IRA update: Starting to see results in equity-focused funding

USGBC's federal legislative director shares the latest IRA news for green builders.

Feature image: The LEED Platinum Las Flores Apartments in Santa Monica, California. Photo credit: © John Edward Linden Photography.

In passing the Inflation Reduction Act (IRA) two years ago, Congress and the Biden administration took unprecedented steps to help ensure that investments under the law go to the communities that need them most.

The law includes specific requirements that significant percentages or all of the funding in many programs goes to disadvantaged communities. The ultimate goal is for programs overall to meet the White House's Justice40 Initiative directing that at least 40% of federal funding for energy- and climate-related federal programs is invested in communities that have both high concentrations of poverty and face other hardships such as proximity to a hazardous waste site, high levels of pollution or low high school graduation rates.

We are early in the life of the IRA: It's a 10-year law that is expected to truly hit its stride in a year or two. But we're starting to see how these policies will play out to affect people in the U.S. A new IRA-funded home energy rebate program aimed at low-income households is Exhibit A.

At the beginning of September, New Mexico became the fourth state to launch its program. Its Home Electrification and Appliance Rebates (HEAR) program, like others from Arizona and New York, will initially prioritize providing electrification and appliance rebates to single-family homeowners with low incomes.

The LEED Platinum Casa Feliz in Albuquerque, New Mexico, was a winner in 2018 of a LEED Homes Award for Outstanding Affordable project. Photo credit: © 2017 Patrick Coulie.

New Mexico is offering up to $1,600 off insulation at point of sale at participating retailers for homeowners earning 80% or less of their area median income, while Arizona is offering heat pump rebates up to $8,000 for homeowners facing financial hardship and heat emergencies. Later, both states will expand the programs to cover other eligible products, including Energy Star-certified heat pumps and heat pump water heaters, ventilation and electrical panel upgrades.

Meanwhile, in August, Wisconsin became the first state to launch a Home Efficiency Rebates (HOMES) program, providing rebates for overall energy savings, with significantly higher rebates of up to $10,000 per home for low-income households.

Altogether, out of the total $8.8 billion from the IRA for state home energy rebate programs, a minimum of $2.6 billion is required to go to low-income households, plus an additional $665 million minimum for low-income multifamily buildings. We expect the low-income share of the pie will be much higher as other states across the country launch their programs in the coming months.

Similarly, many of the tax credits under the IRA offer bonus incentives for projects in disadvantaged communities. The Department of the Treasury recently released statistics on the Low-Income Communities Bonus Credit Program showing that in its first year, some 49,000 projects-largely solar installations-received the additional tax credits, representing about $3.5 billion in investment. That includes 48,000 behind-the-meter residential projects for single-family or multifamily residences and more than 800 projects in affordable housing developments.

On the low-income housing front, the U.S. Department of Housing and Urban Development (HUD) earlier this month announced $69 million in grants to nearly a dozen Section 8 multifamily properties under the IRA's Green and Resilient Retrofit Program. The grants-the latest round of more than $840 million in awards under the program-will fund energy efficiency, clean energy and resilience improvements in almost 2,000 housing units.

The LEED Platinum Las Flores Apartments in Santa Monica, California, was a 2024 LEED Homes Awards winner in the Outstanding Affordable Homes category. It was one of the first all-electric affordable housing developments completed in Southern California. Photo credit: © John Edward Linden Photography.

Other IRA programs are just getting started. The EPA announced in August that it had obligated all of the $27 billion grants to awardees under the Greenhouse Gas Reduction Fund, which was created to expand and capitalize "green banks" and other green lenders around the country. The program, which includes a "solar for all" initiative alongside a strong emphasis on existing building retrofits, will offer favorable financing for clean energy and energy efficiency projects, with strong guidelines for prioritizing lending in disadvantaged communities. Grant recipients have said at least 70% of the financing (and all of the "solar for all" component will be in low-income communities.

There are many more examples of the IRA's impact playing out in communities across the country, from grants for executing regional climate plans to funding for strengthened building energy codes.

Of course, these investments bring significant benefits aside from reducing carbon emissions and other pollution. They are creating good-paying jobs in the building trades, with an emphasis on hiring from within the communities affected. They will also deliver lower energy costs, along with more comfortable, durable homes and buildings across these communities.

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