RULES AND REGS: What the Multifamily Industry Can Expect with the Warner-Lieberman Bill

In an attempt to cut back on U.S. greenhouse gas emissions, Senators John Warner (R-VA) and Joseph Lieberman (I-CT) introduced a bill to Congress that would reduce emissions in 2012 to 2005 levels and by 70 percent in 2050. The bill, known as either Warner-Lieberman or the Climate Security Act, would impose a cap-and-trade system. The Senate began debating the legislation last week, the first time since 2005 that a climate change bill has been discussed. MHN Associate Editor Erika Schnitzer talks to George Kehler (pictured) about the Warner-Lierberman bill, its impact on the multifamily industry and how the industry can prepare itself for higher energy costs in new developments.George Kehler is the director of sustainability and carbon management of Cincinnati- based Cadence Network, an energy management firm providing a range of services allowing companies to monitor, measure and reduce operational costs.MHN: How might the bill affect the multifamily industry?Kehler: The industry will not be regulated, per se, in the cap-and-trade. The major impact will really be on the cost side. If you’re building homes, diesel fuel will become more expensive, digging out and clearing the land will cost more money, when you buy cement–a big CO2 emitter–those costs will impact as well.One of the other things is thinking about, from a society perspective, the value system of the United States and the perception on climate change. A few years ago, it wasn’t on too many people’s tongues and now it’s in the forefront. You add in all the increases in gas prices, so with potential cost increases continuing to go up, people are driving less. There are some things to be considered. When you build homes, are you building them where people work or are you building them way out where there is an hour-long commute? Are you building them where there is mass transit? In Houston, for example, some apartments are being built in metro stations. The other area where I think the industry will be affected is in appliances. We are seeing higher and higher efficiency requirements and we’re seeing federal standards increase in efficiencies and building codes so homes will use less energy.MHN: How can the industry prepare for and manage higher energy costs when planning new developments?Kehler: Energy efficiency and location. We are seeing builders building green homes and that’s going to be the new wave. Builders know how to do that, and I think in the past, consumers were more interested in tile floors and granite countertops—the nice things you could see—versus thick insulation in the attic. The industry will need to be looking at consumer choices, understand the impact of energy cost, understand their carbon footprints and look for the trends to make smart decisions about where they build and what products they offer.The other issue is the number of billion-dollar accidents, such as hurricanes and tornadoes, are becoming more prevalent. From the industry’s perspective of loss, where they build and how they build will be significant. Do developers build to higher standards if the project is in a hurricane-prone area? The forecast for hurricanes continues to be in an upward trend, so where units are located is something else the industry should consider.What is the timeframe for this bill? Kehler: The legislation is still being debated in Congress, and it looks like they aren’t sure that they have the 60 votes yet to overcome the filibuster. If they don’t have the 60 votes, they probably won’t ring it up for vote. President Bush has said if the bill comes to his desk he will veto it, even though the Senate has been looking at it.There is no comparable bill at the House, so the House would either have to come up with its own bill, or modify the Senate bill. The House is not as aggressive in moving forward, so the expectation is that nothing will happen this year. Both Presidential candidates have climate change as part of their agenda, so some type of legislation will be introduced next year, but we may not see anything until 2011-2012.