A little known schedule of estimated utility costs paid by renters and published by public housing authorities (PHAs) is threatening California’s progress in decarbonizing affordable rental housing, a goal that is important not only because of its climate benefits but also because of the need to lower renter utility costs. Utility allowances, or UAs as we call them, are supposed to estimate the average cost renters pay utility companies directly for heating, cooking, water and in some parts of the state, cooling.
Getting these estimates right is important because federal and state law requires that landlords of rent-restricted affordable housing reduce their rents by the amount that a typical household would pay for utilities in order to ensure that their housing costs, which are defined as rent plus utilities, are affordable. Decarbonizing affordable housing is often done in combination with solar PV installation, which increases the potential savings substantially and raises the stakes on getting accurate UAs.
Because PHAs are regulated by the U.S. Department of Housing and Urban Development (HUD), they are supposed to follow a standard process for estimating UAs. Unfortunately, it turns out that the HUD guidance is not always clear in every situation and the quality of implementation by often overworked PHA staff varies considerably. As a result, there is substantial evidence that published UAs in California are not accurate. A report by Bright Power and Climate Action Campaign in the SoCal Gas service area showed that a majority of UA schedules actually incentivize the use of gas appliances, including in three of the most populous counties (LA, Orange, and San Bernardino).
Why are PHA UA schedules so often not accurately reflecting utility cost savings? Not only is HUD guidance inadequate but the outdated methodology results in some UA utility allowances increasing instead of decreasing as they often do in reality when properties electrify using the standard technology for today, like heat pumps. Often, UA’s use electric resistance technology which is greatly more inefficient when compared to heat pumps.
Not only is this lack of accuracy in UA schedules a problem in and of itself since it results in some tenants paying too much and some landlords paying too much, but inaccurate PHA UAs are preventing housing providers from decarbonizing affordable housing. This is because when UAs exceed true average tenant utility costs, housing providers often lack sufficient income to pay for decarbonization improvements.
Why is this important? It’s important because replacing all gas-powered appliances with electric ones and, or, in the case of new construction, building with all electric appliances, which is what we mean by ”decarbonizing” affordable housing, is important not only for reducing greenhouse gas (GHC) emissions but also for lowering tenant and housing provider utility costs, especially in light of recent increases. Decarbonizing affordable housing also has many co-benefits including improved health outcomes among residents, reduction in emissions, and increased climate resilience, to name three.
What can be done to improve UA’s and make sure decarbonization incentives are properly aligned? In the short term, more affordable housing properties should be allowed to enroll in the California Utility Allowance Calculator (CUAC). This is a state utility allowance calculator which models utilities at a property level for a more accurate calculation of utility costs. The California Housing Partnership applauds the Tax Credit Allocation Committee’s newly adopted regulations allowing more properties to enroll in CUAC. With the new regulations, all properties applying for tax credits will be able to use CUAC. In addition, existing tax credit properties not applying for new credits could switch to CUAC if they install solar through public solar programs such as the Solar on Multifamily Affordable Housing program, the Low-Income Weatherization Program, or the Self-Generation Incentive Program.
What can be done with increasing electricity costs? Many housing providers and low income renters have recently experienced huge price hikes in electricity costs even though energy usage has remained consistent, hurting efforts to electrify homes. Combined with other significant cost increases such as insurance, these increases are making it more difficult for affordable housing providers to take care of their properties and residents.
One potential solution is allowing affordable housing providers to enroll common areas of their developments in the CARE program, which offers a 30-35% discount in electricity bills for qualifying low-income customers. Recently, AB 2672 (Petrie-Norris) was signed into law allowing PHA-owned and Homekey facilities to access CARE rates. This increased access to CARE rates should be broadened to cover all affordable housing serving income eligible tenants. A legislative champion is needed to author a bill containing these provisions, which would help the most vulnerable access the benefits of decarbonization.
If California is serious about becoming carbon-free, the state must make it easy for housing developments to decarbonize. With high electricity rates and inaccurate utility allowances, housing providers are not currently incentivized to decarbonize and instead often end up continuing to use natural gas and less efficient technologies. By updating utility allowance schedules, allowing more properties to use a property-specific calculation, and providing relief for high bills to those housing the lowest income, California can create a viable decarbonization pathway for those living in affordable housing.
ABOUT THE AUTHOR
Andrew Dawson interfaces with internal and external partners to inform the Partnership’s legislative and regulatory advocacy efforts and leads the policy work for sustainable housing. He previously worked in the Senate Housing Committee as as Science Technology Fellow thought the California Council on Science and Technology. His doctoral research focused on lithium-ion batteries and storage capacity expansion.