If you work in the affordable housing industry, you are probably familiar with Utility Allowances. When tenants pay for their own utilities, the maximum rent that can be charged for their assisted unit is reduced by the amount of their typical monthly utility bills. The idea is that affordable rent should include utilities costs that tenants pay out of their own pocket.
In the past, the Utility Allowances have been uniformly set by unit type (studio, one-bedroom, etc.) and metropolitan area every year, and published by the local housing authority. This standardized formula has not accounted for differences in location within a metro area, and more importantly, variations in building types and systems. Improvements in green building, energy efficient heating and cooling systems, and solar energy generation have dramatically reduced utility costs compared to buildings without these improvements.
In response to these changes in the construction industry, HUD is now preparing to implement a new system for calculating utility allowances called "Utility Benchmarking". This new system will shift the responsibility for calculating the utility allowances from HUD to affordable housing owners. HUD will require affordable housing owners to track, analyze and report utility consumption and costs for each property according to established standards. New utility allowances appropriate for each property will then be set by using the data collected for that property.
Utility Benchmarking will provide a number of benefits to affordable housing owners and their tenants. First, it should help owners identify inefficient utility systems, equipment and operations practices. This will provide valuable information for physical needs assessments and planned rehabilitations. Second, Utility Benchmarking will provide greater incentive for affordable housing owners to incorporate green building materials and energy efficient systems into their buildings. In the long run, this should lead to lower operations costs and more financially sustainable projects.
Affordable housing building owners should begin preparing now for Utility Benchmarking. HUD recently posted information about it on their HUDdle Blog. You can also go to their Utility Benchmarking web page for information on how to get started, training opportunities, and new policies and incentives.