Affordable Energy and theConsolidated Plan Process

Roger D. ColtonFisher, Sheehan & Colton

Public Finance and General EconomicsBelmont, Massachusetts

June 2005

The HUD Consolidated Plan

Identifies affordable housing needs.

Discusses housing market. Identifies barriers to affordable

housing. Identifies and ranks action steps.

Starting Point: Home Energy Burdens

Shelter burdens affordable at 30% of income.

Utility costs affordable at 6% of income (20% of shelter costs).

Home Energy Affordability Gap

County-by-county calculation of home energy burdens by Federal Poverty Level.

To the extent that burdens are above 6%, they do not result in sustainable housing costs.

Home Energy Burdens at 30% of Area Median Income

2-person 3-person 4-person

Davenport 11.9% 10.6% 9.5%

Des Moines 10.0% 8.9% 8.0%

Sioux City 12.7% 11.3% 10.1%

Impact of price changes

Natural Gas Propane

February 1999 $5.06 $0.577

February 2002 $5.73 $0.842

February 2003 $7.86 $1.087

February 2004 $8.59 $1.108

Dollar increase $280 $340

Burden increase 1.4% 1.7%

Gas bills: weather and prices

Usage Bills

1998/1999 90.4 $531

1999/2000 82.1 $575

2000/2001 99.1 $947

2002/2003 90.4 $809

2003/2004 84.6 $812

Impact on affordable housing development

Tenants can pay less rent; OR Developer pays more of the energy

costs.

Either way, developmentsupports less debt financing.

Affordable PaymentsAdjusted for Utility Bills

Occupation Income W/o utilities Adjusted forutilities

Pct reduction

Retail sales $22,260 $464 $354 24%

Dental ass’t $29,680 $618 $515 17%

Truck driver $32,400 $675 $574 15%

K /12 teacher $36,780 $766 $669 13%

Patrol officer $43,000 $896 $804 10%

Affordable Purchase PricesAdjusted for Utility Bills

Occupation Sales Price W/o utilities Adjusted forutilities

$ Reduction

Retail sales $170,000 $75,092 $57,349 $17,742

Dental ass’t $170,000 $100,122 $83,381 $16,741

Truck driver $170,000 $109,298 $92,924 $16,374

K /12 teacher $10,000 $124,073 $108,290 $15,783

Patrol officer $170,000 $146,053 $130,112 $14,944

Reduced Sales Price:Colorado Counties

Number of Counties

Pct Reduction 60% AMI 80% AMI

0 – 10% 3 11

11 – 15% 10 23

16 – 20% 13 26

21% or more 37 3

Reduced Affordable Units:Colorado Counties

Number of Counties

Pct Reduction 60% AMI 80% AMI

0 – 10% 8 12

11 – 15% 9 21

16 – 20% 18 8

21% or more 28 22

Recommended Action #1

Homeownership and rental units developed as either new construction or substantial rehabilitation by grantees or participating jurisdictions should be developed to Energy Star standards.

HUD Recommendation

Include following in any Request for Proposals or procurement process:

“All new buildings and gut rehab shall be designed to meet the National Energy Five Star efficiency performance standard of 86. All procedures used for this rating (86) shall comply with National Home Energy Rating System guidelines.”

The Efficiency Standard

Each five percent increase in efficiency results in one point on the Energy Rating above 80. A home that is built to meet the 1993 Model Energy Code has a rating of 80. A home that is five percent more efficient has a rating of 81. A home that is 30% more efficient has a rating of 86 and qualifies as an Energy Star Home.

Quantifying the Effective Impacts of Efficiency Investments

Cash flow Net Present Value Svgs Reduced interest rates Reduced sales price

$160 - $270 $2800 - $4300 0.31% - 0.45% $3700 - $5500

Things that just don’t fit

2.5% of HUD-insured mortgages failed because of high energy prices. /a/

Value of home increases $20 for each $1 of energy efficiency investment. /b/

/a/ Metrostudy Corp. (1976). An Analysis of the Contribution of Energy Price Changes to HUD-Insured Mortgage Failures, Federal Energy Administration.

/b/ 1999 Appraiser Journal

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