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The Inflation Reduction Act’s Climate Investments and What They Mean for Community Development

The Inflation Reduction Act, a sweeping health care, climate and tax package signed into law in August, presents groundbreaking opportunities to combat environmental injustices. LISC’s Mark Kudlowitz examines how the new law can impact community development and revitalize communities that have long suffered disproportionate impacts from climate change.

The passage of the Inflation Reduction Act (IRA) in August is a historic investment by Congress to address the ongoing impacts of climate change. These resources are necessary to meet the Biden Administration’s goal of cutting U.S. greenhouse gas emissions in half by 2030. The new law also provides a tremendous opportunity for underserved communities to further environmental equity and climate justice.

Ample research shows that in nearly all regions of the U.S., children in low-income households are more likely to live in areas with the highest projected increases in childhood asthma due to climate-driven changes. We also know that the greatest increases in extreme temperature-related premature mortality are expected in areas with the largest share of low-income and minority populations. Climate impacts will also have a disproportionate impact on tenants in our nation’s affordable housing properties, many of which are located in coastal zones at risk of floods due to discriminatory land use decisions.

The IRA is the most significant climate law in our nation’s history. The Act provides close to $370 billion in new spending and targeted tax incentives to fight climate change, including $60 billion of investments targeted to disadvantaged communities to support environmental justice. Of this, an estimated $25 billion is directly targeted, or can be leveraged, to support investments in affordable housing. It will be critical for federal agencies to work together on implementing these new and expanded programs and we are encouraged to see that the Administration has created an interagency working group that will also focus on advancing environmental justice.

The Inflation Reduction Act provides a tremendous opportunity for underserved communities to further environmental equity and climate justice.

While there are many important programs in the IRA, we believe these five have the most potential for disadvantaged communities and populations:

First, the IRA provides nearly $1 billion to improve energy efficiency, water efficiency, and climate resilience in U.S. Department of Housing and Urban Development (HUD) assisted properties. These resources will reduce operating costs for owners on thin operating budgets, and improve the quality of housing for tenants. This program is an expanded version of the Green Retrofit Program for Multifamily Housing, which demonstrated energy savings from these investments. This new initiative is much larger and more importantly, can support climate resilience activities in addition to retrofits. It also provides HUD with the flexibility to support energy and water use benchmarking for properties participating in the program and potentially for other HUD-assisted housing, which will be key in understanding the performance of this critical affordable housing stock.

The law also includes rebate programs for building energy efficiency retrofit projects that achieve modeled or measured reductions in energy usage, with higher amounts of multifamily housing occupied by lower income households. There is also an electrification home rebate program targeted to low- or moderate-income homeowners and multifamily owners. Affordable rental housing projects serving a higher share of lower income households can receive a rebate up to 100 percent of the cost, providing a strong incentive for owners, and helping improve indoor air quality for tenants.

The Act also creates a new Greenhouse Gas Reduction Fund program at the Environmental Protection Agency (EPA). This program will provide $27 billion to states, localities, and other eligible entities, including nonprofits, to support activities that reduce or avoid greenhouse gases. Of the $27 billion, $15 billion is targeted to projects in underserved communities. It’s anticipated that GGRF resources will be utilized by green banks, community development financial institutions (CDFIs), credit unions, and other mission-based financial institutions to provide loans, technical assistance, and other supports for projects such as building retrofits, clean energy finance, and electrification activities. This program provides critical sources of new funding for CDFIs and other organizations to expand their financing of community solar, deep energy retrofits, and other related mission-driven projects.

Lastly, EPA will also implement a new Environmental and Climate Justice Block Grant program which will provide flexible assistance to community-based organizations working in disadvantaged communities on climate resiliency and adaptation; mitigating climate and health risk from urban heat islands; community-led air and pollution monitoring; and reducing indoor air pollution, amongst other uses. This is an exciting opportunity to provide community-based organizations with increased resources to carry out these vital projects.

Our nation is at a critical moment, with a host of new and expanded federal resources focused on environmental and climate justice at the ready. LISC is committed to working with the federal government and our community-based partners to maximize the impact of these programs and to ensure that underserved communities are able to access and deploy this funding.

Mark Kudlowitz Mark Kudlowitz, Senior Policy Director
Mark advocates for federal policies which support multiple LISC national programs, including: Affordable Housing, Rural Development, and Transit Oriented Development. Before LISC, Mark worked as the Policy Director of the U.S. Department of Housing and Urban Development’s Office of Multifamily Housing Programs and also worked for over seven years at the Community Development Financial Institutions Fund at the U.S. Department of the Treasury. Mark managed affordable housing and community development programs at the District of Columbia’s Department of Housing and Community Development and held multiple positions at the Housing Assistance Council, a national rural affordable housing organization. Mark earned his B.A. from the University of Florida and M.S.W. from the University of Michigan.