Solar + Housing = Impact: Why Investors Should Boost Renewable Energy in Affordable Housing
Though emerging markets have made great strides in expanding access to off-grid solar to the poor, in the U.S. and other developed countries, access to solar energy has largely been limited to middle- and upper-income communities. Despite the rapid growth in alternative energy, low-income people in these markets rarely enjoy its benefits. Yet they are often the ones who would benefit the most.
By investing in projects that bring solar energy to low-income communities, impact investors have an opportunity to address these issues while also tackling growing environmental concerns.
Electricity generated with fossil fuels has had a disproportionate impact on the health of low-income families, especially in indigenous communities and communities of color. These populations are far more likely to be exposed to harmful substances that lead to higher rates of health problems like lung and heart disease, cancer and asthma. Low-income communities also struggle with high and often-unpredictable energy costs on top of their already rising cost of housing.
Recently in Denver, Enterprise Community Loan Fund’s Impact Note, which facilitates more accessible and effective impact investing, provided a 15-year loan of $2.4 million to support a project by the Housing Authority of the City and County of Denver (DHA) to build a 2-megawatt (2MW) community solar garden. The 10-acre garden will provide electricity for more than 500 affordable homes. To our knowledge, this is the first solar project in the U.S. to be both 100 percent focused on a low-income community and developed, owned and operated by a housing authority – and it’s also the largest low-income community solar garden in Colorado. The Impact Note helped make this possible because it enables retail, accredited and institutional investors to support community and economic development locally and nationwide.
The impact investors helping bring solar energy to low-income communities are improving quality of life for residents in three ways: reducing health inequity by addressing environmental concerns, protecting the financial sustainability of publicly owned affordable homes and creating new opportunities for green employment.
First, the project aims to reduce the carbon footprint of DHA’s affordable housing portfolio, which will support the City of Denver in meeting its 2020 sustainability goals. The city aims to reduce its energy consumption by 20 percent and double the amount of renewable energy it is producing by 2020, changes that will benefit the environment generally and the health of low-income Denverites specifically.
Second, as a public housing authority, DHA’s top priority is keeping rents affordable to low-income families, veterans and seniors. The solar garden provides a renewable energy choice that lowers energy costs for affordable homes. The program is estimated to save 20 percent on utility bills over the 20-year term of the project. Because DHA pays the majority of the utility bills on behalf of the residents, much of the savings will be retained at the property level, making more money available for other needs such as improving the property and resident services, maintaining staff levels and addressing other critical needs. In addition, some DHA residents will receive a portion of the savings as a direct credit on their utility bills.
Finally, as part of the solar garden program, over 35 Coloradoans, including 5 DHA residents received hands-on solar job training with some leading to employment opportunities. DHA partnered with GRID Alternatives, a solar workforce development provider, to train residents through a two-week experiential and classroom-based course. After completing their training, graduates had the opportunity to join GRID as paid solar installers, including on the 2MW project managed by the DHA.
Achieving a financial return along with these three significant social impacts represents an opportunity for impact investors across the U.S. Investors looking to place capital into projects that yield a similar impact should look to Denver as a model, and seek out fund managers that can replicate it.
We encourage other housing authorities and managers of affordable housing, across the country and around the world to pursue similar renewable energy solutions. We offer three recommendations based on our work in Denver to increase the chances of success:
- Draw on Long-Term Relationships: This is not the first project Enterprise and DHA have partnered on, nor is it likely to be the last. We previously financed nine affordable housing developments with a total of 735 homes. Enterprise recently closed its first New Market Tax Credit project in Colorado with DHA to construct a collaborative resources facility and community gardens with a fresh-food farmers market. (The building will serve as DHA’s new headquarters once complete.) These numerous shared projects made a seemingly daunting task possible. While it may be tempting to focus on one-off deals with exciting new partners, often it’s the long-term relationships that lead to the most innovative and impactful initiatives.
- Build A Qualified Team: A project of this scope requires team members with a wide variety of specialized skills, and Enterprise had local expertise in solar and experience in affordable housing finance, solar engineering and development. Fortunately, the political environment also supported the community solar concept. We also have staff focused on raising funds through the Impact Note, which made this deal possible financially. It was critical that we included team members with deep knowledge of solar energy and public utility commissions.
- Be Forward-Thinking: In addition to solar energy being more sustainable and forward-thinking than fossil fuel options, our approach also addressed a changing and volatile policy situation that will affect developers and residents for years to come. As federal financial support for affordable housing in the U.S. becomes increasingly uncertain, housing organizations must look for alternate forms of funding or areas to cut costs. Through the reduced utility costs from the solar garden’s operations, DHA will be better positioned to absorb federal budget cuts while maintaining the same level of service to residents.
By tackling environmental issues, decreasing energy costs to ensure long-term financial sustainability, and improving the quality of life for those in need, investing in solar gardens for public housing represents a unique opportunity for impact investors. It offers a multi-pronged approach that results in a win for all parties involved, especially low-income communities who will benefit the most.
Lori Chatman is the president of the Enterprise Community Loan Fund and a senior vice president of Enterprise Community Partners.
Ismael Guerrero is executive director of the Denver Housing Authority.
Top photo: adege at Pixabay.