27 Utility rate reduction

This chapter addresses HB854’s requirement to propose recommendations for “utility rate reduction for qualified affordable housing.”

Highlights

Major takeaways in this chapter include:

• Electricity, gas, water, and other essential utility costs strain the budgets of low-income Virginians—as well as those of affordable housing providers working to build and preserve units across the state.
• COVID-19 demonstrated that reliable high-speed internet access is critical for work, education, and healthcare for families. However, more than one-in-three households earning less than $20,000 do not have internet access in Virginia.
• State law and regulatory precedent disallow specific rate reduction carve outs for affordable housing.
• Instead, Virginia can address these challenges by unifying current and new efforts supported by expanded state and federal funding, helping localities reduce up-front utility costs for affordable housing, bolstering current energy efficiency measures, and leveraging the Commonwealth’s substantial new broadband investments to increase internet access and affordability for residents in affordable housing.

27.1 Background

HB854 requests the SAG to:

“. . . consider the following proposals as well as other proposals it considers advisable during the course of its analysis and deliberations: . . . utility rate reduction for qualified affordable housing. . .”

Utilities are an important but often overlooked aspect of affordable housing. They contribute to upfront development costs and then affect affordability through regular service bills for residents and property owners. While mortgage or rent is the main source of a housing cost burden, sometimes households must also dedicate a large share of their income on basic services like electricity and gas.

Different formulas calculate this financial hardship and measure affordability.⁵⁵ For the purposes of this report, “energy cost burden” refers to the share of a household’s income spent specifically on home energy bills. When this burden is too large, it contributes to greater housing insecurity, primarily for low-income households with less spending power.

The subgroup concentrated on household energy burden, which includes the group’s suggested solutions to reduce costs associated with the development and preservation of energy efficient affordable housing. The subgroup also addressed access to and affordability of high-quality internet service to residents of affordable housing, as internet has proven to be an essential household utility.

27.2 Findings

27.2.1 Household utility cost trends in Virginia

The threshold for energy cost burden is six percent of household income.⁵⁶ This calculation includes all costs associated with energy used by the home (e.g., electricity and natural gas), but excludes other utilities like trash collection and internet.

Households paying more than six percent of their income for their home energy bills are at much greater risk of being unable to meet all other necessary expenses. According to tabulations of the Consumer Expenditure Survey by the Harvard Joint Center for Housing Studies:

“Severely cost-burdened renter households in the bottom expenditure quartile (a proxy for lowest income) spent 38 percent less on food and 40 percent less on healthcare in 2018 than otherwise similar renters with housing they could afford.”⁵⁷

Energy cost burden disproportionately impacts low-income households as, on average, they spend ten percent or more of their income on utilities compared to the five percent or less spent by middle- and upper-income households. In 2020, Virginians below 50 percent of the Federal Poverty Level spent 31 percent of their income on home energy bills alone.

FIGURE 27.1: Energy cost burden in Virginia by poverty level

This disproportionate energy cost burden is partly due to low-income households occupying less efficient homes and apartments. Over 57 percent of all households below 50 percent AMI in the state live in homes built more than 40 years ago.⁵⁸

FIGURE 27.2: Energy cost burden by tenure, structure type, and AMI

As of 2019, the median monthly rent in Virginia for a home built prior to 1940 was $670 less than that of one built in the past five years.⁵⁹ Data from the National Renewable Energy Laboratory show that Virginians earning less than 50 percent AMI who live in older housing—particularly single-family homes and mobile homes—have the highest energy burdens.

FIGURE 27.3: Energy cost burden by tenure, year home built, and AMI

High cost burdens can reduce a household’s ability to use electricity, heat or cool their home, or even have running water. Some households choose between paying utility bills and paying mortgage or rent, or other essential expenses. This in turn contributes to high levels of housing instability, including evictions and foreclosures.

27.2.2 Utility rate and expenditure trends

On average, the nominal retail price of residential electricity in Virginia has increased annually by roughly 0.18 cents per kilowatt-hour from 1990 to 2019. When adjusting the price using the Consumer Price Index (CPI) of electricity for urban consumers in U.S. cities, the real price of electricity has decreased by 0.30 percent on average per year during the same period.⁶⁰

FIGURE 27.4: Average retail price of electricity by sector in Virginia

The average bills for residential water and sewer (wastewater) have similarly increased in recent years. In 2020, the typical customer in Virginia paid more than $80 for both water and sewer, or roughly $25 more than the average for 2010.

FIGURE 27.5: Residential water and wastewater bills in Virginia

27.2.3 Internet as a utility

The COVID-19 pandemic has demonstrated that high-speed internet is a vital tool in everyday life. As a result, disparities in broadband access exacerbate existing inequity throughout Virginia.

The statewide provider survey, focus groups, and discussion within this subgroup all identified equitable access to broadband as a need for low-income households and residents in affordable housing.

Across the Commonwealth, more than one-in-three households earning less than $20,000 do not have internet access, compared to fewer than one-in-twenty households earning $75,000 or more.

FIGURE 27.6: Households without internet in Virginia

There also is a broadband divide by race in Virginia: 30 percent of Black households in the state do not have high-speed home internet access compared to 23 percent of Hispanic households and 19 percent of white households.⁶¹

Although Virginia does not currently recognize broadband internet as a “utility” alongside electric and gas service, in 2018 Governor Northam committed the state to achieving universal broadband access by 2028.⁶² Commonwealth Connect—a state-led comprehensive effort to expand the scale and impact of broadband investments—supports this initiative.

Commonwealth Connect promotes solutions in three main areas:

1. State policy changes to remove barriers and support infrastructure,
2. Financial, planning, technical, and other assistance to local governments, and
3. Grants to communities to spur solutions via public-private partnerships.⁶³

Since 2017, the Commonwealth has awarded $140 million and connected 124,000 locations to address broadband accessibility throughout Virginia.

Broadband investments funded by the CARES Act

In October 2020, Virginia dedicated $30 million of federal CARES Act dollars to projects that will expand broadband access and affordability across the state. As of spring 2021, the state has funded 71 projects throughout 50 localities. Some relevant examples include:

• An investment of $4 million for the City of Hopewell to provide free public Wi-Fi networks for 747 affordable housing units. This project created eight miles of fiber with 250 access points throughout the city.
• An investment of $750,000 for the Portsmouth Broadband Authority to build a wireless mesh network for 1,065 public housing units. The funds also supported several additional public Wi-Fi hotspots with a total of 173 access points throughout the city.⁶⁴

Along with these affordability-focused projects in urban areas, CARES Act funding supported 45 “last mile” projects to expand broadband access in predominantly rural areas. These investments to deploy physical infrastructure are the state’s priority in the coming years.

Other recent state actions

Broadband expansion was a key topic during the 2021 General Assembly session. Virginia developed two new pilot programs and passed legislation to expand broadband access and close disparity gaps.

The first program authorizes the Virginia Department of Social Services (VDSS) to design a program to expand reliable internet access for low-income residents by providing them with up to $15 in reimbursement costs monthly. VDSS was required to report its recommendations by November 1, 2021.⁶⁵

The second program requires DHCD to create a program within the Virginia Telecommunication Initiative (VATI) where public broadband authorities are permitted to apply for program funds without private sector investment.⁶⁶

Lawmakers also adopted a third bill which authorizes school boards to appropriate funds for the expansion and operation of broadband for educational purposes.⁶⁷ School boards may partner with private broadband service providers and subsidize broadband for qualifying households.

Additionally, Governor Northam and the General Assembly have appropriated $700 million in American Rescue Plan funding to expand universal broadband coverage. This investment accelerated the Governor’s 10-year goal for achieving universal internet access from 2028 to 2024.

What are other states doing? Over the past year, nearly every state in the nation has taken up or is considering new legislation to expand broadband or make it more affordable. These bills, including a handful specifically related to affordable housing, are listed on the National Conference of State Legislatures website.

Internet and LIHTC

As of today, none of the methods to calculate utility allowances for LIHTC developments include broadband internet as a utility for residents. Internet costs are categorized alongside telephone, cable, and other non-essential utilities; without any changes, simply adding internet to LIHTC utility allowances would lower total rent collected and add additional up-front costs.

However, many states do encourage internet infrastructure for new LIHTC units. For example, Virginia Housing currently awards points in its 2019-2020 Qualified Allocation Plan for internet as follows:

• One point awarded “if each unit is provided with the necessary infrastructure for high-speed Internet/broadband service.”
• Four points awarded “if free Wi-Fi access is provided in the community room and such access is restricted to resident only usage.”
• Six points awarded “if each unit is provided with free individual high-speed Internet access.”

If developers receive additional support to offset initial costs, they likely will pursue these points more frequently as internet continues to rise in importance and becomes a significant market advantage.

27.2.4 Regulatory environment

The State Corporation Commission (SCC) regulates rates for most electric and gas utilities in Virginia. Title 56 of the Code of Virginia enumerates how the state may regulate the rate-setting and operations of these utilities.

Due to prevailing state law and regulatory precedent, a standalone rate reduction for affordable housing is not feasible in Virginia. The subgroup reached this conclusion following multiple conversations with SCC officials and utility providers.

The subgroup has found no evidence that any other state provides a separate rate classification for affordable housing.⁶⁸ This applies to both electric and gas utilities.

27.2.5 Relevant state utility and energy programs

COVID-19 assistance

Following the onset of the COVID-19 pandemic, providers of electric, gas, water, and sewer utilities were subject to:

• A shut-off moratorium preventing termination of service due to unpaid bills⁶⁹,
• Establishment of emergency debt repayment plans for customers more than 30 days behind on their bills, and
• Debt forgiveness for customers using CARES Act funding from the federal government.

Utilities have also been encouraging customers to take advantage of LIHEAP funds and provider programs such as Dominion Energy’s EnergyShare.

Low-Income Home Energy Assistance Program (VDSS)

The Low Income Home Energy Assistance Program (LIHEAP) is a federally-funded resource that covers “costs associated with home energy bills, energy crises, weatherization and energy-related minor home repairs.”⁷⁰

VDSS administers LIHEAP in Virginia. Households are eligible for LIHEAP funds if they earn less than 130 percent of the Federal Poverty Level or 60 percent of Virginia median income if using funds for weatherization.

Virginia received more than $87.8 million in LIHEAP funds in fiscal year 2021 and $23.3 million in supplemental funds from the CARES Act. Across Virginia in fiscal year 2019, LIHEAP provided heating assistance to 102,858 households, cooling assistance to 65,196 households, and crisis assistance to 16,592 households.⁷¹

Weatherization Assistance Program (DHCD)

The Weatherization Assistance Program (WAP) helps provide energy efficiency upgrades to low-income households. Funds are provided by the U.S. Department of Energy (DOE) and are used to install insulation, repair heating and cooling systems, and other energy-saving uses.

Prior to 2020 and the COVID-19 pandemic, WAP funded nearly $5 million in weatherization activities across the state, reaching more than 1,200 households annually.

Percentage of Income Payment Program (VDSS and DHCD)

In 2021 the General Assembly passed legislation to begin the Percentage of Income Payment Program (PIPP).⁷² PIPP limits the total electric bills for eligible low-income customers of Dominion Energy and Appalachian Power and directs customers to other resources to alleviate their energy cost burden. VDSS, with help from DHCD, will begin drafting program regulations this year.

In the bill, lawmakers also asked the state to conduct a gap analysis and determine what service gaps, if any, continue to exist for PIPP-eligible customers.⁷³ VDSS will be the lead agency and partner with DHCD on the weatherization component. VDSS will direct the subsidy program.

Utility sponsored and administered programs

Private utilities in Virginia offer charitable programs to provide utility assistance to customers in need. Private donations, usually from ratepayer voluntary contributions, typically fund these unregulated programs. One well-known example is the Dominion Energy EnergyShare program, which provides bill payment assistance and weatherization services.

Dominion Energy and Appalachian Power have also just recently expanded their energy efficiency program offerings pursuant to Va. Code Ann. § 56-585.1, referred to as “Phase VIII” initiatives in their demand side management (DSM) program.

• Dominion Energy’s new programs were approved in July 2020; they include Residential/Non-Residential Multifamily energy efficiency, Residential Home Retrofit, Residential Manufactured Housing, and Residential New Construction programs.⁷⁴
• Appalachian Power’s approved new programs include Low-Income Single Family, Low-Income Multifamily, and ENERGY STAR Manufactured Home programs.⁷⁵

Regional Greenhouse Gas Initiative and Housing Innovations in Energy Efficiency (DHCD)

The Regional Greenhouse Gas Initiative (RGGI) is a cap-and-trade program designed to reduce climate pollution from fossil fuel power plants. Virginia joined RGGI in 2020, bringing the total number of participant states to eleven across the eastern seaboard. By capping emissions, RGGI requires energy producers to either reduce pollution or buy allowances at auction. Funds raised at RGGI auctions flow to the states. According to DHCD:

“Legislation passed by the Virginia General Assembly authorizes proceeds from these auctions to be used for community flood preparedness, coastal resilience and energy efficiency programs for affordable housing. DHCD will administer approximately 50 percent of the auction proceeds through [the Housing Innovations in Energy Efficiency (HIEE) program], with technical assistance from the Department of Mines, Minerals, and Energy (DMME).”⁷⁶

The Housing Innovations in Energy Efficiency (HIEE) program expands energy efficiency measures in residential buildings to benefit low-income Virginians. DHCD formed a HIEE Stakeholder Advisory Group in 2020 to establish priorities and craft guidelines for the program.

Virginia’s first RGGI auction in March 2021 produced $21.7 million in proceeds to the Commonwealth. For fiscal year 2021 these funds have been distributed through DHCD’s Affordable and Special Needs Housing (ASNH) program and the Weatherization Assistance Program (WAP).

On July 8, 2021, Governor Northam announced more than $21 million in 24 new ASNH loans for affordable housing projects across Virginia. This includes $6.2 million in HIEE funds to support energy efficiency and renewable energy upgrades.

Beginning in January 2022, lawmakers will receive an annual report on RGGI participation and fund distribution jointly prepared by DHCD, the Department of Conservation and Recreation DCR, and Department of Energy.⁷⁷ The partner agencies will update and deliver this report annually.

27.2.6 Impact of utility costs on affordable housing development

Utility hookup fees

Initial fees for water, wastewater, and other basic infrastructure can be a significant hard cost for affordable housing developers. These expenses are rolled into the project’s financing, increasing the level of debt service needed, and adding to the eventual rent or sales price amounts. Since 2010, the statewide average water and wastewater hookup costs have steadily risen.

FIGURE 27.7: Water and wastewater hookup fees in Virginia

Table 27.1 shows example development fees for two small residential projects in the City of Fairfax: a 13-unit single-family home development and a 9-unit townhome development.⁷⁸ In both cases, wastewater, water, and service connection fees account for the majority of municipal residential development costs.

TABLE 27.1: Examples of local development fees for two residential projects from the City of Fairfax

Fee	Avery Park (13 single-family)	Johnson Crest (9 townhomes)
Land use application	$16,800	$13,330
Site plan	$30,657	$18,966
Zoning permits	$858	$495
Building/trade permits	$28,905	$14,555
Wastewater	$103,636	$71,748
Water	$56,160	$38,880
Water service connection	$7,670	$5,310
Total utility fees	$167,466 ($12,882 per unit)	$115,938 ($12,882 per unit)
Total all fees	$244,686 ($18,822 per unit)	$163,284 ($18,143 per unit)

The Code of Virginia does allow localities to waive a wide range of fees for affordable housing development.⁷⁹ A locality that has adopted an ordinance may give these waivers or reductions to nonprofit or private-sector entities.

To date, very few localities are known to have waiver or reduction policies using the authority granted in Va. Code Ann § 15.2-958.4. The City of Charlottesville will reduce water and sewer connection fees by up to 75 percent for certain projects, and Arlington County is studying proposals.

Ongoing utility costs in multifamily properties

Utility bills for multifamily apartment buildings can be paid several different ways. In some cases, each unit has individual meters and tenants pay independently. Alternatively, the building may be master-metered where the owner pays the entire property bill and builds the cost into the price of rent. In many cases, multiple utilities are metered and billed differently in the same property.

Efforts to encourage energy efficiency and conservation in multifamily properties are often challenging. When utilities are metered individually and paid by tenants, building owners have few reasons to make energy improvements in the building. When utilities are master-metered, the pricing structure usually gives tenants little incentive to conserve their energy use. This market failure is called a split incentive.

FIGURE 27.8: Sample monthly energy costs for all-electric multifamily building

When multifamily properties have income and rent restrictions as part of affordable rental housing programs, such as LIHTC, utility payment becomes more complex. In buildings where some or all utilities are paid by tenants, property managers must reduce the net rent to account for these payments to keep the overall housing costs for residents affordable. Specifics vary with each program, but this calculated reduction is generally referred to as the utility allowance.

The complicated methods for estimating utility allowances in affordable rental properties are beyond the scope of this report, but policymakers must understand that utility allowances can help overcome split incentives by giving owners a pathway to cover the costs of and gain savings from efficiency improvements. Virginia’s affordable rental housing stock represents an important opportunity to deploy energy efficiency investments.

27.2.7 Utility needs vary by region

The geography and climate of Virginia’s diverse physiographic region—from the southwestern Appalachian Plateau to the Coastal Plain—influence utility needs and how they are met. The varied types of necessary utility infrastructure and energy efficiency upgrades present unique challenges and costs.

Examples of regional challenges include:

• Variability in the fixed fees for the 32 electric utility providers across the state, composed of three investor-owned companies, 13 cooperatives, and 16 non-jurisdictional operators; Fees range from $4 to $35 per month.
• Wide cost ranges for water and wastewater fees. According to the 32nd Annual Virginia Water and Wastewater Rate Report (2020) from Draper Aden Associates, the lowest and highest combined charges for water connection service were $88 and $32,910 while the lowest and highest charges for wastewater connection were $25 and $21,600.
• Varied geographic, climate, and socioeconomic conditions influence seasonal and periodic residential energy demand.

27.3 Recommendations

In early 2021 the HB854 utility rate reduction subgroup met four times to discuss how Virginia can expand its efforts to reduce utility costs and energy cost burdens for affordable housing developers and residents. Based on discussions with experts from across the Commonwealth and input from members of the subgroup, the subgroup makes the following recommendations.

Recommendation 1

Take advantage of increased resources to unify state support for energy efficiency and household-based utility assistance.

Virginia should strategically organize, prioritize, and deploy new federal and state funds available for residential energy efficiency and utility assistance. Since HB854 was first drafted in early 2020, a number of important developments have occurred that dramatically changed the landscape of utilities and housing:

• COVID-19 pandemic has had long-term impacts including an economic downturn,
• The CARES Act, American Rescue Plan, and other major federal relief packages include significant rounds of funding for utility assistance, weatherization, and energy efficiency,
• RGGI participation will generate funds for DHCD to use for increased energy efficiency measures in affordable housing, and
• PIPP will reduce energy cost burdens for low-income customers of Dominion Energy and Appalachian Power.

These changes require state policymakers and program administrators to holistically evaluate where and how to use these new resources while meeting needs without wasteful duplication of services.

Strategy 1.1

Direct increased resources to expand current programs into markets and demographics that are currently underserved by utility and efficiency efforts. These include single-family rentals, non-subsidized multifamily, and manufactured homes.

According to analysis by the Oak Ridge National Laboratory, the three major underserved markets for energy assistance are:

1. Multifamily and other rental housing due to the split incentive problem,
2. Rural communities due to lower density, different energy sources, limited provider capacity, and higher infrastructure costs per capita, and
3. Manufactured and mobile homes due to lower household incomes, nonstandard tenure (especially in mobile home parks), concentration in rural areas, and highly inefficient construction in older units.

When evaluating needs and redesigning programs, policymakers should create specific plans to bring solutions to these underserved markets. This work will complement ongoing work by DHCD and VDSS to conduct a gap analysis as required by HB2330, which enables the PIPP program. According to that bill, this analysis may:

“. . . review the needs of PIPP-eligible customers and whether gaps remain in serving such customers that are not already served by existing and available federal, state, local, or nonprofit programs to meet the energy reduction obligations of this section.”

Action items:

Task 1.1.1: Leverage program analysis in Chapter 23 to evaluate eligibility barriers and/or fund limitations specific to underserved markets.

• Who: SAG, steering committee

Task 1.1.2: Develop specific recommendations for any necessary changes to existing programs and needed new programs. These recommendations should incorporate all known information about the range of new funding streams for these activities. One possible example: deployment of RGGI funds to increase weatherization network capacity in rural areas via investments in workforce training.

• Who: SAG, steering committee

Task 1.1.3: Share relevant findings and recommendations from the HB854 study with DHCD and VDSS as they undertake gap analysis study per legislative requirements.

• Who: SAG, steering committee

Recommendation 2

Explore mechanisms to reduce up-front utility costs for the creation and preservation of dedicated affordable housing.

The subgroup seeks to solve challenges associated with both high initial costs for water, sewer, and other residential infrastructure, as well as total energy use of projects over their lifespans. These strategies will lower expenses for developers or owners and reduce rents and utility bills for residents.

Strategy 2.1

Link funding streams between federal, state, and local resources for reducing initial utility hookup costs (and necessary upgrades to older infrastructure) in affordable housing.

Resources for affordable housing development and local infrastructure investments have expanded significantly over the past several years, primarily due to federal pandemic relief packages. State policymakers and local officials should find ways to strategically use these dollars—and other associated incentives—to help reduce upfront utility costs for affordable housing without placing undue pressure on municipal revenue streams.

Action items:

Task 2.1.1: Explore mechanisms for Virginia to establish incentives within housing, community development, and related programs to reward localities that provide utility discounts to affordable housing developers. Determine eligibility and prioritization criteria, potential funding sources, and any additional legislative authority needed. Incentives should establish a rational basis for assistance based on costs and needs within different regions and markets.

• Who: DHCD, Virginia Housing

Task 2.1.2: Monitor federal and state guidance for use of American Rescue Plan dollars made available for local infrastructure investments (e.g., Capital Projects Fund).

• Who: DHCD, Virginia Housing, local government associations

Strategy 2.2

Collaborate with localities and the General Assembly to expand tools available for reducing utility hook up costs rather than mandate fee waivers for affordable housing.

Statewide mandates for localities to lower or waive utility hookup costs and other fees for affordable housing risk counterproductive outcomes. Regional and market variations in infrastructure costs would be a barrier to uniform statewide fee limits or discounts, and mandatory cost reductions limit the ability of localities to provide debt service on bonds.

Voluntary waiver options for localities and incentives to increase levels of state community development and housing funds to participating jurisdictions are more likely to reduce energy cost burdens.

Action items:

Task 2.2.1: Monitor the findings and recommendations from the recently completed Commission on Local Government study on mandatory local tax exemptions.

• Who: DHCD, Virginia Housing

Task 2.2.2: Examine the scope and impacts of local policies created under the authority of Va. Code Ann. § 15.2-958.4 (Waiver of certain fees for affordable housing). Determine whether this legislation is working as intended, or if additional education/guidance is needed.

• Who: DHCD

Task 2.2.3: Consider changes to scoring systems for state funding to localities to award greater points for jurisdictions that have policies to lower utility fees for affordable housing.

• Who: DHCD, Virginia Housing

Recommendation 3

Increase the long-term energy efficiency of new and existing affordable housing units with expanded strategies.

The goal of these strategies is to lower energy costs for both tenants and housing providers to make housing more affordable.

Strategy 3.1

Bolster energy efficiency incentives for LIHTC developments to align with national best practices.

The LIHTC program is the largest producer of dedicated affordable apartments in the country and in Virginia. LIHTC can deliver high-quality, energy efficient units using best practices and technology.

Over the past decade Virginia Housing, developers, advocates, and other stakeholders have grown the proportion of energy-efficient affordable homes. Virginia can sustain this momentum and advance the goal of long-term energy efficiency in affordable housing with critical next steps.

Action items:

Task 3.1.1: Develop a strategy to expand greater coordination between Virginia Housing, developers, and utility providers.

Follow the lead of Connecticut, Minnesota, Pennsylvania, and other states that require an energy rebate analysis to explore what energy incentives a project may be eligible for that can be incorporated into the development plans.

Coordination with major utility providers should focus on the new multifamily efficiency programs.

• Who: Virginia Housing

Task 3.1.2: Explore potential uses for the new Virginia Housing Opportunity Tax Credit to expand capacity of developers to incorporate efficiency measures and renewable energy investments in LIHTC projects receiving allocations.

In the 2021 Special Session I, lawmakers approved SB1197 to establish the Virginia Housing Opportunity Tax Credit in Va. Code Ann. § 58.1-439.29 and § 58.1-439.30. This new state income tax credit will work in conjunction with the federal LIHTC program to create more affordable rental homes in the Commonwealth. Virginia Housing is currently drafting regulations (PDF) for this program.

Examples of new uses for credits might include on/off-site solar, geothermal, and smart thermostats.

• Who: Virginia Housing

Strategy 3.2

Deploy other forms of state support to help developers strengthen their commitments to energy efficiency in affordable housing construction and operation.

In addition to reducing initial hookup costs, new federal and state resources for affordable housing and energy efficiency should strategically provide funds to developers for the building and maintenance of homes that are friendly to both the environment and household budgets.

Action items:

Task 3.2.1: Support and monitor DHCD’s use of RGGI funds (via Home Innovation in Energy Efficiency) for builders to go above and beyond current code requirements.

Other innovative uses for these funds may include large-scale offsite solar and behind-the-meter storage.

• Who: DHCD

Task 3.2.2: Support the efforts of Dominion Energy and Appalachian Power to roll out new efficiency programs to low-income households, especially those living in non-subsidized market-affordable rental housing.

State housing agencies and other partners may help connect property owners and managers with these resources.

• Who: DHCD, Virginia Housing

Strategy 3.3

Determine how residential and commercial Property Assessed Clean Energy can support new/existing affordable housing; recommend potential enhancements to state law.

Property Assessed Clean Energy (PACE) programs are an innovative solution to finance green investments for new and existing buildings. Localities with PACE programs for commercial (C-PACE) and/or residential (R-PACE) allow property owners to pay back the cost of certain improvements that improve energy efficiency or reduce carbon emissions via real estate assessments. The PACE lien runs with the property regardless of changes in ownership.

There are only a handful of relatively new PACE programs in Virginia. State policymakers should continue to monitor and support these programs to specifically evaluate how they can effectively serve affordable housing developers and operators.

Action items:

Task 3.3.1: Monitor the ongoing efforts of the Virginia Department of Energy to create a statewide R-PACE program for localities to opt into. (See Appropriation Act - Item 125 E, 2021 Special Session I, Virginia General Assembly.)

• Who: Virginia Department of Energy

Task 3.3.2: Work with the Virginia PACE Authority and other necessary partners to determine how many affordable housing properties have used C-PACE.

Investigate specific barriers and successes with these case studies and make necessary recommendations for the expanded use of PACE programs by affordable housing developers and owners.

• Who: Virginia Department of Energy

Recommendation 4

Leverage current state broadband initiatives to expand access and affordability of high-speed internet for affordable housing residents.

Internet service is a daily necessity for nearly all households in Virginia. Almost 92 percent of all renters say that high-speed internet is “important” or “very important.”⁸⁰ Renters are much less likely than homeowners to have reliable broadband in their homes—especially persons of color, low-income households, and people in rural communities.⁸¹

Although the state is making significant strides to bring broadband to more people, many challenges and gaps remain. There are now more resources than ever to meet Governor’s Northam goal of full broadband access by 2024, and state policymakers should take advantage of this momentum to ensure residents of affordable housing are not left behind.

One important distinction in this discussion is broadband access versus affordability. Solutions to expand access focus on new infrastructure in rural areas and other underserved places. Increasing affordability—especially for low-income customers—typically involves direct household subsidies or making network access free.

Another important consideration is the urban and rural divide. In denser cities and suburbs, where broadband infrastructure may already be common, expanding access and affordability via free Wi-Fi and other connection types is highly effective. In non-metro areas without widespread wireless access, extending infrastructure and coverage of household connectivity requires more subsidy.

Strategy 4.1

Align state and local efforts to expand broadband access so that new and existing affordable housing has reliable, affordable, high-quality internet.

Action items:

Task 4.1.1: Determine what types of projects and activities are eligible to be funded by federal dollars set aside for broadband in the American Rescue Plan.

• Who: DHCD, Secretary of Commerce and Trade

Task 4.1.2: Survey LIHTC developers to evaluate whether current QAP points for internet access are a meaningful incentive, or if alternative approaches to expand broadband in LIHTC buildings are needed.

• Who: Virginia Housing

Task 4.1.3: Identify a permanent funding source for the types of projects coordinated by Governor’s Office with CARES Act subsidy. These include rural last-mile, free Wi-Fi in public housing, and other initiatives.

Ensure localities are a major partner in such future projects; encourage participating jurisdictions to have a permanent role in the maintenance of new systems when applicable.

• Who: DHCD, Secretary of Commerce and Trade

Strategy 4.2

Increase broadband affordability by promoting current assistance and urban construction programs to residents and operators of affordable housing.

Action items:

Task 4.2.1: Monitor design and rollout of pilot VDSS internet assistance program in late 2021. Identify potential ways for affordable housing residents to learn about and apply for this assistance when made available.

Encourage VDSS to market program specifically among tenants via public housing authorities, HCV administrators, and other housing providers.

• Who: DHCD, Virginia Housing, Virginia Association of Housing and Community Development Officials (VAHCDO), others

Task 4.2.2: Ensure all eligible affordable housing residents are given the opportunity to apply for the FCC’s two internet affordability programs:

1. Lifeline, which provides a $9.25 per month discount, and
2. Emergency Broadband Benefit, which provides up to $50 per month.

• Who: DHCD, Virginia Housing, VAHCDO, others

Task 4.2.3: Engage marketing and communication professionals to establish simple, clear messaging to promote household internet affordability programs in affordable housing communities.

Draw on lessons from utility providers and social service organizations who struggled to effectively communicate important relief program information throughout the pandemic.

Partner with owners and operators of affordable housing (and low-cost non-subsidized housing) to distribute materials among residents.

One best practice example of this outreach is the Affordable Housing Broadband Initiative in New York.

• Who: DHCD, Virginia Housing, VAHCDO, VDSS, others