Energy Efficiency in Multifamily Buildings

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.