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Updated Guidance on Treatment of Solar Benefits for PHAs and HUD-Assisted Housing

--Happy Friday all. I just wanted to take a minute and address some recent inquries we have had from owners who are exploring the use of solar at their properties. For tenants of public housing or of properties with assistance from HUD, we have received several questions on whether the financial benefit of solar must be factored into the tenant’s utility allowance or included in the tenant’s annual adjusted income. The following “handbook” is a distillation of what we have learned from discussions with both HUD and numerous Public Housing Authorities across the country with respect to how solar can impact the utility allowances at a given property. Many solar incentive programs stipulate that the financial benefits must be passed along to tenants as a condition for eligibility. For tenants of HUD-assisted properties, whether they receive a direct financial benefit (i.e., a credit on their electricity bill) or an indirect financial benefit (i.e., a financial benefit not reflected on their utility provider bill but instead distributed by an owner/management company), the question is whether that financial benefit must be factored into the tenant’s utility allowance or included in the tenant’s annual adjusted income. Either way, the financial benefit to owners is directly reduced and, therefore, they should be aware of existing rules for utility allowance analyses and income calculations.


The following is a step-by-step guide taken from the U.S. Department of Housing and Urban Development’s Notice H 2023–09 issued August 3rd, 2023.


Step One:

Determine if Solar Credits Affect Utility Allowance Calculation. Step One is a test for determining the solar credit’s relationship to the utility allowance calculation. To understand the effect of a community solar credit on a unit’s utility allowance calculation, you will need a copy of the tenant’s electricity bill (this can be accessed by the utility company if it is not already available). Per this guidance, you will not need any additional information as the solar credit will appear as a negative amount on the tenant’s electricity bill. If the credit reduces the cost of energy consumption by lowering actual utility rates, then the owner is required to submit a new baseline analysis in accordance with Housing Notice 2015-04, regardless of when the last analysis was submitted to HUD/Contract Administrator for approval. Factors for determining whether the credit is tied to the cost of consumption: We have provided a helpful visual below to illustrate how this works.

 

Question A

Question B

Step Two:

Determine if Solar Credits Should be Considered Annual Income for Rent Calculation or Determining Eligibility for HUD-assisted Multifamily Programs The second step is to determine if the credits fall within HUD’s definition of annual income. In all foreseeable instances as of the date of this Notice, if the solar credit is tied to the cost of consumption (i.e., utility allowance is affected) (addressed in Step One), then the credit will not count toward income. If a solar benefit appears on a household’s electricity bill as an amount credited from the total cost of the bill, HUD has determined that the credit should be treated as a discount page 5 of 11 or coupon to achieve a lower energy bill (rather than a cash payment or cash-equivalent payment being made available to a resident). In this case, the credit will not be counted toward income, as discounts on items purchased by a tenant are not viewed as “annual income” to the family. Generally, income is not generated when a family purchases something at a cheaper rate than it otherwise would. Note that if the credits are found to be third-party payments based on Step One, there may be instances when the credits are not mere discounts and must be treated as income. For instance, a recurring monthly utility payment made on behalf of the family by an individual outside of the household is not considered a discount but is considered annual income to the family.

Montgomery County Now Mandating Energy Benchmarking for Multifamily Buildings Larger than 25,000 SF



----If you received a letter like the one above recently, we can help. Benchmarking refers to the process of tracking a building’s energy usage and measuring it against its own past performance or against other similar buildings. If you are a private building owner or property manager in Montgomery County, MD, and own or operate a building including a multifamily property larger than 25,000 gross square feet, you are required to report that building’s energy usage to the Department of Energy and Environment (DOEE) by June 1, 2024. That process can begin very soon at the end of this year. If you received a letter like the one above and are in need of this service, please reach out and we can help ensure you are in compliance and not subject to fines.


For more information regarding Montgomery County's policy regarding benchmarking follow the link below. 


Benchmarking Montgomery County 

84 Units in Raleigh, NC

On this particular property, we will have saved the up to $18,809 in Net Operating Income over the course of the upcoming year.


71 Units in Frederick, MD


On this particular property, we will have saved the owner up to $45,374 in Net Operating Income over the course of the upcoming year.

48 Units in Greenville, NC

On this particular property, we will have saved the owner up to $22,752 in Net Operating Income over the course of the upcoming year.

11010 Brent Road 
Potomac, MD 20854
(301) 706-3321
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