educate 
residential lenders and prospective borrowers regarding the 
availability, benefits, advantages, and terms of energy efficient 
mortgages. This is a critical endeavor as many lenders and borrowers 
simply do not understand EEMs and LEMs or in some cases, realize that 
they even exist.
    As stated above, this bill represents Congress's most comprehensive 
effort to promote energy efficiency across the residential sector of 
our Nation's buildings, using a multifaceted and multiprofessional 
approach that integrates all players in the residential building field 
in the process of building and retrofitting energy efficient housing. 
For example, the bill includes provisions that will require appraisers 
to consider renewable energy sources for or energy efficiency 
improvements to the property being appraised. This provision will 
ensure that the energy efficiency achievements that designers and 
builders accomplish will be valued in the price of the home. This is a 
necessary step that will in time, change the way our Nation thinks 
about energy use and will result in energy savings across the economy.
The Economic Impact of EEHA
    This legislation not only will foster more energy efficient homes; 
it will create jobs. As a result it could not come at a better time. 
The current economic crisis has affected every American, but the impact 
of this recession on the design and construction industry has been 
simply devastating.
    According to the U.S. Department of Labor, the unemployment rate in 
the construction industry in March 2010 was 24.9 percent, the highest 
by far in any industry. \5\ The Associated General Contractors of 
America (AGC) reports that in the last year, 48 out of 50 States and 
the District of Columbia lost jobs in the construction industry. \6\ 
This situation has major impacts on the economy as a whole, as this 
industry accounts for nearly one in nine dollars of Gross Domestic 
Product. \7\
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     \5\ http://www.bls.gov/news.release/pdf/empsit.pdf
     \6\ http://www.agc.org/cs/news_media/press_room/
press_release?pressrelease.id=568
     \7\ 7 U.S. Census Bureau and Bureau of Economic Analysis.
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    The Labor Department reports that employment at architectural firms 
has dropped by 18 percent between 2008 and 2009. \8\ That is only 
counting those who have applied for unemployment insurance. Many 
architects report being underemployed or working without pay for as 
long as 18 months. That is an enormous burden for skilled workers who 
have families to feed and mortgage bills to pay. Worse, many young 
architects are simply leaving the profession, looking for opportunities 
elsewhere. Once economic conditions improve, a dearth of young talent 
will hamper the ability of our country to design and construct high-
quality buildings for years.
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     \8\ Bureau of Labor Statistics.
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    Although economists believe the country has entered a recovery 
phase, the good news has not reached the design and construction 
industry. The AIA Architecture Billings Index (ABI), which surveys work 
on the drawing boards, is a leading indicator of construction activity 
9 to 12 months down the line. \9\ The most recent ABI shows continued 
weak demand for architectural work than the month before. This means 
that the construction industry should expect soft demand for its 
service for the next 9 to 12 months. Clearly, the green shoots of 
economic recovery are not bearing fruit in this important sector.
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     \9\ www.aia.org/aiaucmp/groups/aia/documents/pdf/aias076074.pdf 
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    The AIA supports legislation that puts architects and other design 
and construction personnel back to work. That is why the AIA is pleased 
to note that in its analysis (Attachment A) of EEHA, it found that the 
legislation would crate as many as 84,500 jobs in this sector in the 
first year alone. Promoting energy efficient housing not only lowers 
energy bills and improves our Nation's energy independence; it also can 
help accelerate our economic recovery.
    The AIA strongly supports the Members of this Committee in their 
efforts to make the Nation's housing stock more energy efficient. This 
legislation will reduce energy costs for Americans, reduce our demand 
on foreign sources of oil, preserve our natural environment, and create 
much-needed jobs in the design and construction industry.
Attachment A









PREPARED STATEMENT OF ROGER PLATT, SENIOR VICE PRESIDENT, GLOBAL POLICY 
                  AND LAW, U.S. GREEN BUILDING COUNCIL

    On behalf of the U.S. Green Building Council's (USGBC) nearly 
17,000 organizational members and 80 local chapters, I would like to 
thank Chairman Menendez and Ranking Member Vitter for convening a 
hearing on the important issue of green housing and ``The Energy 
Efficiency in Housing Act'' (EEHA). The U.S. Green Building Council is 
proud to have included EEHA earlier this year in the USGBC ``Top 10 
Pieces of Green Building Legislation'' Scorecard and look forward to 
working with the Committee to ensure swift passage of the bill.
The Imperative
    Green homes are inherently affordable homes. Constructing and 
rehabilitating residential projects to green standards can measurably 
reduce a resident's financial obligation to a utility bill, result in 
long-term durability and ease of maintenance, and have a positive 
impact on individual and community health and well-being. Green homes 
offer similarly significant benefits for our environment--comprising a 
critical part of our Nation's strategy for addressing climate change.
    On the aggregate, buildings are responsible for 38 percent of U.S. 
CO2 emissions per year. \1\ In addition, buildings annually account for 
39 percent of U.S. primary energy use; \2\ use 13.6 percent of all 
potable water or 15 trillion gallons per year; \3\ and consume 40 
percent of raw materials globally (3 billion tons annually). \4\ The 
EPA estimates that 136 million tons of building-related construction 
and demolition debris are generated in the U.S. in a single year. \5\ 
(By way of comparison, the U.S. creates 209.7 million tons of municipal 
solid waste per year. \6\) It is clear that we must act quickly to 
reduce the impact of the built environment on our planet.
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     \1\ Energy Information Administration (2008). Assumptions to the 
Annual Energy Outlook.
     \2\ Energy Information Administration (2008). EIA Annual Energy 
Outlook.
     \3\ U.S. Geological Survey (2000). 2000 data.
     \4\ Lenssen and Roodman, 1995, ``Worldwatch Paper 124: A Building 
Revolution: How Ecology and Health Concerns Are Transforming 
Construction'', Worldwatch Institute.
     \5\ U.S. EPA Characterization of Construction and Demolition 
Debris in the United States, 1997 Update.
     \6\ U.S. EPA Characterization of Municipal Solid Waste in the 
United States, 1997 Update. Report No. EPA530-R-98-007.
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    Critically, sustainability is not limited to environmental 
performance alone, but rather, hinges on the creation of buildings and 
neighborhoods that are also socially and economically sustainable. As 
such, USGBC strives to integrate the theories and practices of social 
and economic justice within those of sustainable building. The Energy 
Efficiency in Housing Act (S. 1379) makes important and necessary 
progress toward achievement of these broader goals while targeting the 
hard realities of affordability and climate change.
    USGBC is particularly encouraged by provisions in the legislation 
that promise to advance the market transformation to sustainability by:

    Providing needed financing mechanisms, such as energy- and 
        location-efficient mortgages, to assist consumers in accessing 
        more efficient properties and establishing mortgage incentives 
        for energy efficient multifamily housing (Sections 5-6);

    Supporting States and Indian Tribes in their efforts to 
        improve efficiency and generate clean energy in homes and 
        buildings through the establishment of the Alternative Energy 
        Sources State Revolving Fund within the Dept. of Treasury 
        (Section 19);

    Providing needed education to consumers and lenders about 
        the benefits of energy efficiency through green banking centers 
        (Section 22); and

    Empowering the private market to move further and faster by 
        advancing the Federal commitment to green and energy efficient 
        affordable housing (Sections 4, 15, and 16).

    By allocating funds through competition based on a host of 
priorities in the public interest, HUD plays a critical role in both 
defining and delivering affordable housing. The Energy Efficiency in 
Housing Act establishes energy efficiency and green building generally 
as key public priorities, and provides a framework whereby developers 
can compete to provide the highest quality housing. This public sector 
leadership sends a powerful message to the rest of the housing 
industry, incentivizes private businesses to become experts in green 
building generally, and ensures that low-income families will maintain 
access to decent, safe, and affordable housing, even as our society's 
standards for what is decent and safe continue to rise.
Demonstrating That Green Is Affordable
    Affordable housing is not a special building type. Instead, the 
term describes a relationship between people and buildings. Congress 
has determined that for federally subsidized programs, the costs to 
inhabit a residence should not exceed 30 percent of the gross annual 
income for the family living in that residence. This calculation 
includes payments for water, gas, and electricity, which can be 
significant and unpredictable. Compounding these potential costs, more 
than 80 percent of housing units assisted by HUD are 15 to 30 years 
old, \7\ and many low-income housing units are among the least 
efficient housing in the country.
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     \7\ Harvard University Graduate School of Design, Public Housing 
Operating Cost Study, June 2003 available at www.gsd.harvard.edu/
research/research_centers/phocs/documents/Final%20Report.pdf.
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    When paid directly by low-income residents, high utility costs 
erode and in some cases entirely undermine affordability. Indeed, low-
income households spend on average 19.5 percent of annual income on 
home energy costs, while the average for median-income households is 
just 4.6 percent. These costs can become an even greater burden on low-
income families during the winter months, when home energy costs may 
climb as high as 70 percent of monthly income. \8\
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     \8\ National Fuel Funds Network, National Low-Income Energy 
Consortium, et. al, The Cold Facts: The First Annual Report on the 
Effect of Home Energy Costs on Low-Income Americans (2001-2002), 
available at www.nliec.org/facts.pdf.
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    Affordability is similarly in jeopardy where utilities are paid by 
HUD or another public agency, as these recurring costs limit the public 
funds that are available for the construction and maintenance of 
affordable housing. Indeed, HUD spends more than $5 billion annually in 
direct and indirect utility costs. \9\ Green building offers 
opportunities to reduce energy and resource consumption, enabling lower 
utility costs and critical savings for agencies and residents alike.
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     \9\ U.S. Government Accountability Office, Green Affordable 
Housing, GAO-09-46, October 2008, available at www.gao.gov/products/
GAO-09-46.
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    An affordable housing project developed in Michigan by the Genesis 
Nonprofit Housing Corporation demonstrates the economic and 
environmental savings that are possible through green building. The 
project was built in two phases utilizing the same basic design and the 
same builder, but phase two was built to LEED standards and certified 
by USGBC. Compared to phase one, the LEED building added just 2 percent 
to the initial construction cost, but the owner reports that in its 
first 2 years of operation the LEED certified building produced an 
impressive 26 percent savings on electricity and 41 percent savings on 
gas.
    Public housing agencies have experienced similar successes. Over 
the past 3 years, the District of Columbia Housing Authority (DCHA) has 
implemented major green building improvements in 5,000 units of public 
housing across 31 separate properties. These improvements included HVAC 
upgrades, new lighting, appliances, and water fixtures for residents. 
As a result, DCHA has reduced its overall utility budget by 24 percent, 
from $16 million annually to $12.1 million in 2008. After paying 
capital costs for these improvements, DCHA expects to net approximately 
$1 million per year indefinitely. Additionally, DCHA has estimated $2.3 
million in annual operating and maintenance savings from fewer 
emergency repairs and replacements. \10\
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     \10\ Presentation by the DC Housing Authority at D.C. HUD Field 
Office Energy Forum, March 18, 2009.
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    Nationally, nearly 200 energy performance contracts have been 
undertaken by public housing authorities, resulting in gross savings to 
HUD of about $50 million annually. \11\ Due to program requirements, 
there is currently no means of encouraging similar cost-savings in the 
1.6 million units of privately owned housing receiving project-based 
subsidies from HUD. The EEHA provides HUD with the needed congressional 
authority to develop such an initiative.
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     \11\ GAO, Green Affordable Housing, p. 15.
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    USGBC commends Senator Whitehouse for his leadership in 
introduction of S. 1379, or EEHA. We are committed to advancing policy 
that will efficiency of public housing and that will begin the 
necessary transformation of the home mortgage market to encourage and 
value efficiency. EEHA would save energy, taxpayer dollars, and 
maintain affordability in our Nation's housing stock. We look forward 
to assisting the Committee in swift passage of the bill, and are happy 
to work with the Senator and the Committee on making the attached 
recommendations for S. 1379.
Attachment: USGBC Comments on The Energy Efficiency in Housing Act 
        (EEHA), S. 1379
The U.S. Green Building Council Recommends that:
    Section 3(3)(C)(ii) on Definitions of Green Building Standards be 
revised to include the LEED for Neighborhood Development rating system.
    Section 3(3)(C)(i) be revised to include the phrase ``and 
rehabilitation'' in the reference to Green Communities, so that the 
provision reads: ``The national Green Communities criteria checklist 
for residential construction and rehabilitation, which provides 
criteria for the design.''
    Section 2(b)(1) on Purposes be adjusted to include the phrase 
``sustainable practices'' to reflect the many opportunities presented 
by green building, so that the provision reads: ``To encourage the use 
of energy efficiency, and conservation methods, and sustainable 
practices in Federal housing programs.''
    Similarly, Section 7(b) on Energy Efficiency and Conservation 
Demonstration Program for Multifamily Housing Projects goals be revised 
to reflect the energy saving and cost-saving opportunities of green 
building practices such as water conservation \1\ as follows:
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     \1\ According to the EPA, if one out of every 100 homes in the 
U.S. were retrofitted with water-efficient fixtures, we could save 100 
million kWh of electricity per year--the GHG reduction equivalent of 
removing nearly 15,000 automobiles from the road.

    7(b)(3) reads: encourages energy efficiency, and 
        conservation, and sustainable practices by owners and residents 
        of multifamily housing projects and installation of renewable 
        energy improvements, such as improvements providing for use of 
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        solar, wind, geothermal, or biomass energy sources;

    7(b)(4) reads: creates incentives for project owners to 
        carry out such energy efficiency and water efficiency 
        renovations and improvements by allowing a portion of the 
        savings in operating costs resulting from such renovations and 
        improvements to be retained by the project owner, 
        notwithstanding otherwise applicable limitations on dividends;

    7(b)(6) reads: promotes the installation, in existing 
        residential buildings, of energy and water efficient and cost-
        effective improvements and renewable energy improvements, such 
        as improvements providing for use of solar, wind, geothermal, 
        or biomass energy sources;

    7(b)(9) reads: creates a database of energy efficiency and 
        conservation, and renewable energy, techniques, energy savings 
        management practices that include consideration of indirect 
        energy usages such as water use and transportation and resident 
        behavior and environmental control factors; \2\ and energy 
        efficiency and conservation financing vehicles.
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     \2\ HUD is already collecting data on occupant comfort and control 
in multifamily housing through the Green Initiative of the Mark to 
Market Program.

    Section 7(c)(4) on the Secretary's authority in carrying out the 
demonstration program be revised to reflect the goals of this bill to 
maintain affordability so that the provision reads, ``Waive or modify 
any existing Federal regulatory provision that would otherwise impair 
the implementation or effectiveness of the demonstration program under 
this section, including provisions relating to methods for rent 
adjustments, comparability standards, maximum rent schedules, and 
utility allowances, keeping with the intention that assisted families 
pay no more than 30 percent of gross annual income in rent plus 
utilities. Notwithstanding the preceding provisions.''
    (This recommendation seeks to preempt an unintended impact of 
7(c)(4) where in carrying out the demonstration project, owners of 
rental housing may charge additional rent for rent-restricted units 
based solely on projected utility savings. If these projections are 
overly optimistic or simply incorrect, residents may end up shouldering 
the additional costs.)
    Section 15(a)(4)(C)(i) on HOPE VI, identification of green building 
rating systems, be revised to minimize confusion and to include a 
reference current law, The Energy Independence and Security Act of 2007 
(Public Law No: 110-140) as it directs identification of a green 
building rating system for Federal buildings, so that the provision 
reads: ``IN GENERAL--For purposes of this paragraph, the Secretary, in 
consultation with the Secretary of Energy, shall identify rating 
systems and levels for green buildings that the Secretary determines to 
be the most likely to encourage a comprehensive and environmentally 
sound approach to ratings and standards for green buildings, with 
consideration of the findings of Public Law 110-140 as it pertains to 
green Federal buildings in that determination.''
    Section 15(a)(4) on HOPE VI, green developments requirements be 
revised to reflect consistency with the efficiency standards for 
residential and nonresidential construction as specified by this Act in 
sections 3(6)(B) through 3(6)(C).
    (Section 15 should apply equally to the HOPE VI program and to the 
Administration's Choice Neighborhoods Initiative, and this 
clarification may be useful in report language.)
    Inclusion of S. 2897, The Energy Efficiency Modernization Act of 
2009 introduced by Senator Bennet in this Act. The legislation is 
supported by USGBC and a coalition of affordable housing groups and 
would encourage owners of assisted multifamily rental housing projects 
to undertake utility cost-saving measures by providing loans funded 
from residual receipts already associated with the projects.
                                 ______
                                 
  PREPARED STATEMENT OF LEANNE TOBIAS, MANAGING PRINCIPAL, AND MARTHA 
               PASCHAL, MANAGING DIRECTOR, MALACHITE LLC

    Malachite LLC is a boutique, woman-owned green real estate advisory 
company headquartered in Bethesda, MD. Our company works with 
developers, real estate funds, nonprofit organizations and Government 
entities on sustainable building matters. Our multidisciplinary team 
includes professionals drawn from the fields of architecture, 
construction management, engineering, development, property operations, 
investment, and finance.
    Our company works with clients on all aspects of green real estate 
development and retrofit, including:

    Green project retrofit, development, and certification

    Finance, tax, and investment advisory

    Leasing and building operations

    Policy and program development

    Research and education

    Our team members are experienced with single-family and multi-
family green housing, including market rate, mixed-income and 
affordable projects, and with diverse commercial real estate. We are 
the author of the ``U.S. green building finance study of the Commission 
for Environmental Cooperation'', a U.S.-Canada-Mexico trilateral 
commission, as well as the Urban Land Institute's new book, 
``Retrofitting Office Buildings to be Green and Energy-Efficient.'' We 
were recently selected to help write the building retrofit guidance for 
Federal agencies under the Energy Information and Security Act of 2007.
    Members of our staff serve on numerous Government and industry 
leadership groups for green building. Among them: the U.S. Department 
of Energy's Commercial Building Initiative, the U.S. Environmental 
Protection Agency's Environmental Finance Advisory Board, ASTM's 
Building Energy Performance Assessment Task Group, and the advisory 
board of the Green Building Finance Consortium.
    We appreciate the opportunity to submit this statement on S. 1379, 
the Energy Efficiency in Housing Act (EEHA). This legislation helps to 
establish new mechanisms that would accelerate market development and 
deploy private capital for green housing, and support additional growth 
in the commercial sector. Among these transformative provisions are:

    The establishment of incentives for energy-efficient and 
        location-efficient mortgages and for the construction of 
        energy-efficient single- and multi-family housing under the 
        National Housing Act.

    The development of an energy-efficiency and conservation 
        demonstration program for 50,000 units of multifamily housing 
        over a 4-year period. The program will test the efficacy and 
        establish a database on a variety of renovation techniques.

    The development of an assisted housing pilot loan program 
        for energy-efficiency.

    The amendment of the Home Mortgage Disclosure Act of 1975, 
        to collect information on lending for energy-efficient and 
        location-efficient mortgages.

    The establishment within the U.S. Treasury Department of an 
        Alternative Energy Revolving Fund, with authorization for $5 
        billion in loan capital.

    The establishment of an energy-efficiency credit as a 
        component of Fannie Mae and Freddie Mac housing goals.

    The establishment of appraisal guidelines under the 
        Financial Institutions Reform, Recovery and Enforcement Act 
        (FIRREA) to require consideration of the effect on real estate 
        value of renewable energy savings and energy-efficiency or 
        energy conservation improvements or features.

    The establishment of energy-efficiency outreach programs 
        and, within federally insured financial institutions and credit 
        unions, green banking centers, to educate consumers on energy-
        efficient retrofit practices and financing alternatives.

    Initiatives to encourage the use of energy-efficient and 
        renewable features for home construction in rural areas and in 
        distressed communities.

    There is strong reason to implement these provisions of S. 1379. 
Planning experts estimate that 75 percent of current building stock 
will be in place for the next 50 years, so green and energy-efficient 
retrofits are a critical component in maintaining the quality and 
functionality of the U.S. housing supply.
    Controlling energy costs is also a critical component of housing 
affordability. Rent restricted housing is especially hard hit by rising 
energy prices, such as the uncontrollable expense swings suffered when 
energy prices increased several years ago. The need to conserve energy 
is particularly important for those affordable rental projects which, 
unlike project-based Section 8 housing which can have budget-based 
mechanisms to absorb unexpected expense increases, are encumbered with 
rent restrictions and lack the mechanisms to absorb energy cost 
increases. Indeed, energy cost increases have a disproportionate impact 
on moderate- and lower-income families. The inability to afford energy 
cost increases has been a significant factor in evictions from U.S. 
public housing during periods of rapidly escalating energy prices.
    As well, the U.S. lags the European Union and a number of Asian 
economies in the development of renewable energy technologies for the 
building sector. Investment and innovation in residential energy 
efficiency and renewable energy is also an investment in American 
competitiveness.
    In sum, enactment of S. 1379 would improve the quality, 
functionality and affordability of housing in the United States, which 
enhancing American competitiveness in the development of building 
features related to energy economy and the use of renewable energy.
    Retrofit and Lending Programs. S. 1379 is also beneficial in that 
it provides for the development of pilot retrofit and lending programs 
that will assist the private sector identify the most cost-effective 
housing retrofit and loan underwriting approaches. These initiatives, 
along with the bill's Revolving Loan Fund for States and Indian tribes, 
will help the retrofit industry mature, support economic stimulus, and 
provide lenders with the data and models needed to develop new energy 
retrofit programs. We notice that the pilot lending program proposed 
under S. 1379 is restricted to participation by 3-5 lending 
institutions. In order to ensure that one or more smaller or rural 
institutions participates in the pilot study, it might be appropriate 
to consider increasing the number of lending institutions in the pilot 
program, or requiring that the 3-5 lending institutions include at 
least one smaller or rural-based financial institution. Residents in 
rural housing can be disproportionately impacted by high energy costs, 
as job availability and thus income levels cannot absorb large 
fluctuations in energy pricing. This is a problem seen in tribal areas, 
with the prevalence of poor-quality construction.
    An additional class of lenders and properties to add to the pilot 
programs might be Low-Income Housing Tax Credit (LIHTC) properties 
financed by lenders under the Community Reinvestment Act (CRA). HUD's 
most recent survey (as of 2007) of the Low-Income Housing Tax Credit 
(LIHTC) portfolio, showed that the private sector has successfully 
developed 30,000 properties with over 1.843 million units with LIHTC 
support. Community Reinvestment Act-motivated lenders and investors are 
by far the larger providers of LIHTC financing. Most of the LIHTC 
portfolio are vulnerable to increases in energy costs, and must 
navigate complex approval processes and transaction structures to 
engage in energy efficiency retrofits. LIHTC properties would very much 
benefit from green and energy-efficient retrofits, and should be 
included in the pilot programs included in S. 1379. We recommend that 
LIHTC properties and one or more lenders engaged in CRA lending and 
investing be included in the pilot programs.
    Secondary Mortgage Market Provisions. Another provision of S. 1379 
that should help move the housing market toward energy-efficiency is 
the incentive for Fannie Mae and Freddie Mac to underwrite energy-
efficiency loans in fulfillment of their housing goals. Additional 
participation by Fannie Mae and Freddie Mac in the energy retrofit 
market for single- and multi-family housing would accelerate lenders' 
provision of retrofit loans. In this context, the Senate also might 
consider inserting a provision in S. 1379 that would direct the Federal 
Housing Finance Agency to require Fannie Mae and Freddie Mac to develop 
underwriting standards permitting their participation in property-
assessed clean energy (PACE) programs. PACE programs, developed to 
mainstream energy-efficient lending, have been a significant focus of 
the American Recovery and Reinvestment Act (ARRA) and have been enacted 
or authorized by numerous local or State governments. In the absence of 
underwriting standards, Fannie Mae and Freddie Mac have refused to 
participate in PACE programs as the superior PACE lien takes priority 
over their first-lien mortgages. Attention to this issue is advisable 
to further encourage Fannie Mae and Freddie Mac to engage in energy-
efficient lending and cooperate with State and local governments on 
this front.
    Home Mortgage Disclosure Act. We strongly support the amendment of 
the Home Mortgage Disclosure Act to track the incidence of energy-
efficient lending, as provided for in S. 1379. Lenders have been 
utilizing the Home Mortgage Disclosure Act for over 30 years to develop 
meaningful statistical data about their lending practices. In light of 
the importance of energy-efficiency to U.S. economic welfare and energy 
security, it is appropriate to amend the Act to encompass energy-
efficient lending.
    Appraisal, Consumer Outreach, and Green Banking Centers. Another 
beneficial provision of S. 1379 is the development of energy-related 
appraisal standards for FIRREA transactions. The enactment of appraisal 
standards that explicitly recognize the impact on value of renewable 
energy and energy-efficient features will help to mainstream the 
retrofit, development and financing of sustainable real estate 
throughout the U.S. Additional aspects of S. 1379 that will encourage 
broad-based private sector development of green and energy-efficient 
mortgage programs are the consumer outreach and education and green 
banking center portions of the bill. Together, these provisions help 
the real estate industry and the financial services sector develop the 
standards and practices that will support energy retrofits and 
associated lending programs.
    Conclusion. S. 1379, the Energy Efficiency in Housing Act, enhances 
the functionality, quality and affordability of the U.S.'s housing 
stock. The legislation also encourages American competitiveness in the 
development of the building retrofit products and services for domestic 
and global markets. As well, the Act supports building retrofit and 
lending programs, including important pilot initiatives that will 
provide models for private investment in building retrofits and 
associated financial products. By encouraging the private sector to 
develop new retrofit approaches and financing products, S. 1379 will 
support economic growth and energy independence.
    As a leader in the green building industry, Malachite LLC 
appreciates the opportunity to submit this statement in support of S. 
1379.
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