Bipartisan House Bill Would Authorize HUD Pay-For-Success Demonstration (Enterprise Community Partners)

By Diane Yentel of Enterprise Community Partners     

Rebecca Schaaf of Stewards of Affordable Housing for the Future     

Jonathan Harwitz of Low-Income Investment Fund

Today, Representatives Dennis Ross (R-FL-15), Jim Himes (D-CT-3), Emanuel Cleaver (D-MO-5) and John Delaney (D-MD-6) introduced the Private Investment in Housing Act of 2015, bipartisan legislation that would authorize a “pay-for-success” (PFS) demonstration within HUD that is intended to save taxpayer dollars and improve the energy efficiency of government-supported multifamily properties. This PFS demonstration would be similar to one proposed in another bipartisan bill currently under consideration in the Senate.

HUD currently spends about $7 billion each year on utility bills in government-supported properties. Through straightforward retrofits that will improve the energy and water efficiency of these buildings, HUD could potentially cut utility costs by up to 20 percent—before accounting for upfront costs—while meaningfully reducing instances of asthma and other health problems for residents. In today’s tough fiscal environment, it is highly unlikely that HUD will receive the federal funds necessary to make these cost-saving improvements on their own.

The Private Investment in Housing Act of 2015 would allow HUD to enter into contracts with outside entities, who would raise private capital and work with energy service companies and others to make appropriate and economically justifiable upgrades. The outside entity would pay the investors back—including a financial return—using performance payments from HUD which would be triggered by verified savings.

The PFS contract would allow HUD to overcome barriers to achieving long-term cost savings—including a lack of upfront capital, regulatory impediments and split incentives between building owners and the residents who pay utilities—without costing the federal government anything. The demonstration would help improve up to 20,000 HUD-assisted apartments receiving project-based rental assistance (Section 8 PBRA), supportive housing for the elderly (Section 202) or supportive housing for persons with disabilities (Section 811).

Similar legislation was introduced in the House in 2014 and received bipartisan support. In addition, language authorizing this HUD demonstration has been included in President Obama’s 2015 and 2016 budget proposals, the Senate Transportation, Housing and Urban Development appropriations bill for 2015 and 2016, and the Energy Efficiency and Industrial Competitiveness Act (S.720) sponsored by Sens. Rob Portman (R-OH) and Jeanne Shaheen (D-NH).

Congress should support the Private Investment in Housing Act and any other legislation that seeks to improve the energy efficiency of multifamily housing, reduce the cost of managing HUD-assisting housing and improve outcomes for residents. We look forward to working with HUD and our partners to help implement the demonstration to maximize both the financial savings to taxpayers and the broader benefits to residents and the environment.

Jonathan Harwitz currently serves as Managing Director of Federal Policy and Government Affairs for LIIF in their Washington D.C. office. 

Rebecca Schaaf serves as Senior Vice President, leading SAHF’s energy and water conservation initiatives.