President Obama's Better Building Initiative Doesn't Work for Multifamily Housing

Guest blog By Michael Miller

You might think by this headline that I’m about to rant about the news regarding energy efficiency policy that was circulating last week. President Obama outlined a plan called the Better Buildings Initiative to incentivize energy efficiency in commercial buildings during his visit to Penn State. Actually, I want to explain why multifamily energy management struggles with this type of policy.

While we certainly applaud the President’s plan to create tax incentives for building efficiency and increase financing for building retrofits, the plan does not go far enough to suit the specific needs of the multifamily industry. These needs will be increasingly important given the nation’s current and future housing concerns.

The President’s plan takes on the energy consumption of commercial buildings. It incentivizes the upgrade of the buildings used for offices, stores, schools, universities, hospitals, and other municipal or commercial organizations. The ultimate goal is to make these types of buildings 20 percent more energy efficient in the next 10 years. President Obama’s plan attempts to create these incentives through tax breaks and additional financing opportunities, building on the American Recovery and Reinvestment Act (ARRA).

The National Multi Housing Council commended the Better Buildings Initiative, and was quoted on the White House blog as a supporter of the tax initiatives, finances, and education for commercial buildings. While NMHC (and American Utility Management) are in general agreement, it’s important to remember that the devil is in the details.

Traditionally, multifamily properties have been lumped in with commercial buildings when it comes to these types of initiatives. There are a number of problems with the practice of categorizing multifamily property as commercial and corresponding challenges to implement larger energy management initiatives:

There is not enough information available surrounding the multifamily industry’s energy consumption to create a policy (such as the Better Buildings Initiative) that will help to reduce it. Sustainability strategies must be rooted in facts that we don’t have in the multifamily arena.

• Unlike commercial buildings, very few multifamily buildings are master metered. Almost all units nationwide are individually metered for electricity and natural gas — which means building owners have no information about energy use in individual units.
• To gather this information, local electric, gas, and water utilities would have to share unit-specific information, but state laws bar disclosure.

Facility infrastructure is old and varied. Would the incentives go far enough to justify the investment?

• More than 15 million of the almost 24.5 million units in multifamily housing buildings with two or more units are at least 30 years old. New building codes will do little if anything to bring about efficiency improvements.
• Buildings are of widely varying sizes, shapes, types, and locations, meaning the information collected must take specific multifamily factors into consideration for measurement.

Financial incentives for residents are difficult to establish due to resident/property dynamics.

• More than 60 percent of tenants stay in their units for a year or less, making it difficult to assess and improve multifamily energy efficiency.
• Property managers usually have an economic incentive to keep rents low (and occupancy high), but limited incentive to incur expenses to improve building energy efficiency.

Assessment and benchmarking tools are non-existent in multifamily. As multifamily property owners you’re told by numerous people that they can benchmark your utilities. Let me tell you why you’re wasting your money.

• There is no uniform tool for measuring or assessing the energy efficiency of multifamily housing buildings or improvements to them. This makes it virtually impossible for residents to shop for housing based on energy efficiency, and it limits economic incentives to make building efficiency improvements.
• Jurisdictions such as New York and Seattle are taking steps through legislation that specifically categorizes multifamily — and it’s a step in the right direction. But the only accepted measurement is EPA’s portfolio manager, geared to commercial/industrial applications. It does not take into account factors specific to multifamily mentioned above.

Without addressing each of these issues, there can’t be a comprehensive sustainability strategy for multifamily. And until that happens, we need to focus on what we do know –that reducing energy consumption will save property owners money — and educate the industry about why individual sustainability initiatives are important to their business.

This is not as sexy as the President’s press-savvy Better Buildings plan, but preventing multifamily energy dollars from being sucked into a black hole of additional expense is definitely attractive to multifamily business owners.

Without industry-wide standards for energy consumption, multifamily property owners need to take the initiative to operate more sustainably and cost-effectively. There are a number of simple ways to reduce energy and utility consumption.

Motion sensor faucets, which ensure not a drop of water is wasted, can reduce consumption by 10 to 15 percent at a single property. Installing occupancy sensors for lighting throughout the property can reduce electricity consumption by another 10 to 15 percent. Properties can also provide digital control systems to more accurately monitor boiler system temperature. These three tactics alone achieve a total cost reduction of 10 to 15 percent, a huge return on a comparatively minor investment.

Implementing these types of cost savers is the first step in establishing the effectiveness of efficiency upgrades in supporting larger sustainability campaigns, and protecting the bottom line.

This was a long-winded explanation of why President Obama’s Better Buildings Initiative needs to go further to work for multifamily. But it’s important to understand that if our industry blindly follows the agenda this plan is pushing, there’s significant potential for consumer confusion, incomplete and inadequate data-gathering, and waste of resources.

Michael Miller is President and CEO of American Utility Management (AUM). www.aum-inc.com. For the full blog go to http://blog.aum-inc.com/2011/02/16/why-president-obamas-better-buildings-initiative-doesnt-work-for-multifamily/