2008-09-29, 14:41

The Greening of the Multifamily Industry – Cost-Effective Practices

By: Multifamily Real Estate Industry Team
Virtually every time I speak with a multifamily owner, developer or manager about how the topic of “green” is impacting their communities, I am told, in general, that the incorporation of sustainability features into their apartment buildings or green practices into their management approaches is too costly and “makes no economic” sense.

As a “green” devotee, I find this response quite troubling. While it is true that green building features do result in increased costs, how is it possible that the energy savings associated with implementing these measures, together with increasingly available governmental and other incentives, do not offer off-setting benefits that make sustainability practices economically sensible?

It is against this backdrop, that I read with great interest (and relief) a recent Multi-Housing News article entitled “Green Design Makes Sense.” http://www.nxtbook.com/nxtbooks/nielsen/mhn_200809/index.php?startid=20

The article underscores that, contrary to the generally-held view of many multifamily developers, owners and managers, “green developments do not have to cost that much more” and “in the development of green multi-housing, certain measures are relatively cost-efficient but still go a long way toward achieving environmental sustainability.”

Some of the sustainability features that can be cost-effectively incorporated into the design or rehabilitation of a multifamily community include using Low-VOC paints, finishes and adhesives, installing dual-flush toilets, orienting the direction of a green building in relation to the sun’s exposure, using increasing amounts of post-consumer recycled materials, regionally sourcing of materials, installing mechanical systems such as high-efficiency motors and local control of equipment, and using green roofs to reduce water runoff and heat emission.

AvalonBay Communities, Inc., an apartment REIT that is leading multifamily green development, is piloting several green projects, including a 500+ unit community under development in New York. “The measures taken by AvalonBay include the use of high-efficiency condensing boilers, low-rate ventilation fans, high-efficiency elevators and lighting and Energy Star appliances.” It is noteworthy that the costs of these sustainability features are being offset by reimbursements to be paid to AvalonBay from the New York State Energy Research and Development Authority program. This is good news since, as the pace of the sustainability trend continues to accelerate, increasing number of state and local jurisdictions will also begin to offer similar incentives.

Another California-based affordable housing developer has gone so far as to install photovoltaic cell solar panels for generating solar energy for one of its communities. The incremental costs associated with the use of this solar system were offset by a rebate from the State of California, increased equity from the sale of tax credits and increased debt borrowing capacity, both of which were tied directly to the developer’s incorporation of the solar sustainability features into the community, as well as the annual savings in electricity charges realized by the developer through its use of solar power.

I am not only comforted by these examples of the greening of the multifamily industry, but also convinced that apartment owners, developers and managers will increasingly focus on and incorporate sustainability features into their communities. Further, I believe that this trend will accelerate, as new technologies emerge that make these practices even more feasible and cost-effective, governmental incentives for “being green” become more pervasively available, and other associated off-setting economic benefits (such as greater equity investments and loan amounts and energy cost savings) begin to accrue to owners, developers and managers in connection with their adoption of sustainability features and practices.

(This entry posted by Pamela V. Rothenberg, a member of the Real Estate Development Group)

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