Paying For Green – Part 3 of Our Going Green Series

May 8, 2009

Residential

Drop After Drop Adds Up

Drop After Drop Adds Up

In the first articles I showed how you can save energy and money and have a positive impact on the environment by going green and I showed how important an energy audit is for providing a road map to going green in your own home.

Now that I?ve laid some of the groundwork, most people want to know how to pay for it. My basic tenet is that there is a shade of green for every project and every budget?. Finding the right shade for your individual lifestyle and budget will mean some compromises along the way. But making the most of your energy audit is important. You only have the mental and physical fortitude to undergo disruption to your daily life so many times. So making the most of the time you devote to any home renovation project, green or otherwise, is critical.

In the US, the bulk of the homes that are currently being occupied were built during the housing boom of the 1970?s and 1980?s. These homes are nearing architectural and mechanical obsolescence. Also, these structures account for over 40% of energy consumption and 75% of electricity consumption annually. Can you imagine the impact to our economy if we could reduce those numbers by 10%? The way to do that is to renovate existing buildings, starting with residences.

Let’s Assume You Aren’t Rich and Want to Go Green

I’m going to assume that the family interested in going green does not have the cash available to pay for all the costs of an energy efficiency renovation all at once. You don?t want to use a credit card to finance the purchase, as the interest that you would pay makes the entire process much more costly than needed. So where can you turn?

There are federal and state programs available to help offset the costs of going green. There are local incentives, grants, and rebate programs available to help people achieve energy efficiency improvements, and there are various types of lending programs, from home equity loans to personal lines of credit available form many different sources that are specifically geared to the energy efficiency market. I will give you the ?get started? information to help you find the right program for you.

Federal Resources for Helping to Pay for Going Green

At the federal level, the American Recovery and Revitalization Act (ARRA) passed on February 17, 2009 included billions of dollars in stimulus funds for energy efficiency improvements. Chief among these are the federal tax credits that are available to take for energy efficiency upgrades to your own home for 2009 and 2010 tax years. In summary, the federal government will repay you up to $1500 (previously limited to $750) of the costs of energy efficiency improvements for windows and doors, roofing material, water heaters, insulation, and biomass stoves. In addition, the federal government will pay for 30% of the installed costs of renewable energy upgrades like solar power, geothermal heating and cooling, solar hot water heating, small wind energy systems, and fuel cell technology. Previously the allowable tax credit was capped at $2000. Now, it is uncapped, so they will pay for a full 30% of the costs!

Builders, developers, and commercial property owners can take advantage of these credits as well, but in this care they are based on square footage, not on costs. See the IRS website or the above link for the details.

State-based Resources for Going Green

In addition to the rebates available from the federal government, there are programs from the state that are available to offset costs of energy efficiency improvements. If you visit DSIRE (Database of State Initiatives for Renewables and Efficiency), you can click on any state and find out what rebates and incentives are available. For the Chicago area, the state will rebate up to 30% of the costs of solar power installations. The program is administered through the Illinois Department of Commerce and funded through the Illinois Renewable Energy Trust Fund. The current plan expired on May 1, 2009, but the next round of funding will begin July 1, 2009. The city of Chicago also encourages green building and will fast-track permits and waive up to $25,000 in fees for green certified projects.

For those of you in Wisconsin, you hit the jackpot! There is a fantastic program available for renewable energy and efficiency upgrades called Focus on Energy. This program will offset costs for a host of renewable energy products up to 25% of costs or a maximum of $35,000. Its current funding expires June 30, 2009, but will renew.

Energy Companies Help You Go Green

Grants and rebates are available from the utility companies as well. People’s Gas and NorthShore Gas both have rebate programs that they have extended until October 31, 2009. This program will cover costs of insulation up to $750, clothes washers up to $100, water heaters up to $75 – $400, gas furnaces up to $450, and gas boilers up to $600. It requires professional installation of everything, and you can apply for the rebate online.

ComEd does not have as much of a program available. They will sell you discounted CFL bulbs, can help arrange a home energy audit, and can set up electricity cycling programs for you. Also, they will pay you $25 to recycle that old refrigerator that you plan on replacing with a new, EnergyStar® model.

For those of you in southern Illinois or some of the western suburbs, Ameren has a different set of programs, much better than ComEd. They will help with heating, air-conditioning, lighting, and with the home energy audit, as well as refrigerator recycling.

How About Weatherization Help?

Now, for funding of weatherization improvements, the Illinois Home Weatherization Assistance Program is the place to start. On their web site you will be able to locate local programs. This is geared to low income families, but the information available is good, and at the very least, you can get a good contractor to help with your project. This is funded through the Department of Energy and the money is given to each state to distribute through its weatherization programs. This program will also cover the cost of the home energy audit in some cases.

Can I Get a Loan To Go Green?

The last topic I want to cover is funding though loans. The Department of Housing and Urban Development administers a huge number of programs that are designed to help average Americans finance, refinance, or improve their homes. There are a few income and home value limits, but a vast majority of Americans will fit into its broad criteria.

First, there is the Energy Efficiency Mortgage (EEM) which is a stand-alone product available to help cover the costs of home efficiency improvements. The maximum amount is 5% of the home?s value not to exceed $8000. Now, this may not seem like much, but the beauty of this program is that it can be added to any other FHA/HUD program without penalizing the owner/purchaser on the percentage of loan to value. So, say you want to borrow $250,000 to buy and renovate a home (or refinance an existing home). Though this program you can borrow $258,000 even if that additional $8000 would push your loan over the maximum loan to value. It?s a ?free? $8000 to use for energy efficiency upgrades.

Where this really works out is with the 203k loan program which is designed to encourage purchasers to either renovate their existing home or renovate a home they intend to purchase and live in. (See this previous The Chicago 77 post for more details.) The beauty of this program is that it looks at the value of the home as completed after the renovation, not the value at the time of purchase. The program will help pay for design, inspection, and the energy audit, as well as all the construction. Click here to see a visual overview of this program. There is also a limited repair program that provides $35,000 for home improvements to a home purchased. This additional $35,000 becomes part of the mortgage, allowing the buyer to do significant work to a home before moving in and paying for it over the life of the mortgage.

Fannie Mae also has innovative programs for renovation/purchase of single family homes.  This is called a HomePath® program. There is another program called HomeStyle®

Freddie Mac has a similar array of programs. The best bet is to contact an FHA/HUD approved lender to determine the best program for your situation.

In the more commercial market, Wells Fargo Bank has a variety of loan programs available that are geared toward energy efficiency and green living. There are others, but Wells Fargo seems to have the most developed program. The idea for all of these programs is that the lenders know that you will be saving significant amounts of money in utility costs and reward you with either a larger amount available to borrow based on your credit score, or a discount on the rate you are borrowing at.

That about covers what I know regarding funding, financing, rebates, and rewards for energy efficiency improvements.

For those who are immediately interested in upgrading their home, purchasing a new home, or renovating an existing home, make sure to read by bio below for ways I can help.

My thanks to Brad Walbrun for providing some background material on the 203k-mortgage program.

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About Stuart Feldman

Stuart Feldman, an emergency medicine physician by training, but recently received his LEED AP. He has been working as a green developer for the past four years.

Feel free to contact him through his website www.rivertrailproperties.com. He assists in the design, construction, and materials selection for any project. He is LEED AP certified, and can help get your home LEED rated or EnergyStar® certified, or simply running at peak performance. He has 8 home designs that can be built on most city-sized lots, and he can design homes of any quality and style using his design team. New or renovated home projects can be completed in four months from the time of starting construction. Stuart also is building a conservation community in 2010. The River Hill Conservation Community embraces the best of environmentally responsible design and construction in an innovative and community oriented subdivision in Lake County and will showcase what is possible in the design and construction of truly environmentally responsible homes.

Stuart still works full time in the ER and enjoys time with his 2 young sons and loving wife. In his spare time he enjoys a round of golf, sailing, and dining out. You can contact him at stuartdo@rivertrailproperties.com.

View all posts by Stuart Feldman

One Response to “Paying For Green – Part 3 of Our Going Green Series”

  1. Yaya Says:

    How about new creative solar financing options available? The most attractive one being the Special Municipal Tax Financing program initiated by the city of Berkeley –

    http://www.roxolar.com