--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.
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