PHFA policy creates competitive environment that rewards Passive House (aka "Passivhaus") design innovation and cost containment.
With a simple policy move on tax credits, Pennsylvania has become a pioneer in Passive House progress in the U.S., with the Pennsylvania Housing Finance Agency (PHFA) heading up the wagon train.
PHFA administers the state’s allotment of federal Low Income Housing Tax Credits (LIHTCs), a key source of funding for affordable housing developments. Competition among affordable housing developers for these LIHTCs is fierce, with only 1 in 4 proposals awarded PHFA funding. These LIHTC proposals are evaluated based on a set of criteria called the QAP, or Qualified Allocation Plan. Each state housing commission decides which criteria to include in its state’s QAP, covering everything from access to transit and proximity to employment to the number of units a development provides for very low-income households.
In 2015, PHFA made a small move in its QAP that had big implications for Passive House development. It began awarding 10 out of 130 QAP points to Passive House design (as defined by PHIUS or PHI). The decision to pursue or not to pursue Passive House was entirely voluntary for developers. But if a developer decided to create a Passive House development proposal and could make the project pencil, that developer gained a big, 10-point advantage over the competition. With a success rate of just 1 in 4 for proposals to PHFA, this competitive advantage was a big deal.
Development teams took note and got creative, designing Passive House affordable housing projects that made economic sense and could compete. In the first two years with this Passive House “bonus” at PHFA, 59 out of 179 LIHTC proposals incorporated Passive House design. 18 Passive House developments were awarded LIHTCs. In 2017, the growth in Passive House proposals to PHFA has accelerated.
Exploring Passive House at the inception of project development plays to Passive House’s strengths. The science-based design, energy modeling, and iterative parametric analysis of Passive House design are all best done at the very beginning of a project. That’s when the power of cost optimization is at its strongest. PHFA’s LIHTC policy has created a strong incentive for development teams to innovate, test options, make design alterations, and seek out the best Passive House design solutions at exactly the right phase in design.
The results are bearing out in the construction budgets of the Passive House proposals to PHFA. Between 2015 and 2016 the average construction budgets for conventional project proposals to PHFA was $168/sf. The average for the Passive House proposals to PHFA during the same period was just $171/sf, less than 2% more. And the Passive House projects that were actually awarded LIHTCs from PHFA averaged just $163.50/sf, less expensive than conventional PHFA projects.
The energy performance gains of Passive House are very ambitious, so it’s natural to assume that Passive House construction would be expensive. But as the data from PHFA shows, when you incorporate Passive House design early, the “cost premium” of Passive House can be immaterial.
The Morningside Crossing project (above) in Pittsburgh illustrates the point. At a projected budget of $167/sf, the project is $1/sf less expensive than conventional PHFA-funded projects. Yet the project takes an abandoned 1897 elementary school and its 1929 addition, retrofits them to the PHIUS+ Passive House standard, adds a new Passive House wing, and delivers it all as affordable housing for seniors. The project, which is pursuing certification from PHIUS, checks all the “Passive House can change the world” boxes (healthy affordable housing, community revitalization, adaptive reuse, building as climate action), but the project will likely cost less than a conventional PHFA project.
The 18 PHFA-funded Passive House affordable housing projects coming out of the ground right now provide “proof of concept” to Pennsylvania and the nation that science-based design can provide equitable access to healthy buildings that make economic sense and that help transform the built environment from climate problem to climate solution.
Given these results, it’s no surprise that PHFA is putting its own money on Passive House. Its HQ expansion will be PHIUS-certified. We in NK’s Seattle office believe that the Washington State Housing Finance Commission should take a cue from PHFA’s leadership.
LEARN MORE: For more about PHFA’s policy and the role that our friend and colleague Timothy McDonald of Philadelphia-based Onion Flats played in making it happen, read “How Affordable Housing is Driving Passive House Design” in Architect Magazine.