Finding Value Beyond the Energy Bill Savings

Why whole-building energy efficiency upgrades pay off—even when residents pay their own energy bills.

If residents pay their own electricity bills, how does the building owner benefit from energy efficiency upgrades?

This question illustrates a common misconception about multifamily energy upgrades called split incentives. The solution is simple: comprehensive upgrades through Pacific Gas & Electric’s (PG&E) Multifamily Upgrade Program offer a total value that goes beyond energy bills.

Three ways energy upgrades pay outside of energy and cost savings:

Higher rents, higher net operating income: Energy-efficient buildings can command higher rents that can translate to a higher net operating income for building owners. For example, after completing an extensive retrofit, a 93-unit property near Sacramento, California recently raised its rents from $.65 to $1.00 per square foot—nearly 53 percent—boosting NOI and offsetting rising rent costs with energy cost savings.

Higher property values: According to a report by the Energy Cost Savings Council, every $1 invested in retrofit measures can increase a property’s value by $3. Other factors indicate that the market is placing value on energy efficiency, too, including new legislation that requires multifamily buildings to benchmark, and new property appraisal processes that incorporate energy efficiency into valuations.

Lower vacancy and turnover rates: With better comfort and health, fewer nuisances, and in some cases, nicer, newer appliances, energy-efficient buildings tend to have higher resident satisfaction. Happier residents typically stay put, keeping your units full, revenues high, and bottom line healthy.