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What financial benefits do building owners get when they invest in energy efficiency?

UPDATE: Join us for a discussion on valuing the financial benefits of energy efficiency in the multifamily sector. We’re hosting a webinar on Tuesday, Jan 27, from 1-2 PM CST. Register here:

Typical building owners who have completed energy efficiency upgrades through the Elevate Energy program for multifamily buildings have cut their energy use by 30 percent.  And the benefits of building upgrades can go beyond the simple energy savings to include “non-energy benefits” such as lower operating costs, improved tenant comfort, and lower tenant turnover and vacancy rates.

So, how do we define the range of these many benefits and accurately value them? And why don’t more building owners choose to invest in energy efficiency?

A new white paper by the Elevate Energy research team, Valuing the Financial Benefits of Energy Efficiency in the Multifamily Sector, focuses on how efficiency upgrades affect the financial performance of buildings. The paper also examines building owners’ motivations for investing in energy efficiency, including their perceived financial outcomes and how they used the money they saved.

A Replicable Methodology for Multifamily Buildings

In January 2014, we looked at a group of three buildings that underwent efficiency upgrades. Now, we’ve expanded the analysis to look at 13 buildings upgraded through our efficient buildings program, comparing them to 21 buildings that underwent an energy assessment but did not complete an upgrade.

We found that net operating income of buildings that had energy efficiency upgrades increased by 1.6 percent one year after the upgrades. In addition, gas costs decreased by almost 25 percent and gas consumption decreased by 17 percent. Rental incomes increased by almost $400 per unit annually.

We also interviewed five buildings owners, who most often cited tenant comfort and turnover as benefits. Owners reiterated the importance of keeping rents affordable to help maintain a stable core of happy tenants.  Based on self-reported data, our findings show that costs to turn over an apartment unit could range from a few hundred to a few thousand dollars. We took special note of this finding: while census surveys report more than one-third of renters relocating in the last year, there was an evident lack of research to date on turnover costs in multifamily buildings.

Click here to read the complete methodology and findings.

The Significance of Valuing Energy Efficiency Benefits

By consistently reporting high quality data – such as whole-building data, energy usage and cost data, financial performance, and tenant turnover and vacancy rates – we help strengthen the case for energy efficiency in affordable multifamily housing. Building owners who choose to invest in their property should have the full range of benefits recognized.

Accurately valuing the financial benefits of efficiency upgrades is important to a number of stakeholders, and this paper includes recommendations for lending entities, energy efficiency programs, and building owners. Policy makers who approve energy efficiency standards may also find the findings relevant and useful. Download and share the full paper here.

Thank you to the Preservation Compact and the Community Investment Corporation for their partnership. The paper was made possible through generous support of the Citi Foundation.

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