It should be no news that we are facing an urgent climate crisis. One of the main contributors to this crisis is our building stock. One of the easiest, most cost effective, and fastest changes we can make is in improving the energy and water efficiency of existing buildings. Renter occupied units make up about 36% of all residential building stock at around 43 million units in the U.S. alone. However, in rental units where tenants have individual meters for electricity, gas, and water, there is a fundamental misalignment between financial incentives, legal ability effect change, and our collective need to improve energy efficiency and reduce water usage.
The result of this misalignment is that renters are stuck paying high utility bills over which they have minimal control. A renter may see their electrical or gas bill and have a desire to add insulation or double pane windows to their unit to reduce their heating bill. However, due to financial and legal arrangements, they will never be able to execute on this desire even if they have the financial capacity and it is in their best interest and the best interest of the environment.
On the other side of the equation, the owner of the building has no financial incentive to improve the efficiency of the rental unit since the cost of inefficiency is borne by tenants and the environment at large with no immediate or tangible direct feedback to the owner. Yet, the owner is the only party with the legal power (ownership) to execute the changes necessary to improve energy efficiency. Furthermore, from a market perspective there is a strong dis-incentive to include utilities in the rent unless everyone is required to include them. This is particularly true in price sensitive markets as potential renters may not realize that certain properties include the utilities.
In order to better align the interests of the tenant, property owner, and our collective planetary need to improve efficiency it is hereby proposed that all owners renting out units for housing be required to include utilities in the rental price paid by tenants for any new or renewed rental contract signed after the passage of this legislation (Suggested 2 month grace period after passage).
This mandate can be rolled out within twelve (12) months to a majority of rental units since most rental contracts are renewed on a yearly basis.
Expected Immediate Impact (1-2 years)
With the inclusion of utility costs in the price the total cost of renting a unit will be much more transparent and accurate to potential renters. This will enable renters to evaluate their housing options much more holistically and make apples to apples comparisons between different rental units. In particular this approach eliminates the market disincentive that currently exists for properties that include some utilities. Owners with more efficient buildings will be able to be more competitive as the lack of utility bills will likely be reflected in a lower rental cost.
This will align economic market forces with our environmental needs. While utility usage may increase marginally as individual renters are no longer incentivized to conserve, with a few safeguards in place (listed below) this is likely to be a transitory. effect as landlords seek to find ways to minimize their risk and usage volatility.
In order to minimize their utility expenses, owners are likely to start pushing energy conservation information, tips, efficiency training, programs, efficiency competitions, or awards to renters in an effort to reduce their cost of operations and improve profit margins or market competitiveness.
Energy and water consumption is unlikely to decline significantly during this initial time-frame.
Expected Short-Term Impact (~5 years)
Owners have now been looking for ways to reduce their operational costs for a couple of years and have started to make some minor updates and upgrades to most of the appliances inside the homes. A few owners have added insulation to their units and drastically reduced their energy usage.
Large multi-family rental housing developers now have new demands from their clients for energy efficiency. Projects that were initiated when the mandate was first issued have been designed with both energy efficiency and usage monitoring of individual units for accountability to the owner. These buildings are now being occupied. The increased cost of construction was offset by the higher margin that the owner can expect from the reduction in energy usage.
Contracts between owners, architects, and engineers have started to evolve to reflect the new landscape of liabilities around energy efficiency. Owners are insisting that architects and engineers have some sort of accountability or liability in case the buildings do not deliver on their performance promises.
Manufacturers have shifted their product offerings to reflect the needs of HVAC equipment with much smaller thermal loads. High efficiency home appliances are Insulation and air barrier manufacturing has exploded in volume creating new jobs in local construction and manufacturing segments.
Construction codes have had a few new additions to address the assemblies required for efficient thermal envelopes and the changes in HVAC required.
Energy and water consumption have started to decline by about 10% per year in total for all rental units despite the addition of many new rental units onto the market.
Expected Medium Term Impact (~10 years)
Energy efficiency and resource conservation have become standard operating procedures for the Architecture, Engineering, and Construction communities. Net-zero and net positive buildings that generate income for the owners have gone from a rare request to a common one. A significant amount rental housing in the U.S. is now generating more energy on an annual basis than is being used on site.
Cities are now generating almost as much electricity as they use on an annual basis and the cost of electricity has dropped as PV and wind power has continued to become more cost effective. Power outages have become less common and less devastating when they do happen. When power outages do occur, they are practically a non-event across the country as homes have become more resilient. Most housing units now have thick blankets of insulation that keep the homes safely warm or cool with minimal energy input and some even have battery backups and on site PV generation.
Usage of carbon burning technologies has decreased in existing buildings and almost no new housing units have been built with natural gas. The need for heating has been reduced so dramatically with effective air barriers, insulation, windows, and doors that natural gas heating systems are redundant. In their place, heat pumps now provide for both heating and cooling needs with one piece of equipment in most climate zones. Heat pump hot water heaters have also become the norm and their price has dropped to levels competitive with a natural gas hot water heater due to increases in production volume.
Total Energy usage in all rental units is now about 50% lower than it was in 2020 even with many more units on the market and total carbon emissions from all rental units has dropped by over 80%.
Expected Long Term Impact (~100 years)
As the operational carbon footprint of housing is eliminated, the process through which housing is manufactured, delivered, built, renovated, and demolished will be re-invented to completely neutralize or reverse the negative impacts of the construction industry on both carbon emissions, toxic emissions, biodiversity loss, and habitat loss across the building life-cycle. Buildings will be built to learn and adopt with the changing needs of society while also providing sustainable high efficiency performance for current occupants.
We hope that with this simple mandate we can make all rental housing sustainable and lead us to a more sustainable and diverse future.
Safeguard Against Wastefulness
In order to avoid the potential for tenants to abuse this requirement, a safeguard for owners is included.
If the utility usage amounts in kW, Therms, Btu, Gallons, or Liters (not monetary units) of an individual unit exceed 20% of the normal usage for that month over the last three years, then the owner can charge the entirety of the excess over 100% to the tenant. In case of over use by a tenant, the owner must provide written notice to the tenant with the following information for review by the tenant.
- A one page summary sheet of the last three years (36 months) of relevant utility usage in kW, Therms, Btu, Gallons, or Liters
- The current month’s utility usage and utility billing rate. This notice may be provided via e-mail, or snail mail.
- The amount due to the owner.
- The due dates.
- Notification of the process that the tenant must follow to contest the charge if they think it is not accurate.
- Reminder of any fees or charges for non-payment of utility overages as provided for in the rental contract signed by the tenant.
The tenant shall have 15 days to contest, or 30 days to pay the excess to the owner. In the event that the tenant contests the bill, the owner has 15 days to provide the original utility bills with usage data to the renter. After the original utility bills and usage data have been provided to the tenant, the tenant shall have 30 days to to pay the bill.
In the event that the tenant refuses to pay, the owner can provide the current and previous 3 years of original or electronic utility bills to a local small claims court. Owners shall also be allowed to include provisions in rental contracts that allow for financial or other forms of redress in the event non-payment by a tenant.
Owner and Tenant Financial Safeguards for Areas with Rent Control
Many municipal or regional governments have rent controls in place. While utilities shall be included in the rental list price as part of the rental contract, the amounts shall not be subject to rules regarding rent control. Instead utility payment charges shall instead reflect actual monthly usage for the average of the last three years at the rates that are current at the time of the renewal of an existing rent controlled rental contract. Furthermore, in order to protect tenants against landlords of rent-controlled units from abusing this legislation to increase the price of rent, landlords of rent controlled units must return all surplus over the actual utility charges for the building to tenants at the end of the calendar year. The only exception to this is when the landlord has specific, documented, and published plans for energy efficiency upgrades with the excess money at the beginning of the year. The plans must be made available or distributed to all tenants and included in all new or renewed leases, and the funds for efficiency upgrades listed on a separate line item from utility costs so that tenants can review the data. These funds must be spent to implement energy efficiency upgrades and the spending documented by the end of the calendar year otherwise the excess charges must be returned to the tenants. The intent of this loophole is to provide landlords the means to pay for efficiency upgrades. The complexities of this loophole, particularly in large urban buildings, must be researched and explored further.
Transparency and Data Safeguards
In order to ensure that everyone is operating on the same data, utilities must begin to publish the data on each meter anonymously such that anyone can look up any address and see the energy consumption indicated by each meter. If possible utility companies should publish data for the past 3 years. Further research is needed on this matter to figure the best method for execution, what data should be included, and whether it needs to be a centralized data repository that utilities submit data to on a daily or monthly basis or whether this data is maintained by each utility with a standardized data format so that all data can be cross compared. The data to be published is only the time period of usage, the usage, and the meter ID. The usage data shall only be in kWh, Therms(adjusted for temperature), gallons, or other unit of volume, energy, weight, or quantity of resources consumed. Prices paid can be included but are not necessary. Individual users utility bills should then include their meter ID and renters and landlords can use this number to look up their specific usage and for reference purposes in case of a dispute. In order to protect privacy beyond anonymity behind meter ID’s this data can be released with a delay of 6 months or 12 months or whatever is considered appropriate.