Despite winnowing energy consumption by up to 80 percent, passive design is often seen as an added—and untenable—first cost to building developers. Now, one market sector is getting a boost to make the investment more palatable: affordable housing. Thanks to a movement that originated in Pennsylvania, many states are now offering tax credits and incentives to encourage the construction of buildings that are in compliance with the Passive House performance standard developed by the German-based Passivhaus Institut and adapted to the United States market by the Passive House Institute US.
The effort is spearheaded by Tim McDonald, president and CEO of Philadelphia-based design/build firm Onion Flats. In 2012, Onion Flats created the city’s first certified Passive House project, the Belfield Townhomes—three row houses for low-income residents—designed for Raise of Hope, a Philadelphia-based nonprofit community development organization. McDonald says his team was able to stay within the project budget of $130 per square foot by simplifying the building envelope, eschewing a basement, pre-fabricating modules in a factory, and specifying economical interior finishes and furnishings, such as colorful cabinets from Ikea.
McDonald then began exploring ways to promote energy efficiency in Pennsylvania’s affordable housing sector as part of a research project through Temple University, where he’s an associate professor of architecture. In 2014, he and other architects and builders in the state worked with the Pennsylvania Housing Finance Agency (PHFA) to craft a simple but effective solution to promote high-performance projects without requiring new subsidies or regulations.
First, some background. Federal tax credits for affordable housing construction, offered through the U.S. Department of Housing and Urban Development’s Low Income Housing Tax Credit program, are allocated by each state’s housing finance agency. Winning those tax credits—which can subsidize up to 70 percent of a project’s cost—is a highly competitive process for developers. Through a point-based system called the Qualified Allocation Plan (QAP), each state agency sets its own criteria and priorities—such as project location, target resident demographics, project sponsor types—for deciding who receives the tax credits. The QAP is released to the public each year.
In 2015, the PHFA began offering 10 points out of its 120-point QAP for projects seeking Passive House certification. “Ten points is significant,” says PHFA senior executive director and CEO Brian Hudson Sr.
Developers took notice. Last year, 31 of the 85 proposed new construction developments stated an intent to meet Passive House standards; of those, seven received the tax credits. In 2016, 27 of 94 new construction projects planned to pursue Passive House; of those, 10 were awarded tax credits.
Many housing finance agencies already prioritize sustainability by awarding points for projects aiming to meet the U.S. Green Building Council’s LEED standards or the Enterprise Green Communities criteria. Unlike those programs, Passive House focuses solely on energy efficiency. “We chose Passive House because we felt that it ultimately reduces the cost of operating multifamily housing,” Hudson says, with the outcome being lower utility bills for residents.
The change to Pennsylvania’s QAP “really transformed the affordable housing market in Philly,” says David Salamon, who worked with local firm Wallace Roberts & Todd on two of the original seven projects awarded tax credits in 2015 (Salamon is now a certified Passive House designer at another local firm, Re:Vision Architecture). The local developer, Pennrose Properties, ultimately saw the value of adopting Passive House standards, but without the initial incentive, “these buildings wouldn’t be meeting these standards at all,” Salamon says. “It’s a massive upgrade from what would have been built.”
McDonald has made it his mission to expand this model. To date, he’s contacted housing agencies in 40 states and leads presentations and meetings across the country. He also tracks the progress of Pennsylvania’s Passive House projects on a spreadsheet. “The premium to build to the Passive House standard was less than 2 percent,” he says.
About a dozen of the states McDonald has contacted have added Passive House certification as a factor to their QAPs in varying formats, and many more states are considering it. “What Tim did is phenomenal,” says Lois Arena, senior mechanical engineer at Washington, D.C.–based Steven Winter Associates, which consulted for some of the high-performance projects in Pennsylvania. The firm is now fielding calls from affordable-housing developers in other states, including Connecticut, which added three points for Passive House certification (out of 102 total possible points) to its 2016 QAP. The shift to Passive House “is happening very quickly,” she says.
One reason for the speedy adoption is that the QAP approach relies on competition for existing incentives to spur energy efficiency rather than adding new subsidies or regulations. “It’s a great idea, and we’ve started working along those lines here,” says Greg Hale, senior adviser to the chairman of energy and finance at the New York Governor’s office. Hale is leading an effort to ensure that low- and middle-income residents benefit from the state’s many energy initiatives. He and his team have worked with New York State Homes and Community Renewal to create a Passive House path for the five optional points in the green building category under the state’s current 100-point QAP; that category will also being refined later this year, presumably to give more weight to performance.
McDonald hopes that the incentives for high-performance affordable housing will ultimately lead to more market-rate projects built to Passive House standards as well. “The main reason why people don’t want to do it is fear of the unknown,” he says. Building to these rigorous standards within a constrained budget is something many architects have to learn. “The way I see it, we’re training the industry,” he says. And once architects and builders have the opportunity to complete high-performance buildings, he hopes they won’t go back.