Opinion: Energy slums or efficient housing?


Boulder is considering an ordinance that would require landlords to bring their rental units up to a reasonable standard of energy efficiency. The draft ordinance went to the Planning Board on Thursday, and will likely be considered by the City Council in May. But will the complaints by some landlords derail this important step in our efforts to address climate change while making rental housing more affordable?
The need to use regulation to improve energy efficiency was recognized many years ago. The reason is simple: When the tenants pay the utilities, landlords do not have a direct incentive to improve energy efficiency. And tenants have little incentive to make improvements since they will not be there long enough for the energy savings to pay them back. This “split incentives” paradox is the main obstacle to upgrading rental housing, and is why regulation is the only effective approach.
From my perspective, the complaints about the proposed regulations are overblown. Any building that can meet the energy code of a decade ago is in compliance. The implementation is phased; many buildings will meet their initial requirements at their first rental re-licensing with little or no improvement. After that, landlords have another complete rental license cycle of four years to meet the full requirements. Landlords have flexibility, in that they can choose to meet a performance standard or can opt to get a specified number of points from a list of possible improvements. From work done by the city on example units, the required investments should be cost effective, with the payback exceeding any reasonable cost of financing.
The city is also providing technical assistance, code named “Two Techs in a Truck,” to make energy retrofits as easy as possible. This program will provide energy auditors to determine what investments will get the best return, help obtain rebates from Xcel (assuming that they don`t cut us off because the program actually works) and from the state and federal governments (there may be millions of dollars of assistance), explain tax effects, aid with selection of and dealing with contractors, and assist with financing. Post-retrofit inspections will help ensure that the work was done correctly.
What about the effect on rents? A building that is upgraded should be able to generate more in rental income simply because the tenants will have to pay less in energy bills. And if the improvements selected are cost effective, then landlords ought to be able to increase their profits, since the higher rents will endure past the time when the improvements have been paid off. The tenants are better off, or at least no worse off, since their increase in rent is offset by a reduction in their energy bills. Since all buildings will be energy efficient, the whole market will shift, with no possibility of prospective tenants accidentally confusing apples (efficient retrofitted units) with lemons (energy hog units).
I asked a landlord friend what her experience was with making energy efficiency improvements. She said it made the property more valuable, and attracted tenants who were more likely to care for their rented home.
Another friend was concerned that the requirements might be difficult to do in a condo because of the HOA rules. According to city staff, the requirements can generally be met without impinging on these rules. City staff actually retrofitted an apartment and a condo to check their work in the real world.
A lot of thought and work has been put into this approach. It`s time to bite the bullet and do what`s right.


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