mf affordable economics 2011
DESCRIPTION
The why of energy efficiency for multifamily buildinsTRANSCRIPT
Economics of Affordable Housing
Multifamily Buildings 2011August 9, 2011
Nehemiah Stone
The Benningfield Group
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Affordable Multifamily Energy Costs
• How many households?• How much do they spend?
– Percentage of their income– Total dollars
• How does it impact the community?• How does it impact the economy?• How does it impact the building owner?• What can be done?
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Scale of the Issue
• In the US, 30 Million households live in MF buildings (4M+ in California)
• 13+ Million American households (43M Americans) are in poverty
• They spend ~20-25% of their income on energy (note: if the median income household spent the same %, that would be $10,000 - $13,000/yr.)
• 33 million households are eligible for LIHEAP
• These families spend over $65 Billion/yr on energy
• LIHEAP has about $5.1 Billion available
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Income v Energy Cost Disparity• Households:
– on average pay just under 5% of monthly income for utilities (~$2520 for median income household).
– In affordable housing, households spend about 25% on utilities.
– Elderly on SSI spend over 25%.
• Single-Family vs. Multifamily: – SF households pay ~22% of monthly income for
housing burden (rent or mortgage, plus utilities)– MF occupants pay over 30%
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...Part of the Reason
• “Whereas many of the poor in developing countries live in rural areas, in many US cities, the percentage of the poor is considerably higher than the national average... Making matters worse, the cost of living in cities tends to be considerably higher than the national average suggests, so the urban poor are disproportionately poorer than national statistics would suggest.”
Fereidoon P. Sioshansi (writing in the US Assc. For Energy Economics Dialogue, August 2006
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Cost Per Unit of Energy
• Households in MF dwellings even pay higher ratesthan those in SF:
– $9.84/thousand CF of gas for Single Family– $10.86/thousand CF for Multifamily
– $0.087/kWh for SF– $0.098/kWh for MF
EIA Residential Energy Consumption Survey
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Energy Costs vs. General Inflation
Source: Bureau of Labor Statistics, http://www.bls.gov/CPI/#data
The annual CPI inflation RATE during the same period was 2.78%
Natural Gas 10%Fuel Oil 13.5%Electricity 5%
Annual Inflation
RateFuel
Energy Cost Increases
• In the period of 2003-2006, compared to the cost of other goods (Consumer Price Index):
–Cost of Shelter was about the same as overall price increase
–Cost of Fuels and Utilities increased 15% more than the CPI
Consumer Price Index, U.S. Department of Labor
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Energy Cost v IncomeFederal Poverty
Level is only a little more than $20k/hshld,
...but that still means 13 million households (out of 108 million total) are in poverty
2007 Home Energy Affordability Gap
Poverty Level Home Energy Burden
Below 50% 42.1%50 – 74% 16.9%75 – 99% 12.1%
100 – 124% 9.4%125 – 149% 7.7%
150% - 185% 6.3%
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Fisher, Sheehan and Colton, in “On the Brink: 2007”
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“[for low-income households], the likelihood that their energy bills will exceed their means
is determined more by the condition of their home
than by their income.”
– The Weatherization Leveraging Partnership Project
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HUD
• HUD’s budget last year was ~$43B
• Their request this year (Oct 2011 for 2012) Is ~$42B
• Depending who you ask (i.e., how it is calculated), HUD spends either $6B/yr or nearly $8B/yr on residential energy bills/assistance.
• 13% to 19% of its budget
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Summary Points:
• There is a huge gap between what low-income households can afford and what their energy costs.
• Direct assistance to help pay bills is too little.• Between HUD and LIHEAP, we (the U.S. taxpayer) will
spend around $10 Billion this year on energy for low-income households.
• Is it better to help frantically bail out the boat, or fix the leaks?
• To extend the analogy, what other positive things could some of the bailers do, if they weren’t bailing?
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Broad Societal Benefits
• Efficiency means delay or avoidance of the “marginal plant,” and lower electricity rates.
• Efficiency means less use of water and more sustainable stream flows.
• Efficiency means lower GHG emissions and slower climate change.
• Efficiency means having more to spend on higher, or at least other priorities.
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Multiplier Effect
• Spend a dollar on a haircut, and the barber spends about $0.75 of that in the local community.
• Spend a dollar on energy, and only $0.28 stays in the local community.
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By the time the $1.00 (or what’s left of it locally) has been recycled 19 times, there is $1.87 difference between …
… the value of $1.00 spent on energy,
and the value of $1.00 spent on the averagemarketbasket of goods (e.g., clothes, food, medicine, haircuts, daycare).
Spending Round
Non-Energy EnergyTransaction Cummulative Transaction Cummulative
0 $ 1.00 $ 1.00 1 $ 0.75 $ 1.75 $ 0.28 $ 1.28
2 $ 0.563 $ 2.31 $ 0.210 $ 1.49 3 $ 0.422 $ 2.73 $ 0.158 $ 1.65
4 $ 0.316 $ 3.05 $ 0.118 $ 1.77
5 $ 0.237 $ 3.29 $ 0.089 $ 1.85
6 $ 0.178 $ 3.47 $ 0.066 $ 1.92
7 $ 0.133 $ 3.60 $ 0.050 $ 1.97
8 $ 0.100 $ 3.70 $ 0.037 $ 2.01
9 $ 0.075 $ 3.77 $ 0.028 $ 2.04
10 $ 0.056 $ 3.83 $ 0.021 $ 2.06
11 $ 0.042 $ 3.87 $ 0.016 $ 2.07
12 $ 0.032 $ 3.90 $ 0.012 $ 2.08
13 $ 0.024 $ 3.93 $ 0.009 $ 2.09
14 $ 0.018 $ 3.95 $ 0.007 $ 2.10
15 $ 0.013 $ 3.96 $ 0.005 $ 2.11
16 $ 0.010 $ 3.97 $ 0.004 $ 2.11
17 $ 0.008 $ 3.98 $ 0.003 $ 2.11
18 $ 0.006 $ 3.98 $ 0.002 $ 2.11
19 $ 0.004 $ 3.99 $ 0.002 $ 2.12
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Value to the Community
• $25,000 invested in energy efficiency for low-income tenants, will save those tenants $5,000 - $25,000 per year in energy costs (retrofit vs. new construction).
• 1 to 5 year payback.
• Multiplier effect: additional $9,300 - $46,750 of benefit to the community.
• 6 ½ month to 2.7 year payback.
– …with accumulating benefits every yearthereafter!
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The Jobs Creation Benefit
The American Council for an Energy Efficient Economy (ACEEE) estimated in 1992 that an annual investment in EE of $46 Billion per year for 8 years, would have a net job creation benefit of over one million jobs.
At today’s median income levels, the economic value of the jobs created would approach $56B per year. Spending in the affordable housing sector (~1/10) would net roughly $6B/yr in job creation.
Howard Geller, John De Cicco, Skip Laitner. “Energy Efficiency and Job Creation.” ACEEE. 1992.
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Building Owner Benefits
• Lower utility bills means more security that tenants will be able to pay their rent.
• More comfortable homes with lower utility costs means lower vacancy rates.
• Studies have shown that the market (at sale) recognizes increased property value from energy efficiency.– $1 lower annual energy costs results in a
$10 to $25 increase in property value.– The $25,000 investment (previous slide) should
increase the property value by: • $50k - $125k for retrofits, and• $250k - $625k for new construction.
New Construction or Retrofit?
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Existing MultifamilyThere are 11 existing MF units for each new MF unit built during the past seven years! One of the best ways to get the construction industry back to work, even while no one is buying new homes, is to focus on improving existing ones!
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Other Potential Benefits (not yet researched)
• Greater energy efficiency and comfort means fewer workers’ sick days and increased economic activity.
• Greater energy efficiency and comfort means fewer sick days for children and higher educational achievement.
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