2024 Winter Issue of Urban Land - 50

Approximately $394 billion over the next 10 years
will be spent on decarbonization and converting
the grid to clean energy through IRA, according
to McKinsey & Co.
are less reliant on cars can support developer
and tenant ESG goals.
The availability of IRA funding for building
decarbonization investments through rebates,
grants, tax credits, and tax deductions-
especially when combined with state and
local incentives-is expected to significantly
increase opportunities for developers to
achieve profitable outcomes.
Although investments made through BIL
focus primarily on infrastructure, they have
the potential to catalyze complementary
projects. For example, public investments
in highway conversions that improve public
transportation, walkability, and access to green
space may unlock opportunities for adjacent
real estate development. The synergy between
private and public investments can ultimately
lead to cleaner air, more opportunities for
people to engage with nature, and more
resilient communities overall.
Building the business case
While federal agencies continue to issue
guidance on accessing the billions of dollars
of IRA funds to construct and retrofit
sustainable and resilient buildings, leading real
estate developers are planning now for the
incorporation of decarbonization technologies
due to demand and long-term ROI.
Specific provisions in the IRA legislation
expected to support increased ROI for real
estate projects include:
The IRA creates more predictability for
tax deductions so developers can plan and
take advantage of them. For example, the
IRA lowered barriers to eligibility, increased
maximum deduction amounts, and made
these changes permanent to Section 179D of
the tax code.
IRA tax credits can be used to mitigate
the cost of otherwise potentially expensive
upfront investments for retrofits.
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URBAN LAND WINTER 202 4
Developers have an increased ability to
install emerging technologies thanks to
expanded tax credits for energy efficiency
and renewable energy investments. Those
developers can also receive incentives for
installing such technology in low-income areas
and paying workers the prevailing wage.
Real estate investment trusts (REITs) can
receive and transfer tax credits through the
IRA. Previously they could not access these
credits, as they do not pay taxes directly.
REITs and other companies with little or no
tax liability can transfer the full or partial
benefits of IRA tax credits to third parties, in
some cases including direct payments that are
allowed only for state and local governments
and nonprofits.
Tax credits and tax deductions can be
stacked for new construction projects and
retrofits. Previously, a developer who added
a geothermal heat system, solar panels with
storage, and EV charging to a building could
access multiple tax credits, according to The
Real Estate Roundtable.
Most tax credits and deductions are
increased for affordable housing
developments.
Other compelling reasons for green
upgrades to buildings-such as those
possible through the IRA-include:
Buildings save significant amounts of
money when decarbonization technologies
are introduced. The EPA estimates energy
consumption savings of 20 percent to 40
percent with aggressive retrofits on existing
buildings and cost savings of 6 percent to 9
percent.
Developers who leverage investments can
future-proof their buildings and portfolios and
may, thus, have more valuable buildings-for
example, according to ULI's Net Zero for
2024 Winter Issue of Urban Land

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