The Inflation Reduction Act, also known as the IRA, includes great news for multifamily housing providers! While residential tax credits were available to homeowners who installed solar panels or invested in other forms of renewable energy, rental property owners were excluded from those credits unless the owner lived onsite. The IRA now offers investment Housing Providers the same credits – up to 30% of the price! – that owners who occupy housing have been able to take advantage of for years.
What does the IRA mean for multifamily and investment housing providers?
The investment tax credit for solar energy jumps back to 30% for any system put in place after December 31, 2022
“At Livable, we are committed to conservation and to supporting both residents and housing providers,” says Dan Sharabi, CEO. “The IRA allows our multifamily and other housing investors to finally get the same benefits as homeowners who live on their properties, and we celebrate that incentive to expand our use of renewable energy, including solar.”
Things to keep in mind:
The IRA includes some other provisions that need to be adopted state by state. Those provisions may help some homeowners get rebates and credits for upgrading to energy efficient appliances and other upgrades. Those won’t be available for several months, likely mid-2023, but owners and investors can start investing in solar panels and get the credits for 2022.
Other requirements for the solar investment tax incentives
Large commercial solar projects (1 MW +, or approximately 5,000 200-Watt panels) will need to pay prevailing wages and meet apprenticeship requirements to get the full 30% tax incentive credit; if they choose not to meet those criteria, the maximum tax break is just 6%. This is designed to encourage job growth and longevity in solar. But obviously, these are HUGE projects such as solar farms, not the installation needed for even a 10-unit apartment building.
Small projects (less than 1 MW), like small and mid-size apartment buildings, qualify for the 30% tax credit without those requirements, which makes them far more affordable for typical housing provider investor.
The Act, which is regarded as the largest investment in renewable energy in the US, also includes funds that can be used to improve the energy efficiency of affordable multifamily housing, including housing that is subsidized by HUD and Low Income Housing Tax Credits.
“An analysis by the National Housing Trust identified more than $25 billion in the Act that could benefit affordable multifamily housing. The Act includes $1 billion for HUD’s multifamily housing programs, including for owners and operators of Section 8, Section 202, and Section 236 properties, to improve energy or water efficiency, indoor air quality or sustainability; implement the use of low-emission technologies, materials, or processes, including zero-emission electricity generation, energy storage or building electrification; address climate resilience; and for energy and water benchmarking.”
The Inflation Reduction Act extends tax credits and grants that make renewable energy more affordable for investors and housing providers. It also develops and expands the solar workforce, provides new options for funding, and incentivizes more real estate owners to invest in solar.
Livable and the Independent Rental Owner
Whether or not you’re able to take advantage of the IRA to add solar to your investment property, you can use Livable’s tools to reduce tenant consumption and save money. Our Ratio Utility Billing System allows you to fairly bill your residents for their share of utility use, including water and electricity (no matter its source). We also provide conservation tips and education for your residents to help encourage them to reduce their consumption. You can even get Sample Statements that will let them track their consumption without an actual bill.
We understand that Independent Rental Owners are one of the largest investor groups in the US – and one of the most underserved. We’re here to change that. Come save with us!