The federal government’s new program to provide incentives for making commercial buildings 20% more energy efficient over the next decade is winning applause from several prominent commercial real estate organizations, from the Building Owners and Managers Association (BOMA) International to the National Multi Housing Council (NMHC).

The Obama Administration’s Better Building Initiative announced last week provides incentives to improve hospitals, offices, stores, municipal buildings such as schools, and other commercial buildings.

It provides more generous tax incentives than in the past, more financing opportunities for commercial retrofits and training for commercial building technology workers.

A “Race to Green” initiative will offer competitive grants for state and municipal governments that streamline standards, encourage efficiency upgrades and attract private sector investment.

“We applaud President Obama’s new policy to improve energy efficiency in commercial, multi-family and institutional buildings,” says BOMA International Chair Ray Mackey, Jr., partner and chief operating officer at Stream Realty Partners L.P.

“The initiative includes the critical business incentives, such as the commercial building tax credit and loan guarantees, that are key to meeting the energy efficiency goals of the plan,” says Mackey.   BOMA International has long advocated energy efficiency, he adds, launching its 7-Point Challenge in 2007 to ask members to reduce energy consumption by 30% by 2012. To date, organizations representing 3 billion sq. ft. of office space have signed up, according to the chairman.  

BOMA International’s16,500-plus members own or manage more than 9 billion sq. ft. of commercial properties.

Apartment groups support incentives

NMHC and the National Apartment Association (NAA), which operate a joint legislative program, also endorsed the new Better Buildings Initiative and its financial incentives for making structures more energy efficient. 

"Energy consumption and energy policy are priority issues for the apartment sector. The plan announced [Feb. 3] includes several items long advocated by NMHC/NAA, most notably reforming the existing building efficiency tax incentives,” says Eileen Lee, NMHC/NAA vice president of energy and environment.

Many apartment firms have voluntarily established energy efficiency and green building programs throughout their portfolios, says Lee, but many more have been stymied by the lack of sufficient tax incentives and financing for building retrofits.  

The Obama Administration’s plan is to reform the existing Section 179(d) building efficiency tax incentive, which has largely gone unclaimed by property owners, she says. Changing the deduction to a more generous tax credit and creating more incentives for owners to undertake costly retrofits on existing properties are likely to spur more property improvements, she says.

The Administration’s plan would also ensure that real estate investment trusts (REITs) can take advantage of the credit.

The apartment groups also support the government’s plan to create a pilot financing program though the Department of Energy (DOE) to guarantee loans made to property owners for upgrades. The lack of financing has been a major obstacle to greening  existing buildings, assets Lee. 

"Importantly, the plan does not include the unworkable mandatory building code regulations included in other legislative proposals and instead would create grants to help states and municipalities streamline their building codes.”

NMHC and NAA also support training the next generation of commercial building technology workers, Lee adds. “True energy savings rely not only on well-designed buildings but also on having skilled workers overseeing their day-to-day operations.”

Plan is catalyst, says Green Building Council

The U.S. Green Building Council joined the voices welcoming the plan. The Council’s CEO Rick Fedrizzi called it a “critical step forward.”  The initiatives will help take green building “to an unprecedented scale,” he says.

“The 5 million+ commercial buildings and the 120 million existing homes in the U.S. today are, by and large, squandering away precious energy and resources,” said Jason Hartke, the group’s vice president of national policy, in a statement.  With policies like the one just introduced, hospitals, offices and other buildings can be turned into structures that will lessen dependence on fossil fuel, increasing national security, says Hartke. 

According to the Council, buildings in the United States are responsible for 39% of carbon dioxide emissions, 40% of energy consumption, and 13% water consumption annually.