CT Green Bank Strengthens Commitment to Low-Income Residents

This post, authored by Bettina Bergöö, originally appeared as a guest post in Yerina Mugica's blog.

The nation’s first Green Bank, now in its sixth year, is strengthening its commitment to Connecticut’s low-to-moderate income residents by welcoming a veteran professional in affordable housing development and finance to its board of directors.

The Connecticut Speaker of the House appointed Betsy Crum, Executive Director of the Women’s Institute for Housing and Economic Development, to Connecticut Green Bank’s (CGB) board last month, showing the importance CGB places on Crum’s broad and deep relationships in the affordable housing sector.

Established in 2011, CGB was the first green bank in the United States and is now a partner in the Green Bank Network spearheaded by NRDC. Green banks are public or quasi-public financing authorities established specifically to facilitate private investment into low-carbon, climate-resilient infrastructure.

Throughout her extensive career, Crum has served as an advocate for, developer of, and lender for affordable housing properties. She has also worked for Connecticut’s Department of Housing.

In a recent interview, Crum made clear why affordable housing and reduced energy costs are both critical to supporting distressed communities in Connecticut. Housing is considered affordable if it does not cost more than 30 percent of household income, and the affordable housing sector focuses on meeting the needs of households making 80 percent or less than area median income. Across the U.S., there is a significant need for new construction of low-income housing units in addition to the increasing need to preserve the affordability of existing properties that are targeted by developers in gentrifying areas. 

Connecticut residents pay the highest rates for electricity in the continental U.S., second overall only to Hawaii. They also have one of the country’s highest costs of living. In many states, including Connecticut, a household with one full-time worker would have to work 2.5 full-time jobs at minimum wage to afford a two-bedroom rental apartment at fair market rate. With around 90,000 families in the Connecticut paying more than 50 percent of household income for housing, there is a clear misalignment between prevailing wages and the cost of housing for working families.

In addition to high energy costs, many of the state’s housing stock is old, with more than 80 percent of housing units 50 years old or older with decades of deferred maintenance. This means that buildings in which low-to-moderate income residents live are poorly insulated or have very old heating systems, requiring the purchase of even more energy to make them livable during harsh winters. 

Using in-depth market needs analysis, CBG designed several programs to reduce this energy burden while creating jobs. Financial products include zero-interest pre-development loans offered in partnership with the Housing Development Fund (a local Community Development Financial Institution), New Ecology Inc. (a non-profit leader in clean energy and sustainability for multifamily housing) and the Macarthur Foundation. These loans help multifamily property owners analyze, design and acquire financing for energy improvements, such as weatherization and insulation, HVAC upgrades and solar PV systems. They can also be used to assess remediation health and safety hazards (e.g. mold, asbestos remediation or leaky roofs) that must be taken care of before the energy measures can be implemented. These pre-development loans are designed to incent owners to do the upfront analysis and design work necessary to ensure high quality projects that deliver deep energy savings and high return on investment. Owners contribute a 25% cost share. In some cases, CGB will consider full or partial loan forgiveness for projects that are deemed not viable after completion of pre-development work.

GB also offers low-interest unsecured loans for the construction of such projects in partnership with Capital for Change, another CT CDFI. The loans can be repaid for up to 20 years from the savings incurred by the energy improvements. Neither the property owners nor tenants need to make an upfront capital expenditure.

In addition to these financial products, CGB has a long-standing partnership with the Connecticut Housing Finance Authority (CHFA), Connecticut’s affordable housing lender. Most recently, CGB and CHFA launched BenchmarkCT with the private company WegoWise to collect and analyze energy consumption data for multifamily affordable housing properties. Having this data makes it easier to identify buildings in which energy improvements would be the most beneficial.

Just last week, CGB announced a new partnership with the nonprofit solar installer GRID Alternatives to promote more clean energy installations on affordable multifamily housing units. GRID Alternatives will provide free technical assistance to owners and hands-on solar workforce training for local job trainees, including from nearby community colleges, and educate residents on the new technologies.

At the Women’s Institute for Housing and Economic Development, Crum focuses on developing housing for individuals coming out of homelessness and those earning up to 50 percent of area median income. A number of the properties developed or preserved by the Women’s Institute have incorporated elements of energy efficient design and renewable energy generation.

Crum said that although there are public incentives for incorporating clean energy design into housing developments, private financial institutions often lack an understanding of the benefits of energy improvements and the processes to account for them. This means that affordable housing developers cannot always borrow money based on projected energy savings, so it is difficult to raise the extra money needed to include clean energy design elements in new developments or retrofits.

Other localities face similar challenges.

The New York City Energy Efficiency Corporation (NYCEEC), a green bank-like entity that helps bring in private capital to energy efficiency projects in commercial buildings, has worked with Fannie Mae in New York City to incorporate future savings into assessments of a borrower’s credit risk. This allows for the provision of larger loans for energy-saving projects.

Data availability on energy savings over time can be a key driver of green lending offerings. Crum and the CGB have been active in collecting data on energy savings from energy improvements and sharing that data with private financiers. Any project that has CGB funding is required to include such performance monitoring so the data record continues to grow.

In addition to increasing these efforts with Crum now on the CGB Board, CGB plans to increasingly communicate—to both financiers and property owners who may be skeptical of paying for energy upgrades—the clean energy improvements that have reliably cut energy use with financing from CGB. In many cases, the energy savings don’t just pay for the energy upgrade, but also for additional property and tenant improvements like greater accessibility or a more enjoyable common area. As Crum put it, “What’s so exciting about this is… [affordable housing developers] now have a new source of funding to maintain properties that we never had before.”

Another member of the Green Bank Network, Australia’s Clean Energy Finance Corporation, is also working to lower energy costs in affordable housing properties. Instead of investing in retrofits of existing buildings, however, the CEFC’s approach is to provide funding to “stretch” the design of new construction to include clean energy design elements.

Unlocking funds for clean energy design in affordable housing is new for many private financiers and developers. As more green banks are established and gain experience in the affordable housing sector, they can play an important role in extending the benefits of renewable energy and energy efficiency to all.