Updated Energy Efficiency Standards For New Construction of HUD and USDA-Financed Housing
On 4/26/24, HUD and the Dept. of Agriculture published a notice of final determination (the “Notice”) that adopts IECC 2021 (for single-family/low-rise buildings) and ASHRAE Std. 90.1-2019 (for multifamily buildings with 4+ stories) as the required minimum energy efficiency standards for newly constructed properties financed through covered HUD and USDA programs. The current minimum efficiency standards, IECC 2009 and ASHRAE Std. 90.1-2007, were adopted in 2015.
Covered HUD and USDA programs and compliance dates are as follows:
Adoption of these standards is intended to yield significant cost savings for residents, reduce energy use and pollution, improve resident health and comfort, and increase resilience in extreme weather events of both single and multifamily homes through the use of increased insulation, air sealing, efficient windows, LED lighting, and efficient heating and cooling systems to lower monthly energy bills for families living in newly constructed HUD and USDA- supported properties.
For low-rise multifamily housing, the average additional cost to meet the 2021 IECC standard is estimated to be approximately $3,002/unit. For multifamily housing built to the ASHRAE 90.1-2019 standard (4+ stories), HUD estimates an additional construction cost of $18/unit.
The IRA makes available significant tax credits for builders which may be utilized to offset some of the incremental costs associated with the Notice.
- For single family, the Section 45L tax credit encourages building to the EPA’s Energy Star Single Family New Construction (up to $2,500 credit) or DOE’s Zero Energy Ready Home (ZERH) (up to $5,000 credit) standards.
- For multifamily, Section 45L tax credits are also available for buildings certified to Energy Star Multifamily New Construction (from $500 up to $2,500 per unit) and ZERH (from $1,000 up to $5,000 per unit) programs, (maximum available when meeting prevailing wage requirements).
Since the 2021 IECC is the baseline energy standard for both Energy Star and ZERH, both are accepted as a pathway for compliance with the requirements of the Notice. Additionally, both programs can be used to demonstrate compliance with most program-specific energy efficiency requirements (e.g., Green MIP reduction program).
Finally, the IRA enacted the Home Energy & Appliance Rebate program that when implemented by the States will provide an additional source of financing (up to $14,000/dwelling unit) for increasing the energy efficiency of new homes, and there may be additional incentives available through state, local and utility programs that can further reduce development costs for energy efficient and green building improvements.
Many incentives are location-specific, so if you would like to discuss a project, please call our office, email our tax director, or click here to schedule a meeting and our team will work with you to identify all available incentives and opportunities to add value to your project.
