Even as the city of New York moves next week to mandate utility benchmarking and data reporting from multifamily property owners via the enactment of Local Law 84, two independent studies released this week point to continued ongoing challenges regarding the collection of utility data from apartment operators.
According to Multifamily Utility Usage Data: Issues and Opportunities, a study conducted by Recap Real Estate Advisors, current benchmarking databases operated by federal, private, and mission-oriented organizations are capturing date from only 2 percent or 3 percent of all multifamily units nationwide. Furthermore, the study found that the lack of large and robust data sets, a common data taxonomy, and accepted industry standards for data collection is inhibiting a number of areas, including the meaningful benchmarking of multifamily properties, the identification of appropriate energy conservation measures, and the development of large-scale retrofit financing programs.
“There are some very significant data collection efforts underway, as well as some very promising new tools for analyzing this data,” Recap Real Estate Advisors CEO Todd Trehubenko said in a press release accompanying the study, which was funded by Living Cities and the MacArthur Foundation. “However, there are no common standards, and most owners, utilities, lenders, and regulators are not required to collect or report information about the amount of energy and water that their properties use. There is tremendous missed opportunity to obtain the information necessary for policy makers, energy experts, and capital providers to create powerful new strategies to reduce consumption and costs.”
Meanwhile, on the regulatory and policy side, the Washington, D.C.-based Institute for Market Transformation (IMT) this week released Building Energy Transparency, a comprehensive review of U.S. building energy benchmarking and disclosure policies, including an examination of the four cities (New York, Seattle, Austin, Texas, and Washington, D.C.) that already require at least some owners of multifamily buildings to benchmark and disclose how much energy their properties are consuming. According to the study, benchmarking requirements that are starting to phase in this year will affect some 4 billion square feet of building space, nearly three times the current impact of the LEED rating system.
“These policies are expanding rapidly. Most of them are very new, developed just within the last five years or so,” explains IMT building energy rating program director Andrew Burr. “There is some opposition from real estate owners on the multifamily side. Part of that, we think, is the result of culture change. Energy information has not been historically transparent in the U.S. property market. But at their heart, these policies are market-based in the same way that MPG disclosures for cars work. Jurisdictions are not telling building owners that they need to make improvements or spend capital to make their assets more efficient.”
Despite the ongoing challenges related to capturing the vast scale of multifamily energy data, both reports point to long-term reductions in consumption and costs that are likely to benefit adopters of benchmarking programs, as well as assist lenders in better understanding how energy usage factors into asset values. “This report demonstrates the need for more data collection, not simply for the sake of having more data, but to provide information that is useful in helping to move the industry forward,” says Living Cities CEO Ben Hecht of the Recap report. “This type of data would be helpful to lenders as part of their underwriting processes and helpful to owners as they are making critical decisions about efficiency plans. It would help to bring about a major change in the way that business is done as it relates to housing energy-efficiency.”
Indeed, Burr points to the recent partnership between the U.S. Environmental Protection Agency and Fannie Mae as a likely evolution of benchmarking efforts, a sign that apartment operators will ultimately have their energy skin in the game whether they like it or not. “EPA recently partnered with Fannie Mae to improve the portfolio manager rating tools for multifamily to eventually make a one to 100 rating available for multifamily properties,” Burr says. “Fannie Mae wants to be able to understand how energy-efficiency ultimately can be factored into underwriting.”
To get more accurate and reliable usage data and also reduce the administrative burden and costs associated with data collection that are incurred by property owners, IMT is advocating better partnerships between jurisdictions mandating benchmarking efforts and the utilities that provide energy to apartment operators in those jurisdictions. “It has been tremendously difficult for owners of multifamily properties to capture the utility bill data that they need for benchmarking, and there have been some issues with cost,” Burr says. “We’re advocating partnerships between jurisdictions and the utility where the utility aggregates total energy usage of a property and sends that data directly to the building owner. That’s a best practice and core recommendation of the report.”