NHT Renewable: A New Model for Installing Solar Power in Affordable Housing Properties

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The National Housing Trust/Enterprise Preservation Corp. (NHT/Enterprise), a nonprofit developer/ owner and policy organization based in Washington, D.C., has created and test driven a new model for funding the installation of solar energy systems across a portfolio of existing affordable multifamily rental housing properties, to reduce operating costs and benefit the low-income residents.

The model has been used so far to install solar photovoltaic (PV) and solar thermal systems this year at five apartment properties in Washington owned by NHT- Enterprise Preservation Corporation. This represents the largest multi-site solar installation on affordable housing on the East Coast.

NHT/Enterprise plans to install solar panels in more than 20 apartment buildings over the next two years.

Centerpiece of Model

The centerpiece of the new model is NHT Renewable, a new green affiliate created by NHT/Enterprise to purchase and install the solar systems. NHT Renewable and the model were celebrated at a September ribbon-cutting ceremony for the new solar system at St. Dennis Apartments, one of the five initial properties. Among those in attendance was Julián Castro, Secretary of the U.S. Department of Housing and Urban Development (HUD).

“Energy costs are among the most significant operating expenses in affordable multifamily rental buildings,” Castro said. “Through the Better Buildings Challenge, we are working with building owners to help them meet President Obama’s goal of reducing energy consumption by 20 percent by 2020. Installation of solar energy enables affordable housing owners to better maintain rents for low-income families while saving money and energy.”

“Setting up NHT Renewable enabled us to buy [solar] systems for five properties for 10 buildings at one time and to install them all at once,” says NHT Sustainable Development Manager Jared Lang.

NHT Renewable’s initial solar installations, which cost a total $1.25 million, were funded by equity from NHT/Enterprise, grants from the John D. and Catherine T. MacArthur Foundation and the District of Columbia Sustainable Energy Utilities, and a loan from the Enterprise Communities Loan Fund, a community development financial institution (CDFI). NHT Renewable placed the local and federal renewable energy tax credits with an investor.

NHT/Enterprise Executive Director Michael Bodaken indicated that the model can be replicated by other owners – for-profit or nonprofit – to set up their own energy affiliate to install solar energy systems across their portfolios of affordable multifamily rental properties. In such cases, he said, the funding sources would be equity (from the owner or another party), hard debt, and a combination of federal renewable energy tax credits and a state incentive of some kind (e.g., state solar tax credit). Bodaken indicated that CDFIs represent one potential source of the debt.

Powering Building Operations

At the five Washington properties, NHT Renewable owns and maintains the solar equipment and sells solar-generated power to the properties under a 10-year power purchase agreement at a rate 20% less than that charged by Pepco, the local electric utility company. After 10 years, ownership of the solar equipment will revert to each property.

According to Lang, the solar PV systems supply about 50% of the common area electric needs for each property, and will reduce annual electricity costs by about 20% – or a combined $50,000 – for the five properties. At these properties, residents pay for their own electric and natural gas usage while the owner pays for all water and common area electric and natural gas consumption.

Each property continues to pay Pepco for about half the common area electric usage.

Bodaken says the installation of solar power using the model benefits residents in several ways. The reduction in property operating costs enables owners to maintain affordable rents and frees up cash flow that can be used for resident services or other purposes, he notes. Solar also fixes the price of energy for the property and mitigates the risks of escalating future operating expenses.

In addition to St. Dennis Apartments, the other developments at which NHT Renewable has installed solar systems are Copeland Manor, Meridian Manor, R Street Apartments, and Galen Terrace Apartments.

“We’re excited,” Lang says, “about the potential for this model to enable other owners to get to scale and make a big difference by starting to put solar across their portfolios. We call this portfolio-level solar. We’re reducing greenhouse gas emissions, saving money, and strengthening our portfolio with solar.”