By Nehemiah Stone
Energy efficiency is a hot topic in the multifamily housing industry. Day after day, we encourage property owners to install energy-efficient property retrofits in order to “save energy, save money!” However, energy-efficient multifamily property retrofits have benefits that extend far beyond reduced energy use and lower utility bills.
Research shows that energy-efficient upgrades contribute to higher property values and reduced equipment maintenance costs. Additionally, energy-efficient property retrofits lead to improved resident comfort and health, which ultimately results in lower vacancy rates, and reduced unit rehabilitation costs associated with resident turnover. Energy-efficient retrofits also benefit local communities by reducing the need to run expensive peaking power plants, by decreasing the negative air quality impacts of energy generation, and by creating good quality jobs.
One of the most notable benefits of multifamily energy efficiency improvements is the positive economic impact it has on the local community.
When a California household spends $1.00 on utility bills, only about $0.28 stays in the local community. Conversely, of every dollar that a household spends on average local goods, approximately $0.75 remains in the neighborhood, and is spent over and over again. The total economic activity derived from the spending of a dollar is known as its “multiplier effect.”
The multiplier effect of multifamily energy efficiency improvements shows that energy-efficient retrofits go far and above simply saving on monthly utility bills.
To understand the multiplier effect, consider the $1.00 spent at a local business mentioned in the case above. Now imagine a dollar whose value shrinks by 25% each time it is spent; $1.00 + $0.75 + $0.56 + $0.42 + $0.32 + $0.24, et cetera until there is less than a penny remaining. Altogether, this adds up to $3.99, therefore 3.99 is the multiplier effect for average local goods. The multiplier effect for the dollar spent on utility bills is just $2.12. This means that every dollar that energy efficiency saves a household results in increased local economic activity of $1.87 ($3.99 – $2.12).
To be conservative, assume energy efficiency upgrade costs that are 2½ times the dollar value of the annual savings. That would mean that a $25,000 investment should save the residents $10,000 ($25,000/2.5) per year on their energy bills. Given the multiplier effects noted above, if that $10,000 had not been shaved off residents’ utility bills, it would have only generated approximately $21,200 ($10,000 x 2.12) in local economic activity. Since low- to middle-income households would spend virtually all of the $10,000 savings locally, a $10,000 reduction in energy costs would have a local economic impact of $39,900 ($10,000 x 3.99). Comparing the two, we see that an investment of $25,000 in energy-efficient multifamily property retrofits has a net local economic impact of $18,700 ($39,900 – $21,200) the first year, and nearly $39,900 every year thereafter.
The multiplier effect of multifamily energy efficiency improvements shows that energy-efficient retrofits go far and above simply saving on monthly utility bills. Installing energy-efficient systems in multifamily properties provides direct benefits to multifamily property owners and residents while also boosting local economic and community development.
|Annual Savings||Multiplier||Community Economic Activity|
|Annual Economic Value||$18,700|
For an in-depth look at this topic, please download this slideshow presentation from the 2014 Housing California Conference.
For more information or to qualify your property, contact TRC Energy Services, SDG&E’s authorized program implementer at 866-352-7457 or at firstname.lastname@example.org.