ENERGY STAR® includes Broader Scope of Apartments in Rating System

The multifamily housing industry finally has its long-awaited energy rating system that now covers the whole nine yards.

In September, the Environmental Protection Agency (EPA) rolled out its new 1-100 ENERGY STAR rating system, culminating a three-year effort to create an equitable energy efficiency scoring system for multifamily properties. Beginning Sept. 16, apartments of all shapes and sizes – existing or new – began inputting energy usage data and other information to get a score that many believe will help drive leases.

In recent years, much emphasis has been placed on energy efficiency and the ENERGY STAR rating in the commercial and public building sectors with only limited applications to multifamily. Until now, apartments eligible for the rating were once limited by size and age.

The new system took three years to develop by the EPA, Fannie Mae and multifamily industry and should level the playing field. Scoring now includes all multifamily dwellings and enables an older property to go head-to-head with modern units designed for energy efficiency.

“It’s really big news for the multifamily industry,” said Chrissa Pagitsas, Director of Fannie Mae’s Multifamily Green Initiative.

Score enables owners, operators to quantify performance

While energy efficiency has been a hot button in all building sectors, the apartment industry has mostly sat on the sidelines because of a lack of availability of whole building energy usage data. Different styles and types of multifamily structures have also been difficult to navigate in a one-size-fits-all scoring system.

The ENERGY STAR score will enable owners and operators to quantify energy performance and better assess the relative risk of each property, says the EPA.  The score represents a property’s percentile ranking compared with similar multifamily properties.

Properties with 20 or more units can qualify for the rating by entering required information into EPA’s Portfolio Manager. A score of 75 or higher out of a possible 100 can earn the apartment an ENERGY STAR rating, which many see as a huge leasing advantage.

Work began in 2011 to establish a system that would equally compare property performance, no matter how big or small. Pagitsas said the system should provide owners with a comparable score to the property down the street.

“Frankly the multifamily housing asset is maybe more complicated than any other out there,” she said. “It’s not uniform, different structures, different configurations, different unit sizes, different than your average 10-story office building. The bottom line is yes, we do feel this score does accurately capture the variations because we looked at so many different data elements to understand the true driver of energy.”

The system factors in geographic regions, property styles, unit density, amenities and other elements.

“We looked at what truly drives multifamily energy use, regardless of your type,” she said. “The calculation that the EPA is using will calculate a score that makes sure that you’re compared to apples-to-apples to your peers and not to somebody else.”

Property owners have opportunities to save ‘real money’ on energy costs

The rating system was established based on utility and property characteristic information obtained in the 2012 Multifamily Energy and Water Market Research Survey. The poll generated 1,163 responses from multifamily properties, including Market and Affordable, as well as senior housing.

Respondents were asked to answer questions on their property’s characteristics and to provide all their property’s energy and water consumption and costs from January 2011 to December 2011. Among key findings were that property owners have a huge opportunity to save money and increase asset value by conserving on water and energy.

The least efficient property may end up spending $165,000 more in annual energy costs than a similar property operating resourcefully. Also, inefficient apartment units use more than three times the energy and six times as much water per square foot as efficient properties.

“That’s real money for property owners,” Pagitsas said. “I’m sure every single property owner can find something to do with the extra $165,000. At a point, multifamily owners spend on average 9 percent of their rent receipts on energy. Again, you have an opportunity to save money.”

She said a property could increase its asset value by almost $400,000, assuming a six percent cap rate, based on a 15 percent savings of a combined $158,000 water and energy spend for a 100,000 square foot property.

“Many mutitfamily properties are losing significant amounts of money, but there is a way to capture those savings,” she said.

(Image Source: Shutterstock)


Contributing Editor, Property Management Insider
President, Ballpark Impressions, LLC

author photo two

Tim Blackwell is a long-time publishing and printing executive in the Dallas/Fort Worth area who writes about the multifamily housing and transportation industries. He has contributed numerous articles to Property Management Insider, and worked as a newspaper reporter in the D/FW area. Blackwell is president of Ballpark Impressions, and publishes the Cowcatcher Magazine. He is a member of the Fort Worth Chapter/Society of Professional Journalists.

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