Idea for Landlord Responsibility
I was walking the dog (and the kids) the other day when I was thinking about some of Tom Neal’s ideas to make Wausau greener. I think he suggested helping low-income people better insulate their homes. It got me thinking about my former life as a renter. I lived in a variety of apartment buildings, duplexes, single family homes that I didn’t own. I wouldn’t have been able to add insulation or new windows. I didn’t own the place.
The kicker? I was responsible for the utilities. No matter how drafty the house was, I was still responsible for the heating bill. My landlords could care less. They didn’t feel the pinch.
So here’s my crazy idea for how to make landlords feel that pinch and hopefully how to get them to start paying attention to the energy efficiency of their properties.
Say an office is created. That office is responsible for creating a grading system for structures in the city. At the tenant’s request, a letter grade is assigned to a specific structure. A for well-insulated, energy efficient structures. B for reasonably insulated structures. C for low-to-moderately insulated structures. D for poorly insulated structures. F for little to no insulation. This scale would also take into account the windows, doors, etc, that would effect the insulation value of a structure.
For structures with an A or B grade, the landlord is not affected. For a grade C or less, the landlord starts being responsible for a percentage of the heating bill for that structure. A C grade would mean that the landlord has to pay 15 percent of the bill. A D grade, 30 percent. An F grade, 50 percent.
The goal would be for landlords to start feeling the pocketbook pinch resulting from their apathy about making their properties more energy efficient. It would be in their best interests to start investing in improvements to increase their letter grade.
What is your opinion of this idea? Is it totally impractical? Is it unfair?
Grinning Soul said:
Let us not forget about energy efficient appliances. And even if a refrigerator is older, cleaning the cooling mechanism (under and behind the fridge) can help it run more efficiently.
October 6th, 2008 at 10:54 am #
Dr Rent said:
As with many ideas… it is a good idea in concept… however one of my favorite laws (the law of unintended consequences) would probably come into play.
To say that the landlord is not motivated to make changes that help improve efficiency on units where the tenant pays utilities is not entirely true.
Most tenants are actually pretty smart when it comes to realizing they need to know the total cost of renting a unit (at least the tenants whom I show properties to are). They have to compare the different units they look at .. some include utilities, some don’t… which is the better deal?
The only way to know is to ask. The landlord could refuse to give out that information, but that would be pretty stupid to do because you can simply call up WPS and get the average usage over the last 12 months.
When you do the math, the market is doing a fairly good job locally… if you find a unit utilties included… and you find a different unit where tenant pays utilities… all else being the same, the total cost to the tenant is pretty much the same.
As a matter of fact, there is evidence that units that are separately metered, with tenants paying utilties, are more “green” and the tenant is motivated to do things to help reduce the bill. A tenant is more likely to call about a leaky faucet or constantly running toilet if they pay the water bill. A tenant is more likely to keep the heat at 65 degrees (vs 75 degrees) if they pay the heat.. etc.
Now… the unintended consequences of your idea (again the idea has merit.. but…) Making older units more energy efficient comes at a cost.. and the older the unit, the more it will cost. This business, real estate, is what’s called a “zero-sum game”. Most landlords do the best they can to break even. So, if they have to put a few thousand dollars into upgrades to be more efficient and get a better “grade”, then the rent will need to increase to pay for those.
If the landlord is forced to pay 50% of the utility bill for a bad grade… that will just be figured into the rent. As a matter of fact, this could make the unit less energy efficient as there is less motiviation for the tenant to “conserve” if half of their bill is being paid by someone else.
One could try to make this more of a penalty by saying the landlord would not be able to increase the rent to make up that 50% of the cost. However, again, this is a zero-sum game. If the landlord now has a larger utility bill and can’t generate more revenue to offset, they must instead cut and expense… and the sad truth is that the easiest expense to cut is maintenance.
Grinning Soul makes a good point. When we have a unit turn over, we pull out the fridge, clean it, clean under it, etc. There are times we will get calls from tenants (especially those with cats) about their fridge not getting cold and often the repair is 10 minutes with a shop vac, something a tenant could have easily done.
Because most tenants take into consideration utility costs, landlords also need to take those costs into consideration when pricing their units and thereby already are “feeling the pocketbook pinch”
October 6th, 2008 at 4:04 pm #
Dino Corvino said:
I think it is a great first step. Often the first step is the boldest and most difficult.
I have a little bit of experience in this here in Wausau and in other cities. I think Wausau lags far behind the times landlord wise, but it is also a small town.
I have recently looked into renting a place in Chicago, and oddly enough every single place I looked at had free internet access as part of the cost. EVERYONE. So that would mean I would not have to buy charter I think.
I believe that many landlords will take first steps on their own, to be green, to be sustainable, and as a result those apartments will drive the market.
If you as a tenent have a choice between a house built with solar panels to defray the cost of electricity partially or completely, would you be willing to pay 50 dollars a month more?
If you landlord offered you a monthly bus pass, and your building was on the bus line, would you pay extra for a premium?
If the building was built, and marketed on a sustainable basis for example if your landlord had an arrangement with Terracycle for recycling would that turn your head?
It comes down to a lot of factors, but I believe that as these features are built into buildings, and added to existing ones, it will become the standard.
If all the buildings have solar, and yours does not, as a landlord your going to see the market getting away from you I think.
October 7th, 2008 at 2:36 pm #
Dr Rent said:
I have dabbled with the WiFi thing but currently it is cost prohibititive. In Wausau, the market as a whole isn’t demanding it.
I know many landlords in the Stevens Point area who do offer free internet/wifi as included with the rent, but that is a college town… college rentals… and a completely different demographic than the average Wausau renter.
My vacancies are near record levels as there has been a great deal of multifamily development in the Weston area, and these new units, in an effort to fill up fast, are severely undercutting the market. However, I am confident that if I can keep my head above water, eventually over time they cannot sustain those low rental rates and still cash flow and with out-of-town ownership, I am hoping to compete on service.
Different things I have looked into include including some kind of cable package, relaxing my already pretty relaxed pet policies… and lowering my underwriting standards as it relates to income and credit.
I have not looked into “green” upgrades for two reasons. 1) Cost prohibitive, the return on the investment currently doesn’t make financial sense. And the honest truth is 2) the market here isn’t demanding it. The market here cares about rent and if the landlord is going to fix things… “green” features really won’t “sell” a unit.
October 7th, 2008 at 3:36 pm #