By Wilson Ding, Related Midwest
The integration of sustainable features in affordable housing often comes with a perceived conflict: the expense of green technologies versus tight operating margins. However, innovative financing strategies and open dialogue with government agencies can bridge the gap, making sustainability more achievable for these projects.
By their very nature, affordable housing developments tend to be very complex, often with a number of public and private stakeholders and a multifaceted capital stack. Securing additional resources for the implementation of sustainable technologies in both new and existing communities adds another layer of intricacy, contributing to the sector’s lag behind market-rate in this area.
Yet while the installation of sustainable technologies may require a higher upfront investment of time and money, their ability to reduce ongoing expenses makes them a smart long-term strategy. Tax incentives, grants and other subsidies can also help make these projects feasible.
Round Barn Manor
My firm, Related Midwest, recently finished a $6.8 million renovation of Round Barn Manor, a 156-unit affordable seniors housing community in Champaign, Illinois. Completed in September 2024, the renovation was part of a broader $38.6 million recapitalization initiative carried out in collaboration with Related Affordable, our national affordable housing arm whose portfolio comprises 65,000 units across the country.
Round Barn Manor was one of the 59 properties in Aimco’s affordable real estate portfolio, which Related Affordable acquired in 2018 for $590 million.
The redevelopment of Round Barn Manor included the installation of a ground-mounted, fixed-tilt solar array on an adjacent lawn. The system delivers renewable energy directly to the community, with any excess energy transmitted to the community grid for credits.
Related Midwest worked with Rethink Electric, a residential and commercial solar installation company, to deploy the 186-module, 100.3 kW system. The array was designed to generate more than 126 MWh per year, equivalent to the annual power needs of approximately 12 single-family homes. Most of this energy is used to power common areas of the building, with additional cost savings earmarked for resident programming.
Funding for Round Barn Manor was sourced in part by the Green and Resilient Retrofit Program (GRRP), an initiative of the Inflation Reduction Act of 2022. Implemented by the U.S. Department of Housing and Urban Development, GRRP has awarded approximately $1.15 billion in direct loans and grants to multifamily providers, with the goal of providing climate-resilient housing for low-income individuals and families.
Round Barn Manor also benefited from the Low-Income Communities Bonus Credit Program, an initiative supported by the U.S. Department of Energy. This program offers valuable guidance and incentives to enhance the sustainable design and system capacity of the solar array by increasing clean electricity investment tax credits under Internal Revenue Code Section 48E, enabling the property to further improve energy efficiency and reduce carbon emissions.
As the largest developer of affordable housing in the Midwest, Related Midwest is committed to creating resilient communities in which residents not only live but thrive. This includes the integration of decarbonization strategies whenever possible. Our firm is currently redeveloping another affordable community in Kankakee, Illinois, that will include a roof-mounted solar array, and is exploring sustainable design options for another community in Crystal Lake, Illinois.
Public subsidies
There are programs at the federal, state and local levels to incentivize green building practices in affordable housing, including grants, tax abatements and utility rebate programs. These run the gamut from weatherization assistance to construction financing.
For example, The Freddie Mac Multifamily Green Bonds program provides financing to allow affordable and workforce rental housing providers to make improvements that increase energy or water efficiency, install renewable energy systems and make retrofits to decarbonize and/or electrify the property. Fannie Mae also provides green financing specifically designed to boost sustainability within the affordable rental housing marketplace.
In addition to government incentives, the affordability of some sustainable technologies has eased due to wider adoption and a subsequent fall in prices. The cost to install on-site solar, for example, has dropped by nearly 40 percent over the past decade, according to the Solar Energy Industries Association. This is associated with a 26 percent increase in solar power installations over that time period. Although heat pumps, battery storage and other green technologies have not yet experienced similar price decreases, they may become more affordable over time as owners incorporate them into their properties.
As demand for affordable, climate-resilient housing continues to grow, it will be critical for owners to be able to navigate the complex landscape of financial incentives. Entering collaborative public-private partnerships and taking advantage of tools such as green bonds, utility grants and Low-Income Housing Tax Credits will help pave the way for green and affordable communities.
Wilson Ding is an associate, development (affordable housing), at Related Midwest. This article originally appeared in the February 2025 issue of Heartland Real Estate Business magazine.