[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
U.S. GOVERNMENT PRINTING OFFICE
61-989 WASHINGTON : 2010
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office,
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202�09512�091800, or 866�09512�091800 (toll-free). E-mail, [email protected].
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\4\ Whitney, Sheryl Verlaine, ``Seeking Sustainable and Inclusive
Communities: A King County Case Study'', April 2010.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\1\ http://buildingsdatabook.eere.energy.gov/docs/1.1.3.pdf
\2\ http://buildingsdatabook.eere.energy.gov/docs/3.1.1.pdf
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\3\ http://buildingsdatabook.eere.energy.gov/docs/3.1.1.pdf
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\4\ http://www.eia.doe.gov/oiaf/ieo/pdf/ieoreftab_1.pdf
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\8\ Bureau of Labor Statistics.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\9\ www.aia.org/aiaucmp/groups/aia/documents/pdf/aias076074.pdf
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\9\ U.S. Government Accountability Office, Green Affordable
Housing, GAO-09-46, October 2008, available at www.gao.gov/products/
GAO-09-46.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\10\ Presentation by the DC Housing Authority at D.C. HUD Field
Office Energy Forum, March 18, 2009.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\11\ GAO, Green Affordable Housing, p. 15.
---------------------------------------------------------------------------
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:
---------------------------------------------------------------------------
\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
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.