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Policy Perspectives: Utility Allowances, Energy Efficiency, and HUD Regulations

The following guest essay is part of PHADA’s Policy Perspectives series. The positions and views expressed are those of the author and do not necessarily represent the position of PHADA.


David Weber, PHADA Policy Analyst

 

The recent Federal Register Notice about regulatory waivers granted in the third quarter of 2020 included many waivers regarding Utility Allowances. For those unfamiliar, households who receive Section 8 or other rental assistance for units where the tenant has to pay for utilities, the subsidy is adjusted based on estimates of utility costs. This can be a challenging calculation of varying accuracy due not only to user behavior but also variations in building efficiency, utility rates, and types, and the capacity and willingness of the utility company to provide data. 

One of the waivers granted by the Office of Public and Indian Housing was a waiver allowing a site-specific utility allowance in a proposed Project-Based Housing Choice Voucher supported development. The agency requesting the waiver, the Housing Authority of the City of Austin, was able to demonstrate that the energy-efficient building would result in substantially less consumption, and thus cost to the tenant, than would be the case based on the PHAs utility allowance schedule which by regulation “must be determine(d) based on the typical cost of utilities and services paid by energy-conserving households that occupy units of similar size and type in the same locality.”  And because the project-basing of Housing Choice Vouchers (a program based on allowing tenants to choose private-market units) is a subset of the regular Housing Choice Voucher program, the underlying regulations generally apply, such as the requirement to use the same utility allowance schedule.

Was this an appropriate waiver to grant? Yes. Although the tenant will receive less subsidy, the reduced utility costs they have to pay should offset that loss. For the federal government, it will either cost less or provide additional cash flow to support the project, because if there is less money going to the tenant to pay utility costs, there is more money available to go towards rent before bumping into the cost limits of the payment standards. Some development projects that cannot work with the standard utility allowance might “pencil out” if a site-specific utility allowance were permitted.

Why does this matter?

  1. PHAs, and those working or advocating with PHAs, should know that HUD can waive regulatory requirements regarding Utility Allowances or any other non-statutory HUD-issued requirement.
  2. HUD should consider issuing a broad waiver now on utility allowances in truly energy-efficient buildings and should plan to modify regulations and provide new guidance on developing “energy-efficient” alternate utility allowance schedules. There are a variety of existing, independently developed energy-efficient standards that could be recognized or utilized.  Even better would be to look at creating utility allowances based on more specific data from utilities about historical energy use in the specific unit. PHADA included recommendations relating to utility allowances in its January 2021 comments to HUD on proposed HOTMA rules

In the meantime, if a HUD rule gets in the way of something that just makes sense, a waiver is a possibility. Updated HUD guidance on developing energy-efficient utility allowances could also help in the short term.  With a true energy-efficient UA, a building that qualifies (PBV or not) would mean more choices for tenants, lower rent burdens, and potentially more participating landlords. 

There is much that needs to be reviewed and updated in HUD’s regulations, and our current context creates possibilities that were unrealistic just a year or two ago. That will take some time, but action on guidance for local PHAs in creating their energy-efficient utility allowance option would be most welcome. 

 

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Scheduled for September 12–14, 2021 at the Hyatt Regency Washington on Capitol Hill in Washington, DC.

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