What You Need to Know About HUD’s Green and Resilient Retrofit Program

Published by Karie McMillen on Thursday, November 2, 2023

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A provision of the Inflation Reduction Act (IRA) of 2022 provides $837.5 million in funding and up to $4 billion in loan authority to the U.S. Department of Housing and Urban Development (HUD) for affordable housing properties.

HUD issued Housing Notice H 2023-05 May 11 to implement the Green and Resilient Retrofit Program (GRRP). The legislation provides funding to HUD for three goals: (1) to reduce energy and water use in HUD-assisted multifamily properties, (2) to make HUD-assisted multifamily properties more resilient to extreme weather events and natural disasters, and (3) to reduce greenhouse gas emissions from HUD-assisted multifamily properties, both directly and indirectly and by using material with less embodied carbon.

For a property to be eligible for GRRP funding, the property must be receiving HUD assistance, including Section 8, Section 202, Section 811 and Section 236. A property can qualify for GRRP funding under one of three cohorts available–Elements, Leading Edge and Comprehensive. Property owners can apply for one cohort per property and receive funding by means of a grant or surplus cash loan. Below we will discuss each cohort and funding options.

Elements Award

There is approximately $140 million available for the Elements Award. A property is eligible for an Elements Award if the property is undergoing recapitalization with plans of creating a greener and more climate-resilient property. The funding per property is limited to the lesser of (1) $40,000 per unit, (2) $750,000 or (3) total eligible costs. It can be used for items such as heat pumps, sustainable building materials and solar panels. Two of the four application dates for an Elements Award have passed – June 29 and Sept. 28. Two remain: Jan. 4, 2024, and March 28, 2024. Overall, 200 awardees are anticipated, including 28 from Round 1, which were named Sept. 13 by HUD.

Leading Edge Award

There is approximately $400 million available for the Leading Edge Award. A property is eligible for a Leading Edge Award if it has ambitious carbon reduction and resilience goals. The funding per property is limited to the lesser of (1) $60,000 per unit, (2) $10 million or (3) total eligible costs. In addition, the property must obtain either a net zero energy certification or net zero carbon certification. Two of the four application due dates for Leading Edge Award have passed (July 31, Oct. 31). The remaining due dates are Jan. 31, 2024, and April 30, 2024. Overall, 100 awardees are anticipated.

Comprehensive Award

There is approximately $1.47 billion available for the Comprehensive Award. A property is eligible for a Comprehensive Award if the property is looking to achieve vital green initiatives and utility benchmarks. The funding per property is limited to the lesser of (1) $80,000 per unit, (2) $20 million or (3) total eligible costs. The Comprehensive Award is the broadest in scope and does not require the property owner to have construction or greening experience. HUD will be highly involved throughout the process and transaction exchange. One application due date (Aug. 31) is passed and the other three are Nov. 30, Feb. 28, 2024, and May 30, 2024. Overall, 300 are anticipated.

Funding Options

Grant

A property can receive grant funding up to the amount of its total eligible costs. The recipient of the grant must be the owner of the property incurring the eligible costs. The grant is not required to be repaid if the property remains compliant with GRRP requirements. If a project receives grant funding, the project must remain affordable for the longer of 25 years or five years beyond any existing use restriction.

Surplus Cash Loan

A property can receive a surplus cash loan up to the amount of its total eligible costs. The maturity date of the surplus cash loan is the latter of 15 years following the closing or the maturity date of the existing first mortgage. The interest on the surplus cash loan is a simple interest rate of not less than 1% per year. Payments are made from surplus cash in the amount of 25% for the Elements Award or 50% for the Leading Edge and Comprehensive Awards. If a project receives a surplus cash loan, the project must remain affordable for the longer of 15 years or five years beyond any existing use restriction.

How Can Novogradac Help?

Novogradac is available for consulting services to discuss the program and its benefits and to assist with assembly of the application. Properties that receive GRRP funding will have a HUD audit and REAC submission requirement that Novogradac can perform. For more information on GRRP, visit the HUD website at www.hud.gov/GRRP. 

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