At left, tall apartment towers. At right, trees, In foreground, several mostly submerged cars in brown floodwaters, under a blue sky.

OpinionPolicy

How the Inflation Reduction Act Can Protect Low-income Renters From Climate Change

Climate change is an especially large threat to low-income residents. The Inflation Reduction Act offers a chance to act.

Flooding in the Bronx after Hurricane Ida. Photo by Jim Griffin via Flickr, public domain.

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At left, tall apartment towers. At right, trees, In foreground, several mostly submerged cars in brown floodwaters, under a blue sky.

Flooding in the Bronx after Hurricane Ida. Photo by Jim Griffin via Flickr, public domain.

Time is of the essence to address our housing and climate challenges, and to ensure that those who rely upon affordable homes to thrive can do so in the face of mounting climate risks. The Inflation Reduction Act, which passed in August 2022, presents several important opportunities that should be top of mind for housing advocates, developers, and policy makers as we approach our work in this and coming years.

The risks that threaten our housing stock have never been greater. The affordable housing crisis that once plagued big cities largely on our East and West coasts now touches nearly every part of the U.S. There is virtually no place in our country where a minimum wage earner can afford a two-bedroom rental apartment. The cost to build homes is only getting higher. Building material costs increased 42 percent from 2018 to 2021, according to REALTOR Magazine, and mortgage interest rates are higher than they’ve been in a decade and a half. These factors make it difficult for low-income buyers and nonprofit housing organizations to compete with institutional investors, who typically have more assets on hand to pay those higher housing costs. And those higher costs are passed on to tenants.

The result is that there just aren’t enough safe and accessible housing units in reach of people earning modest incomes—one- and two-wage families, young professionals, and older adults on fixed incomes.

On top of that, our climate is changing, and posing greater threats to affordable apartment buildings and their residents than to single-family homes or other rental housing. The threat is not an abstract one: it means that homes are lost and residents are displaced, sometimes permanently, when disaster strikes. During Hurricane Katrina, a significant portion—about one-fifth—of Louisiana rental units that sustained damage were accessible to tenants in the extremely low-income bracket.

It is an uphill battle to replace stock that serves the lowest income households. Owners are often uninsured and lack the capital reserves to rebuild. And those same owners are least likely to have the financial ability to fortify and weatherize homes so that existing units can withstand disasters and remain safe and habitable.

According to the Louisiana Housing Corporation, the state has lost one-fifth of its subsidized affordable housing stock in the last 10 years due to climate-related disasters. The magnitude of affordable housing loss in Louisiana bodes poorly for the rest of the country, where affordable housing is increasingly expensive to build.

Climate change also poses very real threats for renters. When Hurricane Ida hit New York City in 2021, the overwhelming majority of people who died—11 of 13—were residents of basement apartments. Largely unregulated and ill-suited to occupancy, basement apartments nonetheless serve as affordable homes for many immigrant and lower-income families. Often-illegal conversions persist in an economy where demand for housing outstrips supply, and there is insufficient federal, state, and local funding to help bring these shadow units into compliance.

And aside from record-breaking, named weather events, the increase in the number of excessively hot days means that buildings that lack adequate cooling can severely harm the health and well-being of residents. In Portland, Oregon, after nearly 100 people died during a 2021 heat wave, the city began to install portable heat pumps to cool units, with plans to distribute up to 15,000 in five years. The Portland Clean Energy Community Benefits Fund is prioritizing installation in units occupied by low-income people, particularly seniors who live alone and have medical conditions.

The Environmental Protection Agency notes in a 2021 report on climate change vulnerability that in coastal zones that are subject to flooding, low-income renters are among the most vulnerable to climate change, and increases in extreme-temperature-related premature mortality are disproportionately likely to impact areas with larger shares of low-income and BIPOC populations.

For these reasons and more, it is imperative that policymakers, state leaders, and community-level developers make full use of the opportunities provided in the Inflation Reduction Act (IRA). The legislation includes $1 billion for the U.S. Department of Housing and Urban Development (HUD) to provide loans and grants to affordable housing developers to retrofit buildings to be more energy-efficient, water-efficient, and climate resilient, a critical step forward. Housing and environmental advocacy organizations like the National Housing Trust, where I serve as CEO, are working hard to ensure that HUD uses every method at its disposal to make this program a success.

But this is not a job for HUD alone. Other federal agencies have a role to play to ensure that energy-efficiency rebate programs work equally well in multifamily housing and reduce the bottom line for renters as they do for homeowners. The Department of Energy (DOE) will be distributing $9 billion for rebates to cover the cost of home energy efficiency upgrades and new electric appliances, with incentives to drive funding toward low- and moderate-income households. The EPA is charged to administer a new $27 billion financing resource to reduce emissions for cleaner air. The agency is currently designing the program, which housing advocates, including NHT, have urged should directly target investment in affordable rental housing through set-asides and careful selection of intermediary organizations with experience in affordable housing lending.

These opportunities, deployed well, can help ensure that the U.S. achieves its Justice40 goals to drive climate investments to underserved and disadvantaged communities and address the current threats to our existing stock. HUD’s retrofits can directly prepare homes for threats like flooding, but any investment in energy efficiency and transition to renewable energy made as a result of the IRA will contribute to lasting climate resiliency.

State and local leaders will also be key to the success of the IRA. Funding of this magnitude compels new partnerships between state energy offices that understand climate risks but often are unfamiliar with the complexities of multifamily housing, and state housing finance agencies that know the inner workings of affordable housing but often have little capacity to ensure that investments achieve climate-related goals. New York State’s energy agency co-administers an incentive program with Homes and Community Renewal, the state’s affordable housing agency, to award energy-efficiency funds to developers that apply for housing finance resources. This expedites the use of these resources to create healthier and more efficient homes. Mayors, who are often on the front lines of answering calls for more affordable housing, will find success by both preserving existing housing through retrofits supported by the IRA as well as by cultivating new supply-side solutions that put climate considerations at the forefront, such as requiring that new developments meet Enterprise Green Communities Criteria or other fortified building standards. And for developers and building owners who struggle to finance upgrades to respond to changing conditions, the time is now to get smart about bringing climate-friendly solutions to buildings and residents.

The climate has changed but our building stock has not. The IRA gives us the capital to invest and mandate to act. The time is now.

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