Utility Allowances, Energy-Efficiency, and Renewables in Affordable Housing

Affordable housing programs usually establish restrictions on tenant rent contributions – either income-based rents or formula rents. In either case, tenant contributions must cover both rent and a reasonable amount of basic utilities. Where utilities are tenant-paid, tenants must receive a credit toward their total rent contribution known as a “utility allowance” to ensure compliance with the program’s rent limitations. Although details vary among specific programs, the basic standard for utility allowances is to approximate “reasonable consumption,” using current utility rates. Therefore, an allowance may not cover each tenant’s actual utility costs. Allowances must usually be reviewed annually, and adjusted for significant changes. Inadequate allowances can impose hardship on tenant’s capacity to pay for other necessities, such as food, medical care, and rent, and ultimately result in unnecessary evictions and terminations.

Where utilities are tenant-metered, tenants pay every dollar of their energy bills, regardless of allowance levels. Inefficient units, systems or appliances cost tenants more to operate, and often fail to deliver health, safety and comfort. Tenants have important interests in what energy-related efficiency measures or renewables are provided and their actual impact on utility allowances and total rent and utility expenses. NHLP is working to ensure that state and federal policies governing energy improvements in affordable multifamily properties reflect tenants’ needs.

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