This article is part of the Under the Lens series
Dual Crises: Housing in a Changing Climate
UPDATED Sept. 3 | There’s a bright beacon of hope on the horizon for communities navigating their way through the housing and climate crises: Funding. Targeted, federal funding.
The billions of dollars that will soon be headed to low-income communities to address their affordable housing needs and safeguard their homes against the devastating effects of climate change is expected to be a game changer.
The Inflation Reduction Act (IRA) dedicates $27 billion to address climate change through the Greenhouse Gas Reduction Fund, the largest of its kind. Much of the money will be earmarked for low-income and disadvantaged communities—defined as communities with a combination of environmental and socioeconomic challenges—and “geographically dispersed” low-income folks (those who aren’t living in one singular, geographic area). As housing is intertwined with climate change, it’s fitting that the funds can be used for affordable housing projects.
In a time when climate policy can feel grossly inadequate to meet the need, the funding is expected to deliver climate assistance across the country to the communities that need it most, no matter the predominant politics of any given region. Here’s a closer look at the Greenhouse Gas Reduction Fund, and how the affordable housing industry can take advantage of the opportunity.
How Will the Funding be Distributed?
The $27 billion is split across three funds:
- the Clean Communities Investment Accelerator,
- the National Clean Investment Fund,
- and Solar for All.
Although the funds have the same goals—bringing green investment to low-income and disadvantaged communities, combating air pollution, and reducing greenhouse gas emissions—they will accomplish those goals through distinct distribution strategies and projects.
This past spring, the Environmental Protection Agency selected the nonprofit awardees that will be charged with distributing funding for the Clean Communities Investment Accelerator and the National Clean Investment Fund. Those funds were formally awarded last week and can begin rolling out to communities. Solar for All funds were formally awarded at the same time, but will be handled differently, and are expected to be distributed next year.
Clean Communities Investment Accelerator
The Clean Communities Investment Accelerator is a $6 billion fund that will be distributed through five nonprofits. Those groups will 1) provide funding to community lenders, which typically serve low-income communities not traditionally reached by mainstream lenders, and 2) provide technical assistance for projects like building retrofits and solar power installation.
Each of the five nonprofits has its own criteria and timelines for funding projects and should be contacted separately for information on how to apply for funds.
The five awardees are:
- Opportunity Finance Network (OFN), a network of over 400 community development financial institutions operating across the country. OFN plans to distribute funds to its community lender members and expects its first funding cycle to occur before the end of 2024.
- Inclusiv, an organization with a network of member credit unions across the country that serve low-income communities. The organization has an email sign-up form for those who wish to learn more about its program.
- Justice Climate Fund, a group created by the Community Builders of Color Coalition and including organizations like the African American Alliance of CDFI CEOs. The group operates across the country, providing lending for clean energy projects. It targets low-income communities that most need funds and are most affected by climate change.
- Appalachian Community Capital, a CDFI lending intermediary serving the Appalachian region. The lender plans to distribute funds using its green bank, the Green Bank for Rural America. It will use both private and public capital to invest in green energy projects, including solar installation, green affordable housing, and zero emission transportation.
- Native CDFI Network, a national network of 70-plus Native community development financial institutions. These organizations serve Native communities, which often miss out on the financial opportunities other communities receive. The funding will be deployed across 63 such community lenders for clean energy, transportation, and building projects.
To qualify for funding from the Clean Communities Investment Accelerator, regardless of which of the five awardees is involved, a project must align with one of three categories: creating and storing clean energy, developing or retrofitting net-zero emission buildings, or providing clean transportation. Projects must also fulfill a number of other requirements, including lowering emissions and air pollution and adding at least one additional benefit (one of which can be affordable housing).
One of the most important aspects of the Clean Communities Investment Accelerator is that the entirety of the funding must benefit low-income and disadvantaged communities.
“What we want to be sure of is that community lenders are actually working in hard hit communities, working on renewable energy projects with those who are in those communities, and putting those projects forward to us for review and approval so that we can finance them,” says Donna Gambrell, president and CEO of Appalachian Community Capital.
Gambrell says Appalachian Community Capital is happy that its work will benefit the rural, coal-impacted communities of Appalachia. Air pollution has been the “legacy” passed down to people who live in the Appalachian region, “which for many, many years existed as an extractive economy, or an extractive region,” she says. Appalachia’s rapid loss of its coal economy in the 2010s left an opening for an ongoing shift to investment in green energy.
The funds are also expected to extend beyond the Appalachian region to target other low-income and disadvantaged communities. In its proposal, Appalachian Community Capital expressed its intentions to direct funding to lenders serving Black, Hispanic, Native, and disabled populations.
Among other projects, a few examples of awardees’ proposals for the funds include providing electric vehicle charging stations near multifamily residences (Opportunity Finance Network), funding solar panels to lower utility bills (Inclusiv), and developing green housing for Native communities (Native CDFI Network).
National Clean Investment Fund
The National Clean Investment Fund is the largest of the three funds, with $14 billion to be distributed through three organizations. While only 40 percent of those funds are required to go to low-income and disadvantaged communities, the proposals from the three organizations that were selected to distribute those funds promise to do better.
- Climate United, a national nonprofit and coalition of three organizations: Calvert Impact, the Community Preservation Corporation, and Self-Help. The coalition was awarded half the total amount of the fund and plans to distribute 60 percent or more of those dollars to low-income and disadvantaged communities.
- Coalition for Green Capital, an organization that develops green banks. The organization was awarded $5 billion, which it plans to use to start a national green bank, combining public and private capital to fund clean energy technology. It has earmarked 50 percent of its funds for low-income and disadvantaged communities. The Coalition for Green Capital was also awarded a smaller amount of funding from Solar for All.
- Power Forward Communities, a coalition made up of several large community development nonprofits—Enterprise Community Partners, Rewiring America, Habitat for Humanity International, the Local Initiatives Support Corporation, and United Way Worldwide. The coalition was awarded $2 billion and is dedicating 75 percent of that to low-income communities. It’s using its funds to decarbonize affordable housing across the country.
The Environmental Protection Agency recommends working directly with one of the three fund recipients to access a grant.
The terms of the National Clean Investment Fund are the same as those of the Clean Communities Investment Accelerator, except that projects are not required to meet the “priority project” threshold (creating and storing clean energy, developing or retrofitting net-zero emission buildings, or providing clean transportation).
Funds will travel from the three awardees directly to community lenders but can also be granted directly to individual projects.
Like the Clean Communities Investment Accelerator, the fund will also benefit housing.
Todd Nedwick, senior director of sustainability policy with the National Housing Trust, says the organization has worked with Climate United to develop its multifamily affordable housing strategy. “They envision working closely with housing finance agencies,” Nedwick says. “The [housing finance agencies] would lend money to a property owner and would incorporate into that financing product additional capital from Climate United, from their award” alongside existing financing, enabling the owner to “pay that additional cost of those higher sustainability upgrades.”
Solar for All
The $7 billion Solar for All fund is distributed through a mixture of recipients: tribes, state governments, and nonprofits (some working in individual states, and others serving multiple). This unusual structure provides assurance that all regions will be served, according to Jeff Heie, director of GiveSolar.
GiveSolar is an organization that works with state chapters of Habitat for Humanity to provide solar power in homes. Habitat for Humanity is a partner of GRID Alternatives, one of the nonprofit awardees of the Solar for All fund. Heie says that GRID Alternatives plans to “fill in some of the gaps” for states where “politics got in the way of the state office applying or making an application for Solar for All.” Florida, Idaho, Montana, Nevada, and the Dakotas chose not to apply.
The fund is expected to benefit nearly 1 million low-income and disadvantaged families. Although funding has been formally awarded to recipients, it isn’t expected to be available for distribution until 2025.
“It may not sound like a huge economic impact, but we’re finding that a modestly sized solar system saves a family between $50 and $70 a month on their electric bill, and that will just continue to rise as the price of electricity continues to rise,” says Heie.
The future of solar isn’t entirely bright, he adds. “We’re starting to see utilities around the country attacking solar net metering and trying to eliminate it. And if solar net metering is eliminated, then the economics of solar are much less desirable.” (Net metering is the system of reimbursing individuals for the extra solar power they generate for the grid.)
In the future, homeowners could receive less than a 100 percent reimbursement for the energy they generate. “So right now, when a homeowner produces more than they’re using, they get a full value credit for [it]. Let’s say they produce 100 kilowatt hours more electricity than they used in their home. Then they get 100 kilowatt hours of credit to be used in the wintertime or on rainy days or at nighttime,” Heie says. “What the utilities would probably like to do is to give what’s called avoided costs,” rather than full retail cost—lowering the amount paid back to the individual.
Funding Worries
Although the Greenhouse Gas Reduction Fund isn’t the end-all answer to greening our housing stock—much less to solving the climate crisis—the money could be transformative for low-income and disadvantaged communities.
But some in the community development industry have worries about the fund.
Until the grants were formally awarded on Aug. 16, the Environmental Protection Agency was working with awardees to pin down grant plans. “They got less money than what they asked for,” says Adam Kent, who specializes in green finance at the environmental advocacy nonprofit, the Natural Resources Defense Council. “So they had to go back and kind of tweak their program plan based on their new budget.”
“All the selectees got a haircut on their projects,” Gambrell says.
A tumultuous election season may stoke fears that an administration change could affect the rollout. But the National Resources Defense Council doesn’t expect the outcome of the elections to affect the funds.
What Else Is in the Inflation Reduction Act?
These aren’t the only funds for organizations combating climate change. The Inflation Reduction Act encompasses several programs. One, the Environmental Protection Agency’s Environmental and Climate Justice (ECJ) program, received $3 billion.
The EPA must award grants by September 2026 and the funds are limited to “disadvantaged communities,” which the agency maps.
The grants are mainly directed to community-based nonprofits, or “CBOs,” and to partnerships between them. The EPA has announced multiple programs under ECJ: the Environmental Justice Collaborative Problem-Solving Cooperative Agreement, the Environmental Justice Government-to-Government program, the Environmental Justice Thriving Communities Grantmaking Program, and the Community Change Grants program. Organizations still have until Nov. 21, 2024 to apply for the Community Change Grants program, with awards ranging from $1 million to $20 million.
“The statute says these dollars need to be obligated by September, and [the] EPA has communicated that that is their plan to do it,” Kent said. (The funds have since been obligated.) “And so if these grants are executed, the federal government has then committed these dollars to these organizations to deploy based on the terms of their grant agreement.”
There’s also the question of whether smaller housing providers will be able to reap the benefits of the fund. Building owners can work directly with the awardees charged with distributing the funds, or access funding secondhand via CDFIs and other community lenders, says Nedwick of the National Housing Trust. The affordable housing nonprofit offers resources for housers about the fund, and in 2023 it held a bootcamp for affordable housing providers and housing finance agencies—focusing especially on the smaller housing owners who might have more trouble accessing funds. Half of the 50 housing providers at the bootcamp made use of the free technical assistance offered to them.
“They didn’t have the staff capacity to collect the building performance data that would be necessary to help New Ecology analyze their properties,” Nedwick says.(New Ecology was a third party tasked with evaluating the participants’ portfolios for opportunities to benefit from the funds.) “We sort of understood that this would be a challenge for under-resourced housing providers that have so many other priorities that they’re dealing with. But we did expect more than half of the providers to take advantage of that technical assistance.”
It’s emblematic, he says, of a larger problem: although the funds are intended to be far-reaching, it’s always harder for those smaller housing providers to get a foot in the door.
Challenges aside, the influx of funds is an exciting time for the industry, and an unprecedented opportunity to invest in communities that need it most.
“This is truly a historic moment,” Kent says, “but in order to really maximize the transformational impact of this moment, this work cannot be siloed. It needs to be integrated in all the work of community development. It needs to be a lens through which community development works.”
Editor’s Note: In an earlier version of this story, Shelterforce incorrectly reported that Inclusiv’s CCIA application form was available. Applications for grants are not yet available. The story has also been corrected to clarify that the African American Alliance of CDFI CEOs is a member, not a leader, in the Justice Climate Fund.
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