Energy efficiency investments make good sense for homeowners who will enjoy the benefits directly such as lower utility bills. But for rental, multi-unit buildings where landlords pay for infrastructure and appliance upgrades, the benefits are not easy for them to see especially since tenants will end up enjoying the benefits of a lower utility bill.
The growing need for energy efficiency
So, why should landlords invest in energy efficiency solutions if they won’t be reaping any of the financial benefits?
Energy efficiency measures like insulation, new furnaces, smart appliances and efficient lighting do pay off for building owners. This is the message that Chicago-based group Elevate Energy is trying to convey across the state. The company has developed a programme called Energy Savers which is designed to educate multi-unit building owners about energy efficiency and assist them with free energy audits and advice on contractors and upgrades.
Multi-unit rental buildings house a significant portion of the population in Chicago. In Cook County, which includes Chicago, 41% of households are renters, and the majority of those earn less than half the median area income. The proportion of renters in the Chicago area increased by about 10% between 2007 and 2011, which is more than likely due to the economic crisis.
Elevate’s Energy Savers program was created in 2008 as part of a MacArthur Foundation initiative, The Preservation Compact, focused on affordable housing; though it has since expanded to also include higher-income buildings. Elevate Energy also does other outreach work around energy efficiency and the smart grid, including as a member of the Illinois Science & Energy Innovation Foundation (ISEIF).
Energy efficiency benefits tenants and landlords
For low-income renters, the money saved on lower energy bills, can be spent instead on crucial costs like health care and food. It also means greater comfort for tenants who often find it difficult to maintain a stable temperature in old buildings specifically.
Weatherizing and installing new furnaces also reduces fire hazards caused by space heaters, candles, and ovens used for heat and light.
Elevate spokesperson Stephanie Folk notes that weatherization and other investments often mean more desirable housing that translates to lower tenant turnover. Landlords also stand to save money from utility bills for common building areas or in cases where they pay for heat or other portions of the utility cost. Elevate also works with public housing authorities, which typically cover all or part of utility bills for residents. Energy efficiency upgrades can also translate into lower maintenance costs for landlords, especially in terms of new appliances like more efficient furnaces and hot water heaters.
In three buildings owned by the affordable housing developer Bickerdike Redevelopment Corporation on the west side of Chicago, investment in air sealing and roof cavity insulation led to Bickerdike receiving 19% savings on gas bills from 2011 to 2012 and a 10% overall reduction in utility expenses. The savings of US$12,624 is equal to 17 months’ rent for a unit or 15 months’ maintenance costs in one building, according to an Elevate case study.
In that situation, the developer and tenants share the gas bills - the developer pays a bit more, and tenants pay the majority of electricity costs.
Bickerdike asset manager Michael Burton says that after upgrades, tenants are more likely to pay their rent on time.
Convincing the landlord and building owner
Often for government housing authorities or building owners, the logistics of energy efficiency upgrades are more of a roadblock than the cost. “The barriers are lack of information about how to go about making the right improvements so they will really save money, and where to find the best contractors,” said Folk. “Also challenges with financing. We put together a program to help address all those barriers.”
Elevate’s Energy Savers program provides the energy audit and also reports on energy savings after the changes have been made. For example, thermal imaging at the Bickerdike buildings helped quantify how much a new furnace would save on heating. Elevate doesn’t actually fund upgrades, but it works with the Community Investment Corporation which provides financing.
Bryan Pritchard is president of the firm Tricap Chicago LLC which owns numerous rental buildings across Chicago. The firm has made energy efficiency upgrades at most of their buildings, including with Elevate and through the utilities People’s Gas and ComEd’s programs offering incentives for efficiency, as part of their state mandate to reduce demand.
Pritchard says that investments “have to do with light bulbs, radiators, small modifications, steam pipe insulation - the low-hanging fruit.” He adds that “having personally done the math,” he knows efficiency makes financial sense. And, “By and large people are good citizens as well, we know that continuing to use energy unfettered is not good for the planet.”
Energy efficiency also reduces the burden on utilities’ infrastructure and services, and on power plants. Lastly, energy efficiency upgrades create employment.