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Is Section 8 Ready to Go Green?

Adam Rust's picture

Posted February 22, 2010

While the Department of Housing and Urban Development has intimitated that it will seek way to help America's housing stock "go green," it is yet to provide concrete results in that direction.

HUD Secretary Shaun Donovan established a new department, known as the Office of Sustainability," to research how HUD could lower the combined costs of housing.  HUD's new rubric incorporates both direct housing costs as well as transporation costs.  It notes that the two now consume as much as 60 percent of household income.

This is a good idea.  For years, people have chosen to "drive 'til you qualify." They have moved out to the suburbs and commuted to their jobs in the city.  It led to sprawl, and it masks the real costs of housing. Those Beazer "homes from the 130s" were located at the end of long commutes. In this framework, low-income households don't really lower their housing costs so much as they shift housing costs over to transportation costs.

Section 8 does not tap into drive to you qualify, but it does work on some of the same prinicples. In the last entry of BankTalk, I speculated on the current problem: there is no incentive in place to encourage landlords to pay the costs of lowering the utility bills of their Section 8 tenants. It costs a lot of money to put in insulation. It costs a lot of

money to shift over to a energy-efficient water heater. It costs a lot of money to get a SEER 14 HVAC, or to go and buy EnergyStar appliances. There's not even any talk about requiring programmable thermostats.

HUD has a video that encourages landlords to buy EnergyStar appliances.  That is nice.  That and five hundred dollars might encourage a landlord to get one of those nice low-energy washer/dryer sets.  Every landlord I know, though, is going for the lowest-cost model.

Today I had a potential Section 8 tenant call and cancel her appointment to see my house.  She says she can't afford the cost of gas.  "I don't know who told you that gas is cheaper, it really isn't," she says. There is a perception which is only confirmed by Section 8 policy, that gas costs more. In Durham, Section 8 says that gas costs $20 more, per month, that electric for a 3 bedroom home.

Here is Consumer Reports on the subject of gas versus electric for heating water:

Based on national average fuel costs, gas heaters cost roughly half as much to run as electric models and can pay for their higher up-front cost in as little as a year. Factor in the cost of running a gas line to your home if you don’t have one. Also consider adding insulation to hot-water pipes and the cold water pipe exiting the water heater.

In some communities, I see that gas is estimated to cost less than electric.  That said, gas is more sustainable by any measure.  When electric is generated by coal, there is more carbon.  When electric is generated by nuclear, there are long-term storage costs.

Consumer reports is more blunt. The first point, that gas is less, is clear.  The second point is that there are higher up-front costs for buying a gas water heater.  That will drive landlords, who experience the latter cost but not the former, to electric.

We have extensive tax credits available to homeowners that want to lower energy costs. More often than not, though, those tax credits are not available to landlords.  That is a shame, because landlords have the resources to do things like upgrade apartment buildings with forty units.

What HUD is doing

What Could make A Difference

  • Help landlords overcome the up-front costs when they implement an upgrade to their home.  If there is a priority to weatherize homes, then policy puts teeth into that goal when it incents landlords to make it happen on the ground. Perhaps it is a mistake to pay back those landlords all at once. Instead, pay them back over years at a time, as long as they continue to housing Section 8 recipients.
  • Provide financing for retrofits on large multi-family units with a majority of Section 8 tenants.
  • Spread the word through communication with tenants.
  • Give landlords tax credits on their own taxes.