As a practitioner of sustainability in multifamily, sometimes I hear things that crack me up. My all-time favorite was an article about a town in North Carolina which moved to ban solar because it would suck up all the energy from the sun, take it away from plants and drive business out of their town. This happened eight years ago and this crazy unfounded fear is still funny to me. Which brings me to my newest crack up: “Is sustainability dead?” Sigh. This question has come up in various recent conversations and I drop this “Is it dead?” question in the same bin as “Is recycling dead?” (It is not.)
We should poke this opossum for a moment.
First let’s talk about the Inflation Reduction Act (“IRA”) which people are confident is going to die. The reality is that it cannot die for at least five years. There are commitments that have been made and construction is underway on projects in both red and blue states. Apparently free money is popular with many people (I am one of them). Although the IRA will likely see modifications, it cannot be sweepingly terminated without damages to many states that have projects started based on commitments of these funds.
Now let’s talk about legislation and regulations, otherwise known as building performance standards. These energy, water and greenhouse gas targets are set at local levels (city, county, state) and are not set at the federal level. Thirteen jurisdictions have passed legislation requiring buildings to meet their targets or face penalties. Building performance standards were passed during the previous Trump administration. These targets require building owners and operators to run efficient buildings and practice efficiency (AKA sustainability) with their properties.
Then there are investor requirements. In 2023, North America eclipsed other markets in the number of new entities reporting in the Global Real Estate Sustainability Benchmark (GRESB). There are still investors requiring that properties be run efficiently and who understand the connection between environmental performance and the bottom line.
Lastly, lets talk about renter preferences. GreyStar surveyed their residents this year regarding the importance of sustainability in their renting decision making. Seventy-five percent of the respondents indicated that sustainability is an important factor and, of that 75 percent, more than 40 percent indicated that they would pay a slightly higher rent for a sustainable unit. When you combine these results with the 2023 Cushman & Wakefield report that demonstrated that green rated conventional class A properties yield a 3.1% higher rent than uncertified conventional class A properties in the same market, we can start to see the trend that sustainability and sustainable amenities are part of our marketing futures.
Sustainability is not dead. I suggest to you that it is not even playing dead. It is changing though, and we need to be ready to embrace the shifts. I believe that if we do, we are going to have more profitable (and more) assets.
