The “˜New and the Next’ in Green And Sustainable Development

By
5 min read

Tax Credit Advisor, January 2010: It’s no surprise that green building and sustainability have become a key part of the affordable housing industry. Most if not all state housing agencies provide incentives or requirements in their low-income housing tax credit (LIHTC) programs for proposed projects with these features. In addition, the recession and higher energy costs have fostered even greater importance on leaner utility costs in multifamily rental developments.

Less clear, though, is the set of likely future trends in the field of green and sustainable development. Without doubt, these trends will influence which projects attract equity, debt financing, and subsidies and get built.

Washington, D.C. attorney Jeffrey Lesk, took at stab at this in comments at a recent Washington conference sponsored by the Institute for Professional and Executive Development. A partner in the law firm of Nixon Peabody, LLP, he works on green and affordable housing transactions, including those using housing and energy tax credits.

“We’re at the point in the industry where affordable housing and sustainable development are intersecting big time,” Lesk said. “If you’re working in this area, either because you’ll be required or incentivized to, you’ll be doing green development and you’ll be financing green development.”

Lesk offered his “picks” on “what’s new and what’s next” in green and sustainable development. These include:

  • Larger Projects. “Scale is hugely important.” Large-scale, green projects are essential to make an effective dent in addressing the enormous environmental crisis, and for economic reasons.
  • State LIHTC Criteria. “Every single state has now incorporated green criteria into their qualified allocation plans,” Lesk noted. The incentives and points in each are different – some states offer points for green features and energy conservation, some for water conservation, some for site selection. “States have different degrees, but every one of them has it.”
  • Beefed Up Local Requirements. Increasingly, major and smaller cities throughout the U.S. “are starting to integrate green development requirements into [their] basic codes and basic ordinances.” For example, Lesk said that in cities like Washington, D.C., New York, Portland, and Seattle, developers cannot pull a building permit unless they plan to build to a certain – sometimes high – level of sustainability. This trend is “transitioning in,” said Lesk. It began with government buildings, is moving to major commercial buildings, “and it’s going to be hitting our affordable housing projects probably in the next year or two.”
  • Investor Preferences. Increasingly, LIHTC equity investors want to invest in green projects. “This is an investor’s market, and investors can get what they want They’re all out there with corporate statements that [say] they need to do sustainability like everyone else, and a green development is something that’s going to be important to them.”
  • More Green Roofs. “Green roofs are going to be more and more prevalent.” Lesk said green roofs and solar panels are the two green elements with the “highest impact,” and that green roofs are transitioning from being merely “funky and funny” to mainstream. “Green roofs contribute to open space, soil conservation, and energy conservation.” Lesk said Chicago has more green roofs than any other U.S. city because it promotes and requires them.
  • More Varied Designs Using Alternative Energy. Solar panels don’t necessarily have to be installed on rooftops; Lesk cited a Santa Monica development where the panels are on the side of the building. Similarly, wind power doesn’t have to mean separate freestanding wind turbines; he noted horizontal wind turbines are integrated into the building at one Chicago affordable housing development.
  • Creative Open Space. As developers are required or incentivized to build urban, transit-oriented developments, they’ll have to be more creative to provide open spaces for residents. “The really creative projects are starting to incorporate rooftop as an amenity. It can be a community garden, a basic green roof, or a playing field.”
  • Water Conservation. Lesk predicted that water conservation in buildings will become as important as energy conservation is already. Prompting this in part will be the global warming issue as well as the fact that water is expensive in certain parts of the U.S. But another impetus is a growing recognition that a lot of energy is used to transport purified water to buildings. Examples of common water conservation techniques today include on-site capture and use of rainwater, use of low-flow toilets and water fixtures, and hardier landscaping.
  • Employment Opportunities. The current focus on generating “green jobs” has the potential to create higher-paying, high-skill employment opportunities for residents of affordable housing properties, such as installing green roofs, building wind turbine blades, etc.
  • Increased Federal Programmatic Requirements. In view of the Obama Administration’s support and keen focus on greener buildings and sustainability, Lesk expects these standards to eventually become requirements for developers, owners, and communities in order to access federal dollars and mortgage insurance from the U.S. Department of Housing and Urban Development (HUD), such as HOME or CDBG dollars or FHA insurance. “Everything is going to have to be green that HUD touches.”
  • Greater Emphasis on Rehab. Lesk predicted that existing buildings – the “built environment” – will be part of any established carbon trading system. This, plus estimates that today’s buildings will account for about 90% of the buildings standing in 2020, will foster an “intense focus” on rehabilitation of existing structures to make them more energy efficient and sustainable.