By RBA Architects
White Paper
Rising interest rates and construction costs can make it challenging to get projects financed, built, and completed while staying within budget. Green Building Programs and Government Incentives, Rebates, and Tax Credits can help offset increased costs. Additionally, incorporating energy-efficient designs, materials, and methods can sometimes expedite the approval process with local municipalities.
Are You Leaving Money on the Table?
The Inflation Reduction Act of 2022 (IRA) amended IRS Code Section 45L provides a financial incentive for developers to build or renovate energy-efficient structures. For example:
Multi-Family New Construction (Meets prevailing wage requirement) | Energy Star (No limit on stories) | Zero Energy Ready (5 stories or less) |
$ 2,500 per unit | ✔ | X |
$ 5,000 per unit | ✔ | ✔ |
Multi-Family New Construction (does not meet prevailing wage requirement) | Energy Star (No limit on stories) | Zero Energy Ready (5 stories or less) |
$ 500 per unit | ✔ | X |
$ 1,000 per unit | ✔ | ✔ |
Additionally, Section 179D tax deduction, also known as the Energy Efficient Commercial Buildings Deduction, is a provision in the United States tax code that encourages businesses to invest in energy-efficient improvements to commercial buildings. This deduction allows building owners or lessees to immediately deduct the cost of certain energy-efficient property improvements, rather than capitalizing and depreciating the improvements over the life of the property. The primary aim is to reduce the overall energy consumption of commercial buildings, which are a significant source of energy demand in the U.S.
IRL 45L and 179D are just two of many incentive programs that developers can utilize to help offset rising costs. Engaging with a third-party Energy Rater like Viridiant www.viridiant.com can help developers explore the various options available.
Incorporating Energy-Efficient Equipment and Appliances
Invest in energy-efficient equipment and appliances, even if the upfront cost is higher. The energy savings over time will compensate for the initial expense. The Energy Star label will be required for many projects, but also work with your third-party rater who can help identify various systems and combinations that will meet energy efficiency requirements. Instead of focusing only on initial costs, consider the lifecycle costs of building materials and systems. A higher upfront investment can sometimes result in lower maintenance and operational costs over the building's life.
Picking the Right Design Team
Picking the Right Design Team is vital to ensure that projects are delivered on time and within budget. For energy-efficient projects, it’s crucial that the Architect chosen to lead the design team has completed projects with similar energy rating systems and requirements. A qualified design team can help identify and mitigate any potential risks during the construction period. RBA Architects has completed over 20+ multifamily projects with various energy rating systems and requirements.
Navigating the ever-changing multifamily landscape with its unique set of challenges can be challenging for developers. However, by leveraging available programs, engaging with experienced third-party Energy Raters, and making informed choices regarding equipment, appliances, and design teams, developers can offset expenses and contribute to sustainable and efficient construction practices. With a commitment to these principles, developers can navigate the challenges posed by market fluctuations and regulatory landscapes, ensuring the successful and cost-effective completion of multifamily projects.
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