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Smart Apartments Offer Something for Everyone

Jeff Hamel's picture
Head of Energy Partnerships
  • Member since 2016
  • 8 items added with 13,653 views
  • Oct 10, 2019

This item is part of the Energy Efficiency - Fall 2019 SPECIAL ISSUE, click here for more

Multi-housing stakeholders can overcome historical barriers to deliver connected technologies to the market.

The multi-family housing market accounts for about one-third of all housing stock in the United States, and there is a massive, untapped opportunity to leverage smart technology in the space. But, in order to achieve widespread adoption of energy-saving devices and technology in the sector, stakeholders must first overcome the barrier of the “split incentive” between property managers and tenants.

Energy providers, technology companies, tenants and other stakeholders all stand to gain from the expansion of smart home technology into multifamily dwellings, and are now being presented with the unique opportunity to overcome the split incentive barrier as more residents begin to desire and even demand access to the latest smart technology. More devices that improve efficiencies in multi-housing buildings save money and energy, attract new residents, provide more desirable amenities and improve economics for property owners and operators.

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Multi-Housing Energy Use

There are a wide range of factors that impact the energy . consumption of a multi-housing facility, but NMHC has found that, “residents in multifamily rentals spend considerably more on energy per square foot than do multifamily owners or especially single-family owners or renters,” and the sector can consume up to twice as much energy as single family homes.

Perhaps in response to this energy-use pattern in the sector, there is a clear demand for “smart apartments” as the high-tech trend expands beyond the single-family home, creating the opportunity to achieve greater multi-housing market smart technology penetration. A recent survey found 86 percent of millennials are willing to pay an additional 20 percent in rent for these types of amenities. Smart technology is appealing because it makes life easier, and since millenials and Gen Z are also more sustainably-minded consumers, the potential energy savings are a major draw -- delivering lower monthly bills and a smaller carbon footprint.

Challenges of Implementing Smart Technology in Multi-Housing Units

Historically, there have been significant market barriers for implementing smart technologies and energy-saving programs in the multi-housing market, including limited energy use data and high cost of devices. The U.S. Department of Housing and Urban Development (HUD) has previously cited the systemic lack of data on multifamily energy performance as, “one of the most significant flaws affecting the market.” And as Navigant recently shared, “Smart devices have traditionally been targeted at high-income, single family households.” In practice, these devices can capture effective energy consumption data across all markets, including multi-housing, and are increasingly cost-effective (particularly with utility rebates), making them more accessible to all.

Yet a remaining challenge is the split incentive barrier, referring to the fact that tenants or owners who do not pay for energy are less likely to seek out savings opportunities. There may not be direct energy savings for building managers who implement efficiency upgrades. Since residents often do not own the property and there are higher turnover rates in multi-housing facilities, many hesitate to make upgrades on their own. Even with disparate energy use incentives, smart technology can benefit many, if not all stakeholders by learning occupants’ schedules and automatically reducing the amount of energy used over time.

Many Stakeholders Benefit from Smart Multi-Housing

According to ACEEE’s Multifamily Energy Savings Project the sector could save $3.4 billion in energy costs with energy efficiency improvements. As just one example, in a 2016 smart home deployment pilot project, smart thermostat upgrades resulted in an average of 17 percent savings on multi-housing cooling usage. Vacant smart apartment units have also been shown to save an average of $38 per month on utility costs, representing baseline savings from smart thermostat upgrades.

Stakeholder groups are already overcoming the split incentive and other market barriers to engage with this significant customer base. Multi-family housing industry leaders like PMG and HFF are implementing energy-saving technology innovations in new projects, HUD’s Rental Assistance Demonstration is designed to preserve and improve public housing properties and multi-family savings resources from utilities like SoCal Gas and SCE directly reach customers from this market segment. Utilities like ComEd and Ameren in Illinois are helping to overcome the misconceptions of expensive technologies and complicated logistics by providing multi-housing building owners with direct purchase access to smart thermostats.

With smart apartments that include smart thermostats, tenants achieve energy and cost savings, the assurance of lower utility bills in the future, the ability to manage usage remotely and smaller carbon footprints. Utilities ensure a more balanced and responsive grid with more comprehensive data on energy usage in the sector. Smart technology providers attract more customers beyond early adopters and techies, all while multi-housing stakeholders increase desirability of apartments, save energy and ensure happier tenants. As we continue to learn more about the multi-housing space and how to address historical smart technology adoption barriers, it is clear there is significant untapped opportunity to achieve energy and cost savings and a more stable grid.

(This article was originally published in GreenBuilder

Matt Chester's picture
Matt Chester on Oct 10, 2019

The split incentive issue is definitely a real one in the energy efficiency market, though what do you think about the issue of not a split incentive but an incentive unfulfilled? Perhaps poorly worded, but basically I'm talking about a situation where an energy-conscious tenant would want to make an upgrade but the tenant explicitly disallows it? I had this situation when I wanted to install a smart thermostat in an apartment but was told I was not allowed. What can be done by the industry or other stakeholders, if anything, about this?

Mike Cassity's picture
Mike Cassity on Oct 16, 2019

Jeff thanks for posting. Good information here.

Jason Price's picture
Jason Price on Oct 16, 2019

"A recent survey found 86 percent of millennials are willing to pay an additional 20 percent in rent for these types of amenities."

On top of stagnant salaries, mounting student debt, and increased cost of housing, health care, etc., I find the stat a bit self-serving. What more can we squeeze out of millennials? How about the building owner and the utility split the incentive and coordinate efficiency programs and invest in more behind the meter? Provide incentives for the building owner to upgrade the HVAC, insulate, and caulk, look to battery and renewable. Push the consumption data to the millennial and gamify it but I recommend leaving the tenant out of the equation other than give them the data to modify behavior. 

Matt Chester's picture
Matt Chester on Oct 16, 2019

How about the building owner and the utility split the incentive and coordinate efficiency programs and invest in more behind the meter?

Well said, Jason, It's a similar issue to the debate of people taking responsibility for reducing their carbon footprint vs. systematic change to attack the biggest corporate emitters and the overall set up that leads to emissions. While it's great to have some people want to make those changes, those are drops in the bucket compared with the root problems

Jeff Hamel's picture
Thank Jeff for the Post!
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