Nearly 40 million people live in multifamily rental housing in the United States. Multifamily properties, many of which were built decades ago, are significantly more likely than single-family, owner-occupied homes to be energy inefficient, leading to higher bills and energy cost burdens for residents. Even as multifamily housing starts grow, only a small fraction of units -- approximately 1 in 10 -- would be considered affordable for most U.S. renters. For low-income and minority tenants, the share of their income devoted to energy bills can be as high as 7.2%, which can have negative effects on physical and mental health, housing stability, and productivity. (ACEEE 2016)
Energy efficiency programs tailored for multifamily affordable housing could cut energy usage drastically and reap enormous benefits supporting equitable access to energy efficiency programs, resident health, and the preservation of affordable housing. A 2017 report by the American Council for an Energy-Efficient Economy (ACEEE) estimates that multifamily energy efficiency has the potential to result in $3.4 billion in savings per year.
Despite this enormous opportunity and potential, programs advancing multifamily energy efficiency receives a disproportionately low share of utility ratepayer and state program investment, and lower participation and adoption rates than single family households. Multifamily building owners and tenants face unique challenges that do not align neatly with the preponderance of residential and commercial programs in existence, including:
- Dispersed and/or complex building ownership
Many multifamily buildings have several owners and multiple decision-makers who must be convinced before capital improvements such as energy efficiency measures work can be undertaken: owners, limited partners, managers, building staff, and sometimes tenants. Multifamily buildings may be owned by public housing agencies, nonprofit organizations, and for-profit individuals, partnerships, and housing management corporations. These owners, in turn, can be partnership syndicates, development companies, or institutions such as pension funds and insurance companies. Public housing authorities and nonprofits serve predominantly low-income households, but a great many low-income households live in conventional housing, sometimes called "naturally occurring affordable housing."
- Split financial incentives between the building owner and building tenants
The costs and benefits of energy efficiency improvements are divided between tenants and owners in ways that may cause neither to be fully incentivized to undertake or pay for the work. For instance, WegoWise's 2014 study of 3,000 affordable multifamily housing units in Massachusetts finds that energy bills are 20% higher in buildings where the owner (as opposed to the tenant) pays for utilities.
- Lack of awareness of multifamily energy use and retrofit options
Building owners and even contractors may lack information about what can be done to improve energy efficiency in multifamily buildings and what the best retrofits might be. In addition, building owners and managers may lack information about the utility and governmental incentives available to them for improving the energy efficiency of their buildings. Building owners and managers lack the data about building energy use needed to make decisions about energy efficiency improvements, in part because utilities often do not provide aggregated tenant data to building owners.
- Lack of building owner access to funding and financing
Even where financing is available, a number of factors may inhibit a multifamily property owner from accessing low-costs loans to implement energy efficiency measures: poor or difficulty-to-determine creditworthiness; existing restrictions on the property; fear or inability to take on additional debt; and limited time frames available to re-finance or renovate a building, among others. While low- and no-cost weatherization programs across the country have been crucial in providing home energy improvements and comfort for eligible low-income families, there is a large portion of the U.S. market that does not have access to these services, either due to insufficient program funding or income level that make households ineligible for weatherization assistance.
State Energy Offices and their partners can advance multifamily energy efficiency in a number of important ways, most notably by identifying it as a priority in their comprehensive energy planning, policy-setting, and program design processes. The resources below offer information on how states have
- NASEO's Comments on the Clean Power Plan and Clean Energy Investment Program, available through NASEO's Clean Power Plan Resource Hub, offer insights on how the U.S. Environmental Protection Agency's proposed rule on emissions from power plants can be implemented to support energy efficiency in affordable housing (and in other end-use sectors of the energy economy);
- "Encouraging Affordable Housing Efficiency Under the Clean Power Plan," which is a fact sheet developed by NASEO in January 2016 for Housing Finance Agencies interested in the U.S. Environmental Protection Agency's Clean Power Plan rule for existing power plants.
- "The Nexus of Multifamily Energy Efficiency and Disaster Resiliency," a presentation by NASEO Southeast Regional Coordinator Brian Henderson describing how multifamily energy efficiency policies can support community resiliency during and after disasters.
- The Energy Program Consortium's "Multifamily Programs by State" database (opens as an Excel spreadsheet), which tracks key features of multifamily programs in each state (last updated January 2015).
- Infographic: State Agencies in the Clean Power Plan offers a snapshot of state agency coordination on the Clean Power Plan, and highlights the many ways energy efficiency--including in the housing sector--can be captured in states' compliance efforts. While NASEO does not take a position on the Clean Power Plan, we believe strong state-level coordination among State Energy Officials, air and utility regulators, and state housing officials can lead to strong policy gains for energy efficiency and air quality.
- NASEO's comments to the U.S. Environmental Protection Agency on the design and implementation of the Clean Energy Incentive Program under the Clean Power Plan," including thoughts on the potential for the CEIP to increase investments for energy efficiency in low-income or disadvantaged communities.
To learn more, contact Sandy Fazeli, NASEO Senior Managing Director, at firstname.lastname@example.org.
NASEO Multifamily Publications
Multifamily Policy and Program Horizons, and the Implications for Multifamily Energy Efficiency Finance
Date: February 2015
Authors: Sandy Fazeli, Program Director, NASEO and Lauren Ross, Local Policy Manager, ACEEE
Description: Only small pockets of activity around the country have advanced multifamily energy efficiency in a meaningful way. In fact, even where local efforts have been successful, they operate in a policy and regulatory landscape that overwhelmingly caters to commercial properties or single-family homes. Recent developments are signaling a shift in this landscape, powered in large part by innovative partnerships. This article from the State and Local Energy Report details examples of national, state, local, and utility actions and collaborations show promise for furthering efforts to improve building performance, increase available resources, and ultimately help communities and tenants realize the benefits of energy efficiency for multifamily buildings.
Moving on Multifamily Energy Efficiency: Four Tips For and From States
Date: May 2014
Author: Sandy Fazeli, Program Manager, NASEO
Description: Derived from discussions with energy offices and housing agencies that are currently thinking through issues in multifamily energy efficiency, this article from the State and Local Energy Report covers NASEO’s running list of tips and insights for state governments and their partners to move the bar in the multifamily sector.
Multifamily Energy Efficiency: Reported Barriers and Emerging Practices
Date: November 2013
Authors: Elizabeth Bellis, Energy Programs Consortium; Stephen Morgan, Clean Energy Solutions; Sandy Fazeli and David Terry, NASEO
Description: This report identifies commonly-cited barriers to energy efficiency investments in low-income multifamily housing and discusses current efforts to address them. It highlights strategies for deploying public- and private-sector resources, with the goal of increasing the effectiveness of current and future efforts.
- “Transforming Multifamily Housing: Fannie Mae’s Green Initiative and ENERGY STAR ® for Multifamily”, September 2014, Fannie Mae
- “DC PACE Commercial: An Energy Finance Solution”
June 2014, District Department of the Environment
- “Reducing Energy Costs in Rental Housing: The Need and the Potential”
December 2013, Joint Center for Housing Studies of Harvard University
- “Public-Purpose Energy Services Company”
October 2013, Vermont Energy Investment Corporation
- “Financing for Multi-Tenant Building Efficiency: Why This Market Is Underserved and What Can Be Done To Reach It”
July 2013, American Council for an Energy-Efficient Economy
- “Engaging as Partners: Introducing Utilities to the Energy Efficiency Needs of Multifamily Buildings and their Owners”
March 2013, American Council for an Energy-Efficient Economy and Elevate Energy
- “Partnering for Success: An Action Guide for Advancing Utility Energy Efficiency Funding for Multifamily Rental Housing”
March 2013, National Housing Trust
- “Housing America’s Future: New Directions for National Policy”
February 2013, Bipartisan Policy Center
- “Multifamily Energy Efficiency: Insights on Program Best Practices to Align Stakeholder Interests"
May 2012, Minnesota Department of Commerce Division of Energy Resources
- “Recognizing the Benefits of Energy Efficiency in Multifamily Underwriting”
January 2013, Deutsche Bank and Steven Winter Associates
- “U.S. Multifamily Energy Efficiency Potential by 2020”
October 2009, Benningfield Group
Task Force Contact: Sandy Fazeli, Managing Director, NASEO