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Helping Minnesota communities determine their energy future

CASE STUDY: ENERGY EFFICIENCY – METRO REGION

Rental Housing Energy Efficiency Pilot Project:Residents of Ventura Flats Save Big By Julia Eagles, Metro CERT Organizer • September 2010

Energy usage in buildings accounts for over onethird of energy use in the U.S. and contributes significantly to greenhouse gas emissions.Improving building energy efficiency is widely recognized as one of the best strategies to both cutcosts and address environmental issues. In the lastyear there has been a dramatic rise in the number ofprograms available in the areas of energy efficiencyand conservation, as well as renewable energy.However, practical barriers have slowed the implementation of energy improvements, especiallyin the rental housing sector.

One major barrier to investment in energy efficiencyfor rental housing is known as the split incentive—when those responsible for paying energy bills aredifferent than those making capital investment decisions. Split incentives are common in rentalproperties where tenants pay the energy bills, butowners pay for upgrades. Building owners rarelyinvest in energy efficiency improvements whenrenters are the ones who would see the savings.Additionally, tenants seldom invest in a propertythey do not own, even if they would see the benefitsof lower energy bills. Another barrier is the fact thatthe rental housing owners are not a centralizedgroup, making it a challenge both to disseminateinformation and resources and regulate energy efficiency in the rental sector.

The Metro Clean Energy Resource Team (MetroCERT), a program of the Green Institute, has beenworking to address rental housing split incentives,particularly in the Phillips neighborhoods of SouthMinneapolis. This community consists of nearly70% renters, with a large low-income populationand an older housing stock. In the fall of 2009, withfunding from the City of Minneapolis ClimateChange Innovation grants, Metro CERT did a seriesof energy efficiency workshops targeting renters.The workshops were free and took place in community centers, churches and rental housingproperties. Attendants received a free kit of energy

efficiency and weatherization materials along with apresentation on low-cost and no-cost ways to saveenergy in their homes. Ventura Flats, an apartmentbuilding in the neighborhood, was of particularinterest because of the significant improvements theproperty manager and investor owners madearound energy efficiency.

Project Snapshot

Purpose: To address energy efficiency issues in a multi-unit rental housing property in the Phillips neighborhood of South Minneapolis.

Technology: Energy efficient appliances, water conservationservices, lighting efficiency

Grant: $10,000 City of Minneapolis Climate ChangeInnovation grant for conducting renter energyefficiency workshops and distributing weather-ization kits in Phillips

Ventura Flats apartment building in South Minneapolis

CERTs PARTNERS

University of Minnesota’sRegional SustainableDevelopmentPartnerships

The Green Institute

Southwest RegionalDevelopmentCommission

The Minnesota Project

Office of EnergySecurity, MinnesotaDepartment ofCommerce

CERTs FUNDERS

Office of EnergySecurity, MinnesotaDepartment ofCommerce

The Bush Foundation

Environment & NaturalResource Trust Fund

U.S. Department ofEnergy

Ventura Flats

Ventura Flats is a three story, 74-unit apartment building constructed in 1968 in the VenturaVillage neighborhood within the Phillips community. The building is managed byCornerstone Property Professionals, LLC, with Cecil Smith as the on-site staff. The propertyis investor-owned by Ventura Flats LLC. Although tenants in the building are mostly low-income, the units are market-rate. Some of the units are subsidized through GroupResidential Housing (GRH), which is a state funded income supplement program that paysfor room and board costs for low income people with disabilities. Electricity costs are paidby the individual tenants, but water and heating are covered by the building owners.

Since acquiring Ventura Flats in 2008, Cornerstone Property Professionals, LLC has made anumber of energy and water improvements to the building, which are highlighted below.For Cecil and the Ventura Flats LLC, economics is the primary motivation to invest in theseimprovements. Their goal is to offer affordable housing on a for-profit basis. Therefore,they are interested in chipping away expenses to remain affordable and to make money.The first improvements that were made were those with the shortest return on investment,which will accrue over time to the bottom line. As in any energy efficiency investment, theupfront capital costs, in addition to finding the resources and rebates, are the biggest challenges in making these improvements. Cornerstone Property Professionals, LLC hasmade the decision to build those improvement costs into the acquisition costs of the building. By considering improvements as a cost of the purchase, they had the funds fromthe beginning to make some of those larger investments.

Measures taken

Lighting: In the hallways Cornerstone Property Professionals, LLC installed new fixtureswith full spectrum T-8 bulbs, which addressed security issues without increasing energycosts. There were some incandescent bulbs in common areas and laundry rooms, whichwere replaced with compact fluorescent lights. They also replaced outdoor security fixturesto accommodate CFL bulbs, reducing the energy usage from a 240-Watt incandescent to a46-Watt CFL.

Water: Cecil hired Hydrametrics, a Minnesota company focused on helping organizationsand businesses identify water conservation opportunities, to do a full water retrofit in thebuilding. They’re the only company he could find that is able to meet the CenterPointEnergy requirements for rebates. Fixing leaks alone achieved 10% reduction in water costs.In the end, they found a 50% reduction in overall water usage based on their work: self-cleaning low-flow showerheads (2.5 gallons per minute), faucet aerators (1.5 gpm in thekitchen, 1 gpm in bathroom sinks) and toilet retrofit (from 2.5 gallons/flush to 1.5 gallons/flush). This company offers an option to pay for the work through the savings achieved,but the actual payoff was only 9 months. The job cost was $11,000, and CornerstoneProperty Professionals, LLC received a $1000 rebate from CenterPoint.

Heating: The boiler in the building runs 12 months out of the year and heats both thedomestic hot water for the building and the radiator hot water. There are two 200-gallontanks to heat domestic hot water. The boiler room lacked adequate ventilation, but byreplacing the window and installing passive ventilation, as well as actively adjusting andmonitoring the boiler, they achieved an estimated 35% savings on the heating.

A full retrofit of the boiler would be extremely expensive. Cecil has found that high efficiency boilers are temperamental and there is a higher failure rate. The electronic controlsystem in the boiler maintains the building temperature at about 70 degrees. The buildingcode for a residential property to be habitable is an internal temperature of 68 degrees.

Each of the units has their own thermostats, but they are not reliable controls for in-unittemperature. The boiler has a mixing system with Honeywell controls, which takes returnwater and mixes it with water from the boiler to operate with higher efficiency.

CFL light bulbs were installed in many places

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Ventura Flats also retrofitted their toilets for conservation

Windows: This year they have begun installing new, more efficient windows, starting on thethird floor. They are gas-filled double-pane windows with UV reflective coating on the exterior. Window retrofits generally have limited energy savings, but the improvementswill increase the comfort and upgrade the look of the building.

Appliances: In the last three years, Cornerstone Property Professionals, LLC replaced elevenin-unit refrigerators through the Phillips Community Energy Cooperative’s appliance trade-in program. The program subsidized the cost of replacing old appliances with energy efficiency models for Phillips residents (homeowners, renters, landlords, businesses)through an alternative Low-Income Conservation Improvement Program grant through Xcel Energy. Although the building owners do not pay the electricity costs, this was a service they provided to tenants to improve quality of life in the building and help themsave on energy bills.

Tenant Education: Having made a number of physical improvements to the buildingalready, Cecil was especially enthusiastic about having a workshop for tenants to talk aboutways that they could reduce their energy usage through behavioral changes. He was evenwilling to provide a one-time $25 rental discount for those who attended and installed thefree materials that were distributed. The focus of the workshop was low-cost and no-costmeasures to save energy, such as turning off lights and electronics, using power strips, taking shorter showers, and installing basic materials like CFLs, plastic window insulationkits and weather stripping. The workshop was hosted by the building caretakers, Matt andJanelle Hosfield, who were interested in a workshop not only for the topic but as a way tobring people in the building together. However, there were mixed results. Out of twelvehouseholds that attended the workshop, only two people installed the free materials, evenwith the extra incentive.

There is a great deal of opportunity for improvement within the rental housing stock inMinnesota, and a local initiatives such as Ventura Flats is a great example of how reducingenergy costs in the rental sector can boost the bottom line of businesses and increase housing affordability.

Lessons Learned

Engaging tenants around energy efficiency has been a challenge, given that it is not a toppriority for most people, particularly when they are not paying the larger energy bills likeheating. Continuing education and outreach to residents would help to address some of thebehavioral energy use issues, such as turning off lights and electronics and installing basicenergy saving materials. Given that many of the tenants are low-income, connecting themto income qualified energy savings programs through the utilities would be a good way tohelp people save on their bills. The Home Electric Savings and Appliance Replacement programs through Xcel Energy would be a good fit for this property. Metro CERT continuesto be a resource for Ventura Flats to connect them with energy saving resources and opportunities.

For more information contact Julia Eagles, Metro CERT Organizer at the Green Institute, atjeagles@greeninstitute.org or 612-278-7117.

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