How the Inflation Reduction Act May Affect the Multi-Family & Affordable Housing Sector

August 16, 2022
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Taking aim at record-breaking inflation, the House has recently passed the Inflation Reduction Act of 2022 to invest in U.S. energy production, healthcare, and tax reform. Although this bill addresses an array of issues, it has the potential to be over a $4 billion investment in lower carbon emission strategies to incentivize companies to lower their dependency on fossil fuels. Below is a breakdown of these investments and the impact they may have on the construction industry.

  • $250 million for Environmental Product Declaration Assistance (SEC.60112), which encompasses grants and assistance to businesses that manufacture construction materials and/or products for developing environmental product declarations (EDPs) as well as the states and non-profit organizations that support these businesses. The major goal is that, with these third-party EDP reports, we may gain more information regarding the environmental impact of construction materials throughout the entirety of their use.
  • $100 Million for Low-Embodied Carbon Labeling for Construction Materials (SEC.60116), which is used to accurately identify and label construction materials that have, “substantially lower levels of embodied greenhouse gas emissions associated with all relevant stages of production, use, and disposal,” on all Federal building and transportation projects. This identification and labeling will be done by way of EDPs.
  • $1-4 Billion for Improving Energy Efficiency or Water Efficiency or Climate Resilience of Affordable Housing (SEC.30002), which encompasses grants and loans for businesses that, “improve energy or water efficiency, enhance indoor air quality or sustainability, implement the use of zero-emission electricity generation, low-emission building materials or processes, energy storage, or building electrification strategies, or address climate resilience,” for affordable housing projects in hopes that these incentives will encourage developers to improve and/or construct climate-resilient affordable housing.
  • FEMA Building Materials Program (SEC.70006), which provides financial assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act for costs and incentives associated with low-carbon materials and net-zero energy projects.

Although these costs may vary, there is no doubt that the federal government is creating major incentives for facilities to be developed with more emission-conscious construction materials. With the largest investment being $1-4 billion in the affordable housing sector, there is a possibility this will manifest into more affordable housing developments. While LEED and other previous green-building initiatives have discouraged some developers due to increased construction costs, these current programs are hoping to bridge this gap and present viable incentives to move the industry in a more sustainable direction. Only time will tell, but as more information becomes available, we will be sure to give updates on how this bill will impact the commercial construction industry.

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