Cracking the Multifamily Efficiency Nut for 35 Years
Contributing author: Helen Booth-Tobin
17 percent of Minnesota’s building stock is in multifamily housing (defined as buildings with five or more units). Multifamily housing is inherently energy-efficient, and uses about half the energy of single-family housing. The recent boom in multifamily housing development is thus a good overall energy-efficiency strategy. However, because of split incentives between building tenants and building owners and other barriers, many energy-savings opportunities are left on the table, and the multifamily sector is thus a tough efficiency nut to crack.
How can we achieve these savings? Since its earliest days, CEE has tested technologies, communication strategies, program design, and financing options to make Minnesota’s multifamily buildings more efficient.
Research to understand and improve the sector’s energy performance
In the early 80s, CEE recognized an opportunity for energy savings: many multifamily buildings were too small to warrant the attention of full-blown engi:(neering services, but too complicated for a residential energy auditor. Building owners were looking for an objective third party opinion, which CEE supplied with results of our field research. The multifamily building stock is simpler and less varied than the commercial sector. As a result, staff were able complete in-depth studies in a small number of buildings, evaluate the effectiveness of different types of retrofits, and apply the findings to buildings with similar systems. Throughout the 80s and early 90s, CEE conducted field research to assess boiler and water heating retrofits in the Twin Cities metro area. The studies emphasized cost-effective opportunities for mechanical system retrofits. Our research team also completed a formal characterization of Minneapolis multifamily housing to better understand these buildings. CEE’s current multifamily research is investigating contaminant transfer between units, ventilation, air leakage sealing, and condensing boilers.
Integrated programs to deliver retrofits
But building science expertise alone can’t sell energy improvements. Throughout the years, owner-tenant split incentives, building owner skepticism, lack of financial resources, trouble finding and hiring contractors, and quality control issues have created barriers to achieving energy-efficient multifamily buildings. CEE has developed and refined several programs to serve this tricky sector.
Throughout the 80s, CEE audited more than 1,500 multifamily buildings, of which 40 percent implemented measures through CEE programs, and another 30 percent implemented retrofits using CEE information and their own contractors. From 1984 to 1986, CEE ran its first multifamily pilot program, offering low-cost mechanical system upgrades to assess the feasibility and delivery of full-scale multifamily retrofits. The pilot provided a one-stop service to multifamily building owners, including help choosing a retrofit and finding a contractor, post-installation inspections, operating instructions for maintenance staff, and financial incentives. In the 90s and early 2000s, we disseminated this program design in outstate Minnesota, Wisconsin, and California.
Financing for multifamily energy improvements
A major challenge to completing upgrades is the availability of loan programs to smaller rental property owners. As a non-traditional lender, CEE has always offered programs meeting a wide variety of financing needs. For the multifamily sector, this means options for a pocket of the multifamily sector who can’t obtain financing from a more traditional lender. Rental property owners look to our Lending Center if they have a lack of rental history, only own a single rental property, or have no access to a credit line. In addition to many city contracts that include rental financing, CEE has offered two different rental loan programs: the Rental Energy Loan Program (635 loans and $4,817,966 since 1993) and MHFA Rental Rehab Loan Program (264 loans totaling $7,304,497 between 1996 and 2012). The Rental Energy Loan is our only multifamily program currently available. We typically finance one to eight unit properties constructed during the 60s and 70s in the Twin Cities metro area. HVAC system improvements, windows, and new roofing or siding are the most common projects financed through our Lending Center.
But in keeping with CEE’s program experience, persuading rental property owners to finance and complete upgrades is extremely difficult. Most rental property owners are reactive, replacing boilers when they break rather than when they’re wasting energy.
Challenges and opportunities for the next 35 years
So what would motivate building owners to make proactive energy improvements? In 2013, CEE designed and ran a comprehensive multifamily retrofit program pilot program informed by focus group interviews with multifamily building owners, and also started implementing a comprehensive multifamily program for Minnesota Energy Resources. We learned that in addition to short paybacks and big ROIs, owners and managers want to ensure occupant comfort and tenant retention. Leveraging these non-energy benefits could prove more effective than promoting energy savings alone. Complicated metering can make it hard to figure out how and where the building uses energy. Will multifamily retrofits become more attractive as smart meters, benchmarking software and other technologies provide detailed energy data and comparisons to peer groups? Renters have little incentive to turn down the heat when the landlord covers the gas bill. But as more and more buildings install separate furnaces and meters for each unit, will tenants be more receptive to energy saving tips? How can building owners be incented to install energy-efficient equipment if tenants are paying the bills?
Through partnerships, policy, and technological innovation, CEE will continue to experiment and identify energy solutions for the multifamily sector.
Photo credit: Tambako The Jaguar and synes