The Department of Housing and Urban Development (HUD) Office of Multifamily Housing Programs published guidance on the treatment of financial benefits for HUD-assisted tenants resulting from community solar programs on August 3. Specifically, the notice addresses whether and how financial benefits are factored into utility allowance and income calculations for HUD-assisted households.

The notice applies to several of HUD’s Multifamily Housing programs, including project-based Section 8, Section 202, and Section 811.

What is Community Solar?

Community solar programs provide people residing in properties that may be unsuitable for solar panels with the opportunity to subscribe to community solar arrays. Subscribers then receive credits on their utility bills that are directly attributable to the solar project’s energy generation.

These subscribers may be tenants who receive financial benefits directly, either through individual metering or sub-metering, or owners of master-metered properties, who must then distribute such financial benefits to tenants.

Many community solar programs and on-site solar incentive programs stipulate that financial benefits must be distributed to tenants as a condition of program eligibility. The Inflation Reduction Act (IRA), for example, expanded or created several programs to finance solar facilities, including some targeted to affordable multifamily housing.

For tenants of HUD-assisted properties receiving either a direct financial benefit (i.e., a credit on their electricity bill) or an indirect financial benefit (i.e., a financial benefit distributed not via an individual meter but by an owner), the question is whether that financial benefit must be factored into the tenant’s utility allowance or included in the tenant’s annual adjusted income.

New, Comprehensive HUD Guidance

HUD had previously clarified solar program treatment in specific geographic areas, and had explained options for non-financial benefits to be distributed to tenants in master-metered properties. HUD’s Notice H 2023-09, titled “Treatment of Financial Benefits to HUD-Assisted Tenants Resulting from Participating in Solar Programs,” is more comprehensive.

Notice H 2023-09 covers the following scenarios:

1. Electricity is individually metered, and the tenant receives a financial benefit (a virtual net metering credit) that appears as a negative amount on the tenant’s electricity bill.
2. Electricity is individually metered or sub-metered, but it is administratively infeasible or not legally possible for the financial benefit to be distributed via individual discounts on tenants’ electricity bills, so the owner must find another means of distributing the financial benefits.
3. Electricity is master-metered, such that residents do not receive individual electricity bills, and the owner must find another means of distributing the financial benefits.

The notice describes terminology used about solar programs; the guidance then covers how to determine whether direct benefits to tenants must be factored into utility allowance and/or annual income calculations, and whether indirect benefits to tenants must be factored into Annual Income calculations.