President Barack Obama recently visited Penn State University to introduce his Better Buildings Initiative, an incentive program intended to stimulate energy-efficient retrofits to existing commercial buildings.  The initiative is also designed to create jobs in the construction and manufacturing industries.

Despite the long-term economic benefits of energy efficiency, many building owners often run into difficulty raising capital to make improvements.  To resolve this problem – with the aim of increasing commercial building efficiency by 20 percent by 2020 – the Obama initiative proposes loan guarantees and corporate tax credits for commercial building owners who retrofit their portfolios.  Additionally, it will reward local and state governments for taking leadership in requiring enhanced building performance.  Business and political leaders and industry groups agree that the initiative will create green jobs in the design, construction, and manufacturing industries.

Although several items on the president’s ambitious list require legislative action, federal agencies can take preliminary steps using existing authority, said Lane Burt, director of technical policy at the U.S. Green Building Council (USGBC). A pilot program guaranteeing loans for building owners could “run through existing programs at the Department of Energy,” he said.  Although tax credits for green upgrades will need Congressional approval, existing tax incentives like the Commercial Building Tax Deduction (CBTD) could be used almost immediately.  “The deduction was designed for energy-efficient new construction,” said Burt, so it can be difficult to claim the deduction for retrofits.  Burt said the Internal Revenue Service will clarify its guidance on using the CBTD for improvements, potentially helping more building owners deduct as much as $1.80/ft2 from their gross income on tax forms.

The White House highlights five points that comprise the building efficiency plan.  It didn’t say how much the program will cost, but at least four of the programs are likely to require new or expanded outlays, including: turning tax deductions for commercial building retrofits into tax breaks, a move the administration said “could result in a ten-fold increase in commercial retrofit take up”; boosting access to Small Business Administration loans; introducing Race to Green, modeled after the Race to the Top education program that would reward states and municipalities that encourage retrofits; and expanding job-training programs in energy auditing and building operations.

“That’s money that could be spent growing those businesses and hiring new workers,” Obama said.  The president argued that the U.S. needs to “out-educate” and “out-innovate” the rest of the world.  “In America, innovation isn’t just how we change our lives; it’s how we make a living,” he said.

Two groups that applauded news of the initiative are The National Multi Housing Council (NMHC) and the National Apartment Association (NAA). The organizations released the following statement about the Better Buildings Initiative. “We commend the Obama Administration for its focus on energy efficiency in commercial properties, including apartments, and for taking an incentive-based approach to achieving meaningful reductions in our building energy usage.  Energy consumption and energy policy are priority issues for the apartment sector.  The plan announced today includes several items long advocated by NMHC/NAA, most notably reforming the existing building efficiency tax incentives.  Many apartment firms have voluntarily established energy efficiency and green building programs throughout their portfolios, but many more have been stymied by the lack of sufficient tax incentives and financing for building retrofits.”