The Senate’s Historic Opportunity to Lower Your Energy Bill

Buildings are where we live, work, go to school, and spend about 90 percent our time. Those same buildings are responsible for about 40 percent of carbon emissions in the United States – but the investments in the Inflation Reduction Act of 2022 will help to substantially reduce emissions from our buildings while lowering energy costs for consumers and improving occupant comfort. By 2030, these building-related provisions of this bill will save around 26 million metric tons of carbon pollution – but savings will persist and continue to grow over the life of the investments. As NRDC’s President, Manish Bapna, said: “This is the ultimate clean energy comeback - the strongest climate action yet in the moment we need it most. Congress must pass it without delay.”

The legislation, which provides about $369 billion in new climate, energy and environmental justice investments, is the most substantial climate action in American history. There are no two ways about it: this is absolutely a must-pass bill, to ease the pressure on Americans’ wallets, create high-quality jobs, and to take a giant step forward to protecting the future of our country and our world.

Breathe Easier While Saving Energy and Money

Energy bills are a substantial portion of a family’s budget, often the biggest household expense after rent or a mortgage payment. Making a home more energy efficient, while replacing building systems that burn fossil fuels on-site with equipment powered by clean electricity, makes our indoor air cleaner. The combination of efficiency and electrification is a key strategy to combat the climate crisis – and is central to the energy and dollar savings in this bill. To lower energy bills and reduce the burning of fossil fuels in our homes, the Act includes the following:

• The HOMES Rebate program, which allocates $4.3 billion to states for consumer rebates for comprehensive home energy retrofits. This includes up to $4,000 for homeowners completing a whole-house project, based on the energy performance of the home – and the rebate amount doubles for low- and moderate-income households. The HOMES program also addresses multifamily buildings, with owners also eligible for up to similar per-unit incentives when they achieve certain energy savings levels.
• The High-Efficiency Electric Home Rebate Program, which will direct $4.5 billion to states for the efficient electrification of low- and moderate-income households, including both single family and multifamily properties. This will include up to $1,750 for a heat pump water heater, up to $8,000 for a heat pump for space heating or cooling, up to $840 for electric cooking equipment or a heat pump clothes dryer, as well as funding for upgrading electric load service, insulation and air sealing, and electric wiring. The bill includes variable cost relief for these measures, delivering more savings to low-income people. Notably, these rebates are intended to be available at the point of sale, so that the price will be reduced from the start without having to wait months for a rebate - helping to make these products more accessible to lower-income families.
• Tax incentives covering up to 30 percent of the cost of replacing appliances and equipment in a home, including up to $600 for central air conditioning systems and windows, and up to $2,000 for efficient heat pumps and heat pump water heaters.

Improving Affordable Housing

Specific to affordable housing, the Act makes a $1 billion commitment to privately-owned properties that meet eligibility guidelines specified by the Department of Housing and Urban Development (including, but not limited to, properties eligible for the project-based “Section 8” program). This funding can be used for multi-benefit projects that save water as well as energy, including building electrification and energy storage, make buildings healthier by improving indoor air quality, and address climate resilience. 

With most of the multifamily housing stock master-metered for water and sewer – meaning the entire building is measured on a single meter - the offer of grants for water efficiency upgrades could be particularly valuable. Reducing operating expenses is important for preserving affordable housing. The Act also expands funding for the benchmarking of energy and water use in affordable housing, which will produce a valuable database for road mapping future efficiency upgrades. 

The legislation also includes a noteworthy change that addresses an issue with the Low-Income Housing Tax Credit (LIHTC), which creates and preserves more than 100,000 affordable apartments each year. The seemingly small change eliminates a barrier to combining energy efficiency tax credits with LIHTC, making it easier for affordable housing developers to access additional resources to pursue energy efficiency, which should help to unlock the cost, comfort, and health benefits of efficiency upgrades for low-income residents.

State energy offices and housing agencies will have a big hand in implementing the building-related provisions of this bill. Officials at both the state and federal level will have work to do to ensure that program dollars reach the households most in need of assistance, including lower-income renters and those living in historically underserved communities. This includes giving States the discretion to administer rebate and loan programs for the smartest combination of home interventions to enable combined upgrades in efficiency and electrification. But, by including specific considerations for multifamily buildings and more generous payments for low-income households, the Act sets things off in the right direction.

Building Right From the Start

It’s important to construct new buildings to be efficient from the start, to avoid “digging the hole” of needed emissions reductions any deeper. The Act includes tax credits to builders of new homes meeting the most recent Energy Star New Homes specifications (including a future specification already approved by the Environmental Protection Agency), with double the credit available for homes that qualify as zero-energy ready. It also includes $1 billion for support states and local governments to adopt, implement, and comply with a code that is equivalent – or better than - the 2021 International Energy Conservation Code. Two-thirds of that funding is specified for jurisdictions that adopt, comply with, and enforce a zero energy code (or an equivalent stretch code that meets or exceeds the zero energy criteria). Taken together, these incentives for builders and jurisdictions will result in a more efficient, lower-emissions new buildings stock.

Action Starts Now

We can’t wait any longer. Congress must take swift action to pass this bill. Our wallets – and the health and safety of our planet – will benefit for decades to come.