Multifamily Industry Faces Mandatory Participation in Energy Benchmarking Programs
The day may be coming when an apartment community’s strongest marketing tool is how much energy and water its units consume each year. And that day may be coming sooner than you think.
A growing list of U.S. cities are already participating in energy and water usage benchmarking and reporting on public and commercial buildings, and apartment buildings seem to be the next likely target. Expect multifamily properties to come more into focus in 2013, says John Lis, president of Velocity, an energy management solutions provider.
Rather than volunteering data for energy benchmarking programs like the Environmental Protection Agency’s ENERGY STAR and U.S. Green Building Council’s LEED, property management companies may find themselves anteing up information that has been required in the past only for office high rises and other structures.
“There are 30 cities in the next 12-15 months that are going to pass mandates for you to load your data into it,” Lis said. “The mandates are coming. Local ordinances in Seattle, Austin, Chicago, San Francisco, New York City, they’re all saying that they want multifamily property managers who have 10,000 square feet or more, which is almost every building, to load their property profiles into the EPA utility profile manager.”
EPA’s ENERGY STAR Portfolio Manager is a repository for energy consumption that is used to rate energy performance for buildings. ENERGY STAR officials encouraged attendees at November’s NHMC OpTech 2012 conference in Dallas to begin entering data into the system as the EPA works to develop a certification system for all multifamily installations.
Which is probably good advice, Lis said. Sooner or later apartments will be required to provide the information, which would signal the beginning of those little stickers on windows and doors and a new competitive wrinkle to leasing apartments.
“As the mandates start coming out, you will have no choice,” he said. “What if you can charge $1,000 here and $1,000 here? This property is an 84 rating, and this one is a 64. The guy at 84 is 100 percent occupied and the guy at 64 is not, so he has to get his 64 up to an 84 just so he doesn’t have the Scarlet Letter of energy hogging.”
What’s Good for Commercial Should be Good for Multifamily
Commercial buildings account for 18 percent of total U.S. energy consumption and contribute an estimated 15 percent of U.S. greenhouse gas emissions, according to the EPA. Because an estimated 30 percent of the building’s total operating costs are attributed to energy expenditures, reductions in consumption can be meaningful to the bottom line.
Putting all the cards on the table for electricity, gas, fuel oil, steam, and water is nothing new in the commercial building sector, and results have been positive. The EPA estimates that the 2,500 buildings that have earned the ENERGY STAR label for energy efficiency through 2005 save a combined $350 million on their energy bills when compared with average energy consumption of similar buildings.
The road to disclosure gained momentum in 2009, nine years after the U.S. Green Building Council introduced its LEED-certified buildings program, when New York City enacted Local Law No. 84, which calls for energy and water benchmarking for city and covered buildings. Washington D.C. followed in early 2011 by releasing its first annual energy performance ratings for all public buildings with more than 10,000 square feet three years after establishing the 2008 Clean & Affordable Energy Act.
Today, Washington State, California and Austin, Tex., have charted ordinances that require disclosure of energy consumption during real estate transactions of buildings. And in January, California will begin disclosure with transactions of commercial buildings larger than 50,000 square feet.
Now, usage reporting for apartments is working its way into the mix. Apartments and condominiums are among the 12,000 buildings in New York City that will share energy and water data this year, according to a report on BuildingGreen.com .
Most recently, New York City began releasing data ranging from site energy use intensity to carbon emissions on about 3,000 buildings. This year, more than 12,000 buildings, including apartment buildings and condominiums, will share energy and water data. Some apartments have already reported their data through Portfolio Manager.
New Mandates Are About Self-Policing not Government Control
At NMHC OpTech 2012, Lis sensed that property owners were wary of what lies ahead. When ordinances first arrived on the scene for commercial buildings, property owners hired outside consultants to work with Portfolio Manager, the required repository for U.S. mandates.
Ordinances created an unwelcome expense to property owners and fears that more administrative headaches were on the way.
Lis believes that governmental agencies don’t want to impose mandates on property owners – apartment or otherwise – that suggest energy consumption must be reduced. Rather, they encourage self-policing and, perhaps, the power of persuasion.
“The reality is, this is being passed because they don’t want to mandate that you have to be energy efficient,” he said. “What (cities) want to do is have everyone tracked in there so you can see who isn’t energy efficient. They think it will trickle down to the residents. That will force the owner to have to make changes to get up to speed. They feel like that’s the softer approach to getting the whole system turned around. This way it’s self monitoring.”
The first step, says Lis, is developing a plan to document a property’s energy and water consumption.
Get in the Habit of Entering Energy Consumption Data
ENERGY STAR spokesman Michael Zatz, one of three panelists who spoke on energy and water benchmarking at OpTech 2012, isn’t sure if an across-the-board ENERGY STAR rating system will fly in multifamily. Several variables must be maneuvered, including getting utility management companies to divulge total consumption costs and dealing with confidentiality laws on individual billings, says Zatz. A decision could come later this year.
However, he said its good practice for owners and managers to start entering data into the system, regardless if a property one day aspires to be certified.
Steve Heinz, founder and CEO of EnergyCap, agrees.
“You’re not pledging to the Federal Government that you’re going to reduce your energy use by ‘X’ amount,” he said last summer at NAA in Boston. “You’re just saying that my organization believes in the objective of the EPA and ENERGY STAR program to become more energy efficient and environmentally aware.”
Property Owners Need to Get Ready
With more than two dozen cities expected to adopt mandates, Lis said property owners should get ready to put their numbers on the line. The profile manager asks a number of very specific questions about a property’s energy systems and assets, requiring a thorough site inspection and inventorying the various components related to electricity, gas, and water consumption.
“Whether it’s a gas-fired boiler or electric heaters, there are numerous components to this profile manager that you have to enter in addition to the monthly data,” he said. “The first piece is collecting the data.”
The next step is determining if the data is accurate, which includes detailed checks and balances of billing and consumption reports. Finally, a site audit identifying energy- and water-related assets needs to be completed. From there, Lis said, the property should be able to determine existing inefficiencies that can be corrected to improve marketability.
“Multifamily to the EPA is a black hole,” Lis said. “The goal is to take this black hole and make it visible to everyone, to take away the tension points on the mandates, on legislation, on incentives and rebates, on manufacturers. It’s tying all of this together in one bucket so that we can be transparent to everybody.”
Are you currently living in one of the cities mandating participation? Please share your stories or concerns in the comments below.