Low-income housing tax credit:  State housing agencies that administer the federal Low Income Housing Tax Credit, which accounts for almost all newly rehabilitated and constructed rental apartments for low-income people, are increasingly encouraging or requiring developers to use sustainable practices in order to receive tax credits through competitive scoring processes.

Virtually every state now encourages some level of sustainable principles, and in many states proposed developments are required to include green features. Significantly, 28 state agencies added new green policies to their Low Income Housing Tax Credit programs from 2006 to 2007, and 36 agencies have done so since 2005.  Local governments can extend the reach of programs in several ways:

• Work with the state housing agency to incorporate or strengthen green building policies for the Low Income Tax Credit program. 
  • The Maine Housing Authority requires comprehensive green building criteria for virtually all its programs. 
  • The Minnesota Housing Finance Agency has integrated green criteria into its rental and single-family initiatives. 
  • Washington has adopted holistic green criteria for its affordable housing trust fund, which supports 4,500 new homes every two years.
• Incorporate or strengthen green building requirements for projects seeking local affordable housing funding. In 2005, San Francisco Mayor Gavin Newsom committed to ensure that all city-supported affordable housing developments include holistic environmental standards based on Enterprise’s Green Communities criteria.

Income or sales tax credits:  Providing an income or sales tax credit can be a powerful tool for encouraging green building and related goals such as energy efficiency measures and renewable energy generation.

Tax credits can be structured to allow for non-taxable organizations like non-governmental organizations and municipalities to participate. They can be crafted to allow a “pass through” mechanism that allows third parties to purchase the credits and sell them as cash to the building owner, providing more liquidity and cash flow to a project.

Local governments can build a constituency of elected officials and industry groups to advocate for state tax credits to encourage green building. New Mexico passed legislation that provides a tax credit for green buildings. Standards recognized in the bill include Build Green NM, LEED and ENEGY STAR. The credit increases commensurate with the level of certification achieved. The total amount of tax credits is limited to an aggregate amount of $5 million.

Property tax abatement:  Most cities and counties are responsible for assessing property taxes. Reducing or temporarily freezing property taxes can provide a financial incentive to invest in green building performance.

• Baltimore, Maryland, provides a tax abatement equal to 100 percent of the county assessed property tax for commercial buildings that achieve a LEED Silver rating. The tax credit continues for 10 years.
• In 2005, Nevada passed Assembly Bill 3, which included provisions for a partial abatement of property taxes for projects that achieve a LEED Silver rating. The abatement initially was to continue for up to 10 years and cover up to half of the property taxes due. The property tax abatement was highly successful. As of June 2007, nearly 63 million square feet of development in Nevada had applied for LEED certification. Due to budgetary constraints, the Nevada Legislature passed Assembly Bill 621 in June 2007, which reduces the amount of the property tax abatement.