Sustainable Apartment Living is Paying Off for Apartment Owners
Sustainable apartment living continues to gain popularity among residents, nudging property managers toward more effective utility management solutions and green practices. Residents are willing to pay more to live in sustainable communities, and even to allow management to view their utility bills in order to analyze energy performance.
Several factors continue to point the green arrow in multifamily’s direction.
Sustainable communities are good for business, not just a marketing gimmick to boost occupancy and rents. Lower utility costs and more effective waste management add value to properties, attracting the interest of institutional stakeholders. Investors and lenders prefer properties that perform at their maximum efficiency, not those with leaky toilets and electricity meters spinning like game-show wheels.
Properties and portfolios that have control of their energy and waste management spending stick out like a green thumb. And utility management outfits such as RealPage Utility Management are helping them achieve it.
Millennials, Gen Z renters embrace green lifestyles
Support for recycling and sustainability initiatives is growing across multifamily. Of residents polled in the 2020 NMHC Kingsley Renter’s Preference Survey, 73% said they are interested in, or won’t rent an apartment without, sustainability/green initiatives at the property. This is up from 65% in 2017.
Among most desirable amenities are ENERGY STAR certified appliances, high-efficiency washers and dryers and smart thermostats.
Residents are also mindful that it takes a village for a property to reach its energy and utility efficiency potential. While advocating energy efficiency in multifamily isn’t a new fad, younger renters are at the forefront of a growing wave. They demand green solutions for just about everything, especially housing.
In 2015, Forbes reported that almost three of four Millennials said they were willing to pay extra for sustainable offerings. Nearly five years later, the trend is holding up. A 2019 Harvard Business Review article notes that Millennials want brands that embrace purpose and sustainability.
Gen Z’ers, a key apartment industry target, are just as likely to embrace a green lifestyle.
Creating buy-ins to be more environmentally friendly
However, people today need a little push to be more earth friendly.
Of those surveyed by Harvard Business Review who said they want to buy purpose-driven brands that advocate sustainability, only 26% open their wallet to do so. Evidently, they need a bit of persuasion or incentive.
The article points to the struggle for Calgary, Alberta, to get a buy-in from residents for its “grasscycling” program, which promotes the natural decomposition of lawn clippings rather than bagging them and sending them to the landfill. When the program launched, most residents continued to lug bags to the curb.
So, the city started a social influence campaign to try to change residents’ behavior. Messages were placed on doors to encourage residents to recycle grass because their neighbors were doing it. The power of persuasion won. Two weeks later, twice as many residents were grasscycling.
Renters understand the impact of sustainable apartment living
Renters are savvier today about recycling and energy efficiency than they were 20 years ago, says RealPage Vice President Danny Ward. They realize that energy expenses are a significant part of their budgets, and that solutions are available to reduce water, electricity, gas and other utility bills either for them or the community in which they live.
“Residents today understand wallet share more,” Ward says. “They want to live in a nice, comfortable, well-run, clean and safe community, not someplace that is inefficient. We have a much smarter renter today.”
The same can be said for owners, operators, lenders and investors. Utility costs are the third largest expense for multifamily companies, and well-run properties are more valuable in the marketplace. LEED certifications and other energy-efficient designations make a statement.
Sustainable properties are less risky because they indicate to lenders and owners that operators are not only focusing on contributing to the world-wide green effort, but also watching expenses.
Bundling is the differentiator in effective utility management
More and more, ENERGY STAR benchmarking is becoming a requirement across the country, and utility management advisors are playing greater roles in helping apartment communities comply with local regulations and lower costs.
Achieving effective energy savings and compliance requires a comprehensive approach, rather than a little here and a little there. Maximizing energy efficiency and sustainability starts with putting the entire ecosystem of sustainability in synch, working like a well-oiled machine.
When all parts – utility billing, submetering, expense management, energy management and utility benchmarking – are working in unison, property managers achieve more results than with a spotty approach to utility management, Ward says.
The united approach differentiates properties that are successful at effective utility management and sustainability.
Water, electricity and gas consumption rates and data are the starting point for becoming more energy efficient. The ability to negotiate better rates and benchmarking consumption are critical components to understanding the true energy picture.
“New software solutions now leverage all of this data to help clients understand the details of how these expenses are allocated and how they compare to the neighborhood or peers,” Ward says. “The operator now has visibility and responsibility.” Utility advisors at RealPage Utility Management can be called in to create a money-saving, green program that addresses all aspects of utility usage and expense.
When the data is understood, operators can focus on resident behavior toward recycling and conservation – much like Alberta did – while reinforcing the true value of sustainable apartment living and utility management. Meanwhile the operational requirements of institutional stakeholders are being satisfied, increasing the value of the asset. The result is a big payback in both operating expenses and asset value – a double win for owners.
For more than two decades, RealPage has worked alongside its multifamily housing clients and their residents to save time, money and energy. RealPage Utility Management is proving that a unified approach to utility management and sustainability provides the most efficient means of going green.