Capitalizing on California’s Tax Benefits for Energy Efficient Affordable Housing Projects

Capitalizing on Californias Tax Benefits for Energy Efficient Affordable Housing Projects.jpg

One of the most important aspects to do with the incorporation of energy efficiency into affordable housing development projects is the use of tax benefits. California established tax incentives and programs in 1986 to deal with the growing need for affordable housing, and since then has received added federal funding linked to the amount of people in the state through the Low-Income Housing Tax Credit (LIHTC).

At nearly 40 million people today, the state has grown substantially, and the need for affordable housing has grown alongside it. As a result of this, there is plenty of opportunity for developers to benefit from affordable housing developments. 

When it comes to energy systems in affordable housing developments, there are no specific provisions in these programs that force the use of energy efficient systems beyond code minimums. On top of this, energy efficiency does tend to increase the initial budget in developments – so why would a developer want to include energy efficient systems if there is no apparent benefit or regulations minus the existing energy code?

There are numerous ways in which state, federal, and independent agencies can aid in making energy efficient and affordable housing projects a feasible option for development organizations. In this post, we will discuss the methods in which developers can capitalize on California’s tax codes and subsidy programs while including energy efficient systems in affordable housing.

A quick note on competition

Many of the incentives programs are competitive, meaning that the agencies in charge will use California’s environmental certifications and standards to assure the alignment of the project with state policies, and since funds are limited, only the highest scoring projects will obtain the money.

For example, funds for low-income housing can be obtained from tax-exempt bonds, which are issued by separate agencies or programs like California’s Low-Income Weatherization Program, which created to support energy efficiency installation costs.

This is all to say that, when going for tax breaks and subsidies, striving for a quality product is a great strategy to receive the best benefits available.


Tax credit allocating agencies

A credit allocating consultant will be able to help you consider all possible options that contribute to the project eligibility for the highest possible level of LIHTC and which work best for your project. This way, you can strike a good balance between cost efficiency and energy efficiency.


Energy consulting

Consult with an energy consultant to finetune your energy goals and ensure that the process is feasible. Energy consultants understand the complexities of California’s energy codes, so bringing one onto your team is the best way to ensure not only that the systems are as efficient as they need to be to receive tax breaks and subsidies, but also that the materials and practices used in installation are perfect for the style of project and that all inspections are passed the first time around.

Make sure that your energy consultants can do the following four tasks: 

  1. Conduct energy audits and modeling
  2. Rate energy systems
  3. Aid in energy system design, and
  4. Support the project through the procurement and construction phases.


This last capacity might seem superfluous, but the truth is that LIHTC resources can be “recaptured” if the project fails to maintain the requirements of the program during the 15- year compliance period. An energy consultant is the best way to ensure that this does not happen.


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