Tuesday, January 19, 2016

Energy Consumption in the Residential Rental Sector, and Promoting Energy Efficiency

Elizabeth La Jeunesse
Research Analyst
With the recent release of our America’s Rental Housing report, as well as the landmark international agreement on climate change reached in Paris, we took the opportunity to revisit the question of how much energy is consumed by the residential rental sector, as well as to explore pathways to reducing energy usage by renter households. We will revisit this topic again with the release of the US Energy Information Administration (EIA)’s 2015 Residential Energy Consumption Survey (RECS). Meanwhile, here are a few facts about renters' energy usage, as well as ways renters' energy consumption can be reduced even further.

The residential housing sector has a sizable carbon foot­print, accounting for about 22 percent of national energy consumption and a similar share of energy-related domestic CO2 emis­sions (source: EIA website.). While the rental sector’s contribution to these emissions is smaller than the homeownership sector both in aggregate and on a per household basis, it nonetheless represents a sizeable share of residential energy consumption. According to results from the most recent Residential Energy Consumption Survey in 2009, renters were responsible for nearly a quarter of all residential energy use. On a per-household basis, renters living in single-family homes consumed 19 percent less energy than owner-occupants, while renters living in multifamily units consumed 29 per­cent less energy than owner-occupants. This lower energy use among renters reflects in part the smaller average size of rentals relative to owned units. However, while the 2015 RECS is not yet available, the updated data is likely to show higher ener­gy use by the rental sector because of increases in both the rentership rate and the share of single-family rentals.

The construction of new, more energy efficient units and loss or replacement of older units contribute to improvements in the energy efficiency of the rental stock over time. Based on our analysis of data from the 2009 RECS survey, we found that rentals built in the 2000s consumed 28 percent less energy on average than those built before 1980. Figure 1 below illustrates this trend, showing that newer single-family and multifamily rental units consume less energy compared to remaining, older units.

Figure 1
Note: Single-family excludes mobile homes.
Source: JCHS tabulations of US Energy Information Administration, 2009 Residential Energy Consumption Survey

However retrofits to existing units, especially those affecting the building envelope, windows/doors, appliances, and HVAC systems, also play an important role—and have more immediate impacts. As of 2009 the typical unit built before 1970 used nearly 25 percent less energy than same-age rentals in 1980. This substantial reduction in energy usage over time highlights the critical importance of retrofits to existing units for improving energy efficiency.

Figure 2
Note: Includes all structure types. Square footage includes all attached garages, all basements, and finished/heated/cooled attics.
Source: JCHS tabulations of US Energy Information Administration, 1980 and 2009 Residential Energy Consumption Surveys.

A variety of government and private initiatives currently target reductions in energy use in the rental housing sector. In particular, state and local building codes for energy efficiency provide a primary source of new regulations. These are influenced by changes in the International Energy Conservation Code (IECC), which continues to set higher standards for energy efficiency requirements in the building envelope, lighting, heating, and cooling. Federal appliance standards for equipment in residential/multifamily buildings are also tightening. Since 2009, fully 34 new or updated standards have been issued for products, estimated to cover 90 percent of residential energy use (source: US Dept. of Energy). Federal, state and local financial incentives, including tax deductions and credits, utility rebates and loan programs, also target reduced energy usage in rental properties.

In his research brief, "Reducing Energy Costs in Rental Housing," JCHS Senior Research Fellow  Michael Carliner highlights the pros and cons of these and other initiatives to reduce energy usage among renters. One emerging approach that bears particular promise is that of increasing access to energy usage information and related property performance data among renters and property owners. The idea is that greater transparency of energy cost information can incentivize renters and landlords alike to manage their energy consumption choices more efficiently, and to undertake cost-effective, energy saving investments. Energy usage data can even be ‘gamefied’ such that people voluntarily compete in the common effort to save energy—with real energy savings as a result (see ACEEE paper). For some examples of city-wide efforts to increase disclosure access to energy usage data, see Amy Morsh’s recent blog post at the Center for Climate and Energy Solutions.

While increasing access to information can help overcome market inefficiencies, major complications and trade-offs still remain in the quest to reduce renters’ energy consumption. With rental affordability challenges high and rising nationwide, one major question is whether property owners are passing the costs of energy-saving retrofits on to tenants. Structural feasibility is also a potential concern, since new appliance standards are not always compatible with what existing multifamily buildings can structurally accommodate in terms of HVAC sizing. Lastly, as discussed in the America’s Rental Housing report, efforts to improve the energy efficiency of the rental stock must also consider the location of rental housing units, which influences tenants’ travel options and transportation-related energy usage.

As the preceding discussion suggests, reducing renters' energy usage is a complex task with many possible ways forward, but also with many potential challenges and trade-offs. Ongoing and future efforts to improve the energy efficiency of the US rental stock ideally will take these complex factors into account, while balancing other critical policy objectives including rental housing affordability.

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