On Tuesday, September 14, 2010, the Pittsburgh Office of Pepper Hamilton LLP hosted a discussion on how affordable housing developers can utilize and finance green features in their projects. Pepper Partners Jane Luxton and Todd Reinstein presented along with David Evans, Assistant Executive Director, and Holly Glauser, Director of Development, of the Pennsylvania Housing Finance Agency (PHFA). PHFA is the organization responsible for allocating low income housing tax credits in Pennsylvania, such tax credits being the major means of financing the construction and rehabilitation of affordable housing. Recognizing that using green principles in developing projects can lead to significantly lower operating costs, PHFA has been a leader in promoting these concepts. PHFA has primarily accomplished this through its Qualified Allocation Plan (QAP). Each state must adopt a QAP that delineates how points are awarded to proposed projects, thereby determining which projects receive credits.
PHFA has published a draft QAP to govern allocation of tax credits in 2011. The QAP for 2011 goes even further than prior QAPs in encouraging green building practices in that it gives points for (a) smart site selection (adaptive re-use of buildings, brownfields, in-fill housing); (b) reusable energy systems, such as cogeneration and geothermal and (c) the use of green building materials. The draft 2011 QAP also allows for an increase in basis for projects that have “up-front capital expenditures related to energy efficiency systems that will result in demonstrable savings in utility costs to the development, including solar, geothermal, or other innovative energy savings techniques.” An increase in basis is important because it allows the developer to sell additional tax credits to offset the cost of the capital expenditures. Participants in the discussion suggested that PHFA consider expanding the features that allow for an increase in basis by permitting an increase in basis for some or all of the long list of green building practices allowed by California.
The California basis increase provision is at 4 CA ADC §10327 (c)(5)B, which may be found by starting here.
The draft Pennsylvania QAP can be found here. Comments on PHFA’s draft QAP must be submitted by Friday, September 24, 2010. The address for submissions may be found here.
We welcome comments on this blog, including other ideas on the draft QAP or other approaches to financing renewable energy in affordable housing.
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