Do Community Solar Benefits Distributed to Households Count for Annual Income?

HUD’s Office of Multifamily Housing recently issued a memo on the treatment of solar benefits for residents in master-metered buildings that use community or rooftop solar power. The guidance addresses how building owners can distribute the financial benefits of community or rooftop solar to residents who reside in master-metered buildings and don’t have an individual electricity bill.

A growing number of states are offering community solar programs. These programs often aim to reach and benefit multifamily residents by offering access to affordable renewable energy given that these residents often rent their units and can’t take advantage of more traditional rooftop solar incentives. Community solar arrays have multiple subscribers who receive a credit on their utility bill that’s directly attributable to the solar project’s energy generation. These credits can be applied to both owner-paid costs such as common areas costs and tenant-paid utility bills.

In the case of HUD-assisted Multifamily properties that are master-metered, residents don’t have an individual electricity bill, and the full credit of the renewable energy generation goes to the building owner. In addition to community solar programs, the building owner would also receive the full credit if it installed rooftop solar to offset electricity usage in common spaces for elevators, lighting, and HVAC systems. Residents also pay rent according to their income, meaning that financial contributions to residents because of a utility benefit could result in higher rent levels.

HUD has surveyed states that are in the process of implementing different benefit delivery models as part of their community solar offerings, including direct cash payments, and providing additional building amenities like a security guard or shuttle bus. As a result, HUD has identified a list of benefits under review by programs across the country and an assessment of whether the benefit would be considered “income” for the purpose of determining family rent or eligibility for HUD assistance.

Does Memo Apply to Your Site?

The recently issued solar benefits memo doesn’t change existing rules for what determines annual income. Instead, it provides guidance on how to treat amenities, services, and other benefits within existing rules. The notice applies to the following Office of Multifamily Housing Programs:

Project-based Section 8 (New Construction, State Agency Financed, Substantial Rehabilitation, Section 202/8, Rural Housing Services Section 515/8, Loan Management Set-Aside, Property Disposition Set-Aside, Rental Assistance Demonstration Project Based Rental Assistance);

• Section 202/162 Project Assistance Contracts (PAC);
• Section 202 Project Rental Assistance Contracts (PRAC);
• Section 202 Senior Preservation Rental Assistance Contracts (SPRAC);
• Section 811 PRACs; and
• Section 811 Project Rental Assistance (PRA).

Potential Solar Benefits for Master-Metered Building Residents

In its memo, HUD provides a list of resident solar benefits that may be offered and an assessment of whether the benefit should be included as income and rent determination for HUD-assisted housing.

Job training and workforce development. This benefit is a combination of social services, community supports, job training, and/or education that positions an individual for success in the workforce. These services exclude any cash benefits, reimbursements, stipends, or gift cards to a family.

Benefits in this category are not in the income calculation for determining family rent or eligibility for HUD assistance.

Additional support staff. This benefit would allow hiring of additional staff to serve residents and/or building needs. Examples include resident services staff, building security guards, leasing specialists, maintenance staff, etc. This is not annual income. Additional staff being hired to support the residents isn’t included in the income calculation for determining family rent or eligibility for HUD assistance.

Facility upgrades. Facility upgrades, including new building amenities, are not included in the annual income calculation for determining family rent or eligibility for HUD assistance. Examples of improvements to the building and/or its grounds include energy efficiency upgrades, playgrounds, community gardens, renovation, bike racks, etc.

Free or reduced cost high-speed internet service. Free Wi-Fi is an amenity and is not included in the family’s annual income. Discounted Wi-Fi services would also not be treated as annual income to the family.

Financial literacy programs and services. These benefits are programs and services aimed at developing one’s financial literacy to improve personal finances. These may include access to free training, classes, and resources related to budgeting, managing, and paying off debts, and understanding credit and investment products. These services exclude any cash benefits, reimbursements, stipends, or gift cards to a family. These services are not income.

Wellness programs and services. This benefit is not annual income. These services are provided to residents as a preventive measure to help avoid illness while improving and maintaining general health.

Shuttle services. Free shuttle services for residents can utilize small buses or vans to provide shared mobility services. This benefit is not annual income.

Community events and support for resident associations. This benefit includes hosting events for residents or providing financial support for resident associations. This is not considered annual income.

Increased operating or replacement reserves for the site. These are accounts established by owners to pay for operating and large property expenses like long-term major repairs and unexpected expenses, like emergencies. Solar benefits that allow for increases to these accounts are not considered annual income.

Resilience centers. These are spaces that provide critical services during power outages or extreme weather events. Examples include community heating or cooling centers. This is not income.

Non-monetary donations. These are donations such as food, clothing, or toiletries. These may be included in annual income. HUD cannot definitively say whether this benefit would be counted as annual income to a family. A number of factors must be considered, including the frequency of the non-monetary donations. According to HUD Handbook 4350.3, temporary, nonrecurring, or sporadic income (including gifts) is not counted as annual income [par. 5-6(G)(3)].

Gift cards or cash payments. This benefit includes gift cards provided to families, including gift cards for gas, groceries, and department stores. Generally, gift cards and cash payments to a family would be included in family annual income unless an income exclusion under 24 CFR 5.609(c) applies. For example, if a household receives one gift card, it would likely be excluded as a temporary, nonrecurring, or sporadic gift. Or, if a household receives one lump-sum cash payment, it would be excluded as a lump-sum addition to family assets.