The Benefits of Energy-Efficiency Improvements in Multifamily

Robert Nelson, President, Nelson Management Group

April has been all about going green with Earth Day just last week and sustainability being the theme of this month’s CPE and MHN digital issues. As climate change becomes an increasingly talked about issue, many multifamily owners and developers around the country are making green efforts in their buildings. Initiatives include energy-efficiency improvements and educating residents on sustainable practices, which can benefit not only the environment but also property owners and residents. MHN caught up with long-time multifamily owner and manager Robert Nelson, president of New York-based Nelson Management Group, to discuss how his company has implemented vast energy-efficiency upgrades at its properties and the importance of energy management in the multifamily industry.

MHN: Why did you decide to undergo extensive energy-efficiency improvements at your properties?

Nelson: There are a lot of really important reasons. It makes so much sense, from an economic, environmental, and operational standpoint.

For the economic side, the payback period is not uniform but the payback for the most part is usually quite compelling. For example, we have a property in the Bronx called Lafayette Boynton with 972 units, where we have reduced our gas consumption by 35 percent, electric consumption by 38 percent, and the return on investment portfolio-wide is probably about 50 percent.

On top of that, from an operational standpoint, you’re able to provide a better living environment to your residents, whether it be from an aesthetic or comfort standpoint. It also allows an owner to utilize the savings and deploy that capital throughout the property for other types of improvements.

MHN: What are some of the specific improvements you’ve made at your properties?

Nelson: We’ve converted all of our buildings that were utilizing oil to gas. It’s a much cleaner operation when you’re utilizing gas.

We’ve replaced windows in many of our buildings, which is a huge part of conserving energy. A lot of the buildings we own are more than 40 years old, so the existing systems have outlived their use and a lot of heat escapes in the winter. So you’re spending a lot of money to heat that environment because there are drafts, just to keep residents comfortable. If you can seal up the envelope of a building (roof, bricks, basement and windows), then you can save a substantial amount of energy and keep your residents more comfortable.

We’ve also sub-metered certain master-meter apartment buildings. A lot of Mitchell Lama buildings [The Mitchell-Lama program provides affordable rental and cooperative housing to moderate- and middle-income families] were built with master meter, so the electricity was included in the rent. At the time, I’m sure it was the wise decision, but unfortunately as the cost of electricity has increased over the years, it has led to a lot of waste and increased cost for the building owner. When we sub-meter the electric, the New York State Division of Housing and Community Renewal (NYSDHCR) requires us to lower residents’ rents by a prescribed amount. So it’s not just something that works well for the property manager. In certain buildings we’ve been able to reduce residents’ usage of electricity usage by up to 35 percent in any given year. That’s a huge savings not only for the environment but for the operation of the property.

Owners still pay for the common areas, elevators, hallways and machinery, but the residents are now responsible for their consumption within their apartments. What’s interesting is in this equation, it seems 62 percent of our residents have been better off than they were previously and have saved money.

We’ve also installed hot water heaters, which enables us to turn off the massive boiler systems in these properties in the summer so these big pieces of equipment get turned off.

MHN: How have residents been impacted by these improvements or how have they benefited?

Nelson: Residents are more comfortable in the building during the wintertime, and even during the summer time, because the windows are keeping the cold or hot air inside as opposed to it seeping out. From an aesthetic standpoint, the buildings have better curb appeal when they have new windows. When you’re inside the buildings, the new elevators that we’ve installed, which also reduce our electric consumption, result in less heat emanating during the summer months into hallways.

In the common areas, we’ve installed LED lighting, which uses probably one-third of the amount of electricity that the old fixtures were using. It’s also brighter so residents like the appearance of the hallways.

MHN: How do you try to educate residents on the importance of energy efficiency?

Nelson: At the beginning of any heating season, we advise residents on how they can be more comfortable throughout a particular winter. A lot of our buildings have air conditioner sleeves, so in the winter, residents will take out the air conditioner or even if they leave the air conditioner, sometimes there’s a draft that comes through the sleeve. So we’ve also purchased a contraption that goes into the back of the air conditioner sleeve and seals it up so there’s no draft coming through. Usually in early October, we’ll send a memo out letting residents know.

We also encourage our residents to recycle. In New York City, it’s the law as far as plastic and paper is concerned, but we also are involved in the recycling programs with the Department of Sanitation for computers and the types of equipment that in the past were just taken off with the regular trash to the city dumps. Now we’re involved in these recycling programs where once or twice a month they pick up old computers, TVs, air conditioners, so these things can be disposed of by the city in a greener way.

MHN: What are some of the challenges you face with these efforts?

Nelson: I guess the challenge is getting residents to buy into the recycling programs. We’ve also put some electric car charging stations into some of our properties before any of our residents had an electric car, hoping it would cause some of our residents to purchase electric cars. But I think over the next five to 10 years we are going to see a lot more individuals start to buy electric cars, especially with the new model coming out from Tesla which is going to make an electric car quite affordable.

Also some residents don’t like that we don’t overheat buildings anymore. In the past, there were a lot of buildings that property managers overheated and residents liked it like that. So that’s a challenge that we’re not providing 85-degree temperatures in some of the apartments anymore and now we’re providing 74-76 degrees.

MHN: What are some upcoming trends or challenges in making energy-efficiency improvements in multifamily properties?

Nelson: There are a few things out there we’d like to utilize more but unfortunately we’ve found from an economic standpoint that the payback doesn’t justify the investment. I’m sure that will change as it relates to wind power and solar. I would love to able to provide wind power, but so far from the owners I’ve talked to, it just doesn’t seem to make economic sense.