New Law Offers 160% Tax Credit Boost for Deep Energy Retrofits in Affordable Housing, Starting 2026

The Energy Efficiency for Affordable Housing Act is essentially offering a massive financial incentive to developers who want to take older affordable housing buildings and give them a serious, energy-saving makeover. Think less drafty windows and ancient furnaces, and more insulation and high-efficiency systems.

The Supercharger for Tax Credits

Here’s the deal: The federal government uses tax credits to encourage private investment in affordable housing. This bill changes the math on those credits specifically for energy upgrades. Normally, if you spend money on rehabilitation, you count 100% of that spending toward your credit calculation. Under this new rule, if your project achieves “enhanced energy performance,” you get to count 130% of those eligible rehabilitation costs. That’s a 30% bonus just for going green.

This bonus gets even sweeter if the building is in a high-cost area—like many major metropolitan centers. In those locations, the multiplier jumps to 160%. This means for every dollar spent on energy upgrades, the developer can count $1.60 toward their tax credit. This is a huge financial lever designed to make deep energy retrofits—which are usually expensive and complicated—much more appealing than just doing the bare minimum.

What Counts as 'Enhanced Performance'?

So, what does a building need to do to qualify for this massive bonus? The bill lays out two paths. The first path is waiting for the Secretary of Energy to publish new minimum standards. They have 180 days after the law passes to figure out and publish these rules. This gives the Department of Energy a lot of power to define what 'good' looks like in building efficiency.

The second path, which developers can use immediately, is the “qualified retrofit plan.” This is where the street smarts meet the policy. A licensed professional (like an architect or engineer) has to write up a detailed plan that guarantees the building’s site energy usage intensity (EUI) will drop by 50% or more compared to its baseline. EUI is just a fancy way of measuring how much energy a building uses per square foot. The professional has to certify the starting energy use, certify that the plan will hit the 50% reduction, and then, after the work is done, certify that the changes were actually installed.

This 50% reduction is a serious target. For tenants, this isn't just a feel-good environmental measure; it means drastically lower energy bills for the building owner, which in turn helps keep operating costs down and makes the affordable housing project more financially stable long-term. It also means more comfortable, better-performing apartments for the people who live there.

The Timeline and the Fine Print

This isn't happening tomorrow. These increased credit amounts generally apply to projects where the tax credits are officially allocated after December 31, 2025. This gives the Department of Energy time to set its standards and gives developers plenty of lead time to plan these complex, multi-year projects.

One thing to watch is the reliance on the “qualified professional” certifying the retrofit plan and the eventual energy savings. While this is necessary to ensure the work is done right, it puts a lot of trust in the certification process. If the initial baseline energy measurement is fudged, or the final certification isn't rigorous, the 50% savings might not materialize, even though the developer got the big tax break. Still, the overall goal here is clear: use a huge financial incentive to drive serious, measurable energy savings in the affordable housing sector, benefiting both the climate and the residents.