In early December, ACEEE, in partnership with Energi Insurance Services, will host a second gathering of select members of the Small Lenders Energy Efficiency Community (SLEEC) in Washington, DC to discuss strategies for expanding activity in the market for energy efficiency financing.
The goal of the upcoming SLEEC meeting is to discuss how recent developments inform the lender perspective on the size, attractiveness, and viability of the finance market for multifamily efficiency. We chose to address multifamily this year because potential savings are phenomenal at an estimated $3.4 billion per annum, and multifamily has traditionally been characterized by the label “hard to reach” due to significant barriers to entry. Single-family residential, large commercial, and MUSH (municipal, universities, schools, and hospitals) markets pose fewer barriers and have therefore been easier to approach, while multifamily is a more complex market posing greater obstacles.
The first and most commonly cited obstacle is known as the split-incentive problem: Landlords and building owners don’t always have an incentive to pursue energy efficiency improvements since their tenants would be the ones benefitting from reductions in energy bills. The next most bemoaned roadblocks are a lack of information and lack of available capital. Landlords and owners are experts at running their buildings, but may be in the dark on energy efficiency. Utilities and many loan agencies, while knowledgeable about energy efficiency, lack experience interacting with tenants. The resulting information gap inhibits energy efficiency projects from getting off the ground. This problem is exacerbated by a lack of capital, especially in the affordable housing market, where many buildings owners hold 30-year mortgages on their property with only one refinancing opportunity after 15 years. Unless building owners and potential lenders can capitalize on this small window, many projects would not have another opportunity to finance efficiency improvements for another 15 years.
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This post originally appeared on ACEEE’s blog by Matthew McNerney, Research Assistant, Economic Program