What Happens if Energy Star Disappears?

Amid recent reports of the Environmental Protection Agency planning to do away with the Energy Star appliance certification program, the only certainty is the unpredictability that will rule in the wake of its demise.

At a minimum, it could throw into turmoil a once near-universal method of determining energy efficiency for a vast array of building fixtures and appliances. “What Energy Star does so well is simplify the path toward energy efficiency for consumers and building owners,” said Ben Evans, federal legislative director at the U.S. Green Building Council in Washington, D.C. “What you’d have in the absence of that simple blue label (would be) a bunch of wannabe Energy Star labels wanting to compete and offering differing certifications and ratings. If would be very confusing to the consumer. With Energy Star, it’s the gold standard and people know what to look for. Without it, there would just be confusion.”

Developers and property owners would be baffled about their buildings’ level of energy efficiency, Evans said. They’d also be perplexed about how to demonstrate to investors and renters whether their buildings are high-performance properties. Transparency and good information remain the cornerstone of efficient market operation. Were Energy Star to simply disappear, Evans said, that transparency would also vanish.

The current arrangement

The Energy Star program was signed into law in 1992 by President George Bush. At present, 3 million Energy Star-certified apartments and homes exist nationally, said Casius Pealer, director of market development for the Washington, D.C.-based Institute for Market Transformation. More than 320,000 housing units were certified last year alone.

Energy Star is the lone program that many in the multifamily housing industry, as well as many jurisdictions, have rallied around as the metric for energy-efficient building and compliance, said Paula Cino, senior vice president at the National Multifamily Housing Council in Washington, D.C. “If the program were no longer available, it would leave a real question about how we comply and how we develop a consistent metric for measuring energy efficiency in our buildings,” she added. “That’s what the Energy Star program does today, and without that there is no readily available substitute.”

Because it is so broadly used, Energy Star is the foundation for many other standards used around the country to measure energy efficiency in multifamily, Pealer said. Energy Star certification can be used as a compliance option within the National Green Building Standard, a standard advocated by the NMHC for use in the multifamily sector. LEED for Multifamily is based in part on Energy Star, he added, noting that Enterprise Green Communities requires Energy Star certification for projects seeking Green Communities seal of approval.

Nicole Upano, assistant vice president of housing policy and regulatory affairs for the National Apartment Association in Arlington, Va., said the House this past Monday proposed a 29% cut to the amount originally allocated to the EPA for fiscal year 2025. “Even though that’s not specifically targeting the office that administers Energy Star, it still creates uncertainty to environmental programs,” she said.

“The future remains uncertain for the program as it is contemplated today. We’re watching appropriations. The Trump administration is going through its deliberative process and there’s a need for education there as well.” 

Energy Star is currently funded through September 30 of this year, said Trisha Miller, vice president of policy and market development at Aeroseal, a Miamisburg, Ohio-based provider of air sealing solutions for HVAC ductwork and building envelopes in residential and commercial buildings. “(But) the administration’s draft budget indicates that the Energy Star program could sunset as a federal program,” Miller said.

“With the broad reach and positive impact of the Energy Star brand across most states and millions of buildings, it is difficult to see a pathway where a single organization or even multiple organizations could operate the program as it is today.”

A critical standard

Energy Star is regarded as a “critical standard” across the multifamily industry. It’s one that developers, property managers and lenders have all grown to trust, said Miles Alexander, principal at real estate company Alexander Goshen in Fort Lauderdale, Fla.

“It influences how we design energy-efficient buildings, what appliances and systems we source and even how we underwrite and structure deals. Many green lending products and incentive programs are tired directly to Energy Star certifications. Portfolio Manager in particular, is a widely adopted tool we use to track building performance and remain compliant with municipal benchmarking ordinances. For us and many others, Energy Star is the baseline for responsible, future-forward development.”

It has taken decades to build the unified national standard represented by Energy Star, he added. If the Trump Administration proves successful in scaling back or eliminating the Energy Star program, or shifting it to the private sector, that unified standard could be lost, Alexander said.

Should Energy Star be privatized or depleted, the result could be inconsistent benchmarks, adulterated credibility and fewer dependable tools to rely upon for developers and consumers, he added. Incentive structures tied to the program could be disrupted, and the market could fracture, compelling different regions and lenders to possibly develop their own standards. “That creates uncertainty at a time when clarity and consistency are more important than ever for meeting climate goals and building housing that’s both affordable and sustainable,” he said.

Without Energy Star, developers could confront greater expenses and delays, especially when obtaining appliances and systems meeting comparable performance standards.

Additional time and money will be expended identifying alternatives, undertaking independent testing and conforming to efficiency criteria set forth by lenders or municipalities, propelling higher upfront construction costs, delaying work and in some instances resulting in developments being scaled down or placed on hold, particularly affordable and workforce housing communities constrained by tight margins, he said.

“In short, dismantling or defunding the Energy Star program doesn’t just compromise energy efficiency,” Alexander said. “It threatens to unravel a broader system of affordability, transparency and long-term sustainability in multifamily housing.”

Downstream effects

Multifamily properties capturing Energy Star certification typically consume 20 to 30 percent less energy than standard buildings, said Aimee Witteman, chief impact officer at the Urban Land Institute in Washington, D.C. Both residents and owners benefit. The former group often sees yearly utility savings of $200 to $400 per unit, and owners see thousands of dollars in lower operating costs per building as a result of the efficiency gains.

“Without the program, utility costs are likely to increase, adding more pressure on housing affordability,” Witteman said. “Energy Star-aligned initiatives also help reduce both upfront and soft costs related to energy-efficient construction, so developers may encounter higher transaction costs if it is not in place.”

More than 300,000 multifamily buildings use the Energy Star Portfolio Manager, Witteman said. Without access to Portfolio Manager, asset managers would have to identify or develop alternatives and reestablish consistent performance metrics across portfolios. “The program’s impact extends beyond individual buildings,” she continued.

“More than 800 utility and state energy efficiency programs – covering everything from appliance rebates to HVAC Incentives – rely on Energy Star standards. Eliminating the program would require utilities to redesign these initiatives, reverify product performance and rebuild public trust in new benchmarks.”

The better a multifamily building’s energy efficiency, the more it can hike net operating income, which enhances the asset’s cash flow, said David Borchardt, senior mechanical engineer with energy management solution provider MD Energy Advisors, based in Baltimore, Md. As it is constituted today, Energy Star is a tool that enables building owners to normalize their properties’ energy performance, no matter the location. “Additionally, many financial markets use tools such as GRESB, which provide transparency about portfolio performance, and Energy Star is one part of [that] metric,” Borchardt said.

“Many multifamily portfolios report their performance to GRESB because it allows banks and large institutional investors [to look] for where to place capital. The loss of Energy Star would impact one of the most important tools the multifamily industry uses today.”

As well, a number of states and cities have established benchmarking standards that require reporting of Energy Star scores. The requirement makes owners aware of opportunities to boost their properties’ efficiency. “Some of these standards also require buildings to improve performance over time and use Energy Star as that metric,” he said

Greater multifamily energy efficiency translates to better results for everyone in the industry, Borchardt said. Developers’ operating expenses are reduced, their access to capital improved and the buildings they develop retain value. Property managers find reining in costs easier in an energy-efficient building. Renters who experience lower utility bills are less likely to move out or default on payments when rents are increased. “Given the likely increase in energy costs in the coming years, it helps everyone to use a single metric to measure building efficiency,” he added. “The loss of Energy Star could cause disruption to the industry in ways that are not even anticipated.”