MyNewPlace Blog

We recieved a press release from the folks at the United States Green Building Council (USGBC) that outlined two recent studies that are relevant to apartment owners.

The two studies, one done by the New Buildings Institute (NBI) and one by the CoStar Group, demonstrate not only the savings on energy costs of LEED and Environmental Protection Agency (EPA) certified buildings, but that they also outperform their non-certified cohorts.

According to the NBI study, USBGC Gold and Platinum certified buildings are able to save almost 50 percent on their energy bills. EPA Energy Star certified buildings also use an average of 40 percent less energy than average buildings.

Perhaps even more notable, and of particular interest to apartment owners is that the CoStar Study reported that LEED buildings have rent premiums that are $11.24 per square foot higher and have a 3.8 percent higher occupancy rate. For Energy Star buildings, the respective figures are $2.38 per square foot and 3.6 percent.

These new reports quantify the the long term benefits for apartment owners of making green improvements to their apartment buildings. Demand for green apartments seems to be on the rise, as more renters are looking to rent an apartment that is environmentally friendly.

Last week, the MyNewPlace blog posted an article highlighted a section of the Economic Stimulus Act that would allow apartment owners to make these types of improvements and upgrades. The tax write offs that are designed to promote commercial construction also apply to leasehold improvements in apartment buildings.

Since the major reason that apartment owners shy away from making these improvements are the high initial costs, the tax break, which allows for 50 percent of these expenditures to be deducted from taxable net income, significantly decreases the up front cost.

Given that this tax break would mitigate the initial cost of the project, coupled with the data from these new studies, apartment owners would be prudent to consider LEED or Engergy Star Certification.

An aspect of the Economic Stimulus Act of 2008, one that you most likely did not hear the talking heads and pundits discussing, is an incentive designed to increase commercial real estate construction.

A potential upshot of this ignored section could be the most cost-effective way for apartment owners to retrofit, improve or construct their apartment buildings and reap the benefits of environmentally-friendly buildings.

The bipartisan legislation, passed in response to the economic troubles caused by the subprime mortgatge meltdown, includes a provision that increases the amount that may be written off in the first year for improvements to residential rental property.

The Economic Stimulus Act, most widely known for it's highly publicized rebate to American taxpayers, (hopefully the checks for between $300 and $1200 will arrive sometime this summer) also increases to 50% the amount a landlord can write-off for the first year. A landlord would therefore be able to deduct half of the cost of any “qualified leasehold improvements" from his or her total taxable income.

This is the perfect opportunity for apartment management companies to take on green projects that offer long term benefits but may be unrealistic based on the initial pricetag. More and more people are looking to rent an apartment that is envirornmentally friendly as renters look for ways to reduce their own impact on the environment and lead greener lives. Cities themselves are passing legislation that hold new construction products to higher environmental standards. Getting a tax exempt jump on probable governmental regulations could end up saving apartment management companies millions.

Furthermore, the long term benefits of going green are substantial. The Solaire Building, the 27 story luxury apartment building in New York pictured here, consumes 35% less energy, 65% less peak electricity and 50% less potable water than a conventional high rise apartment building. The owners, in addition to slashing utility costs, also receive a tax credit of $2.8 million over five years.

This type of long term savings, coupled with the tax write offs available for the first year certainly constitute a hot iron for apartment management companies to strike. Let's revisit an article we posted a few weeks ago on the issues facing San Francisco's Park Merced's plans to revamp it's entire complex in favor of a more eco-friendly design in order to assess how this particular property would benefit by making green improvements.

The Park Merced's plan would cost over $1.2 billion dollars to implement over 20 years. If they were able to spend $60 million (an equal share per year) in the first year, they'd be able to write off $30 million for their 2009 tax returns.

As a renter, would you put a premium on living in a greener apartment? Have apartment management companies weighed the option of going green, but hesitated because of the initial cost?

So far in our series of ‘green' blogs, we've discussed how the market is responding to the continuously increasing demand for green living. But what exactly is ‘green'?

MSN.com says a material is green if it:

• Saves water or energy
• Replaces toxic chemicals with safe, healthy components
• Conserves natural resources
• Is salvaged
• Uses recycled material or agricultural waste

There are many benefits to changing to a more green lifestyle; not only will you be reducing your impact on your environment, but non-toxic materials can reduce health problems and many local and state governments, utility companies and other entities across the country offer rebates, tax breaks and other incentives for adding eco-friendly elements to your life. People who live in green homes save money monthly by consuming 40% less energy and 50% less water than standard homes.

Image courtesy of Greenhome.com

But what if you're anticipating a move and want to evaluate the level of green at potential residences? Just as you create a checklist that compares location, safety, price, etc., you can add a few green features to your list of priorities.

Apartment communities that practice green may have any of the following features: recycling programs, the regular replacement of weather stripping/window caulking, Energy Star appliances, solar power, reduced water & energy consumption (low-flow showerheads &/or toilets), composts, &/or shade trees to reduce in cooling in costs.

No matter where you choose to live, there are other resources which can help you go green. If you're looking to renovate a room or an entire space to meet green standards visit a website like Green Home that sells environmentally friendly and green supplies, products, even furniture. Though many apartment homes were built before green became a priority; green homes are expected to make up 10% of new home construction by 2010 (up from 2% in 2005) according to the 2006 McGraw-Hill Construction Residential Green Building SmartMarket Report.

Image courtesy of magneticpride.com

What's most eco-friendly differs widely, depending on your location, your climate, your project, and what's locally available. You can calculate your carbon footprint to see ways to reduce waste and live a greener lifestyle.

What green features are included with your apartment? What techniques have you used to lessen your carbon footprint?

Two weeks ago we posted an article entitled “Insurance Company Responds to Demand for Green Apartments." This article related how a company has introduced new policies to accommodate the growing demand for green apartment buildings. One such building is the ParkMerced, located in San Francisco's Ingleside neighborhood.

The new owners of San Francisco's ParkMerced have announced their vision of revitalizing the community into a model for sustainable and green living. Ambitious and innovative, the plan seeks to update the apartment complex and surrounding area to meet the challenges of urban living in the 21^st century.

The community was originally intended for post World War II families; the project was designed with a ‘car-centric' theme. The new plan would integrate Park Merced with the surrounding neighborhood as well as the rest of the city. Environmentalists and planners have hailed the new apartment construction plan as a model for green apartments and living for the 21^st century.

The restoration of the community would have the following impacts:

• Energy consumption would be cut by 62% due to the installation of cogeneration systems
• Water use would decrease by 42% in each unit with the introduction of greywater irrigation
• Reduction of carbon emissions through the provision of more public transportation, the addition of nearby shops and markets, and the creation of pedestrian & bicycle paths.

As promising as these benefits sound, the San Francisco Chronicle article from which we report, foresees a plan that will, “test competing priorities for San Francisco&its embrace of ecological causes and its aversion to denser development." Opposition to the proposal has centered on the current residents' skepticism of adding 5,700 new apartments, which would triple the number of residences available.

Urban Sprawl or High Density Apartment?

Eco-friendly housing depends on a higher concentration of residences; this is how the communities can economically share resources without encroaching on the environment surrounding the city. The ultimate question is, “Is it worth it?"

The contest between eco-friendly living and less dense urban living will have to be decided by renters. What are you willing to give up to go green? Would you rent an apartment in a dense community in order to live more eco-friendly?

Post digested from San Francisco Chronicle, “Grand Green Vision for S.F's ParkMerced“

Most people realize that the most significant and best way to move toward a more environmentally conscious lifestyle is in the arena in which they have the most control, their homes. Demand for green apartments is being driven by the individual's concern about the environment, which is currently a pressing issue.

The question is how and how well will the apartment industry be able to respond?

As the housing and real estate industry becomes more focused on this demand for eco-friendly apartments, insurance companies are beginning to make it easier for multifamily apartment buildings to turn their apartments green.

Fireman's Fund Insurance is leading the way with a new insurance policy that promotes green construction; it has introduced a Certified Green Building Replacement policy and Green Upgrade products. This new policy will insure building restoration that includes green alternatives. When it is necessary to rebuild, the policy will cover the cost of building with:

• Non-toxic, low-odor paints and carpeting
• Energy-Star rated electrical systems
• Interior lighting systems that meet Leadership in Energy and Environmental Design (LEED) standards
• Water efficient interior plumbing
• Energy-Star qualified roof adn insulation

The demand for green apartments has and will continue to emanate from individuals who are looking for a way to reduce their carbon footprint. Apartment owners will need to respond to this demand and Fireman's Insurance Fund is making it easier for all buildings, not just apartment buildings, to go green.

How many people are concerned with the environmental impact of their apartment building? Are green apartments a feature that renters are looking for during their apartment search?

Should MyNewPlace add green or eco-friendly to its list of search filters or provide a green apartment guide as an online resource?