CHPC’s water affordability initiative works to increase access to water conservation resources for the nonprofit multifamily affordable rental housing sector in California. Below is the fourth article in a GREEN series focused on leaders, best practices, and emerging trends for water conservation in affordable housing.
GREEN members are responding to the drought. These are their stories.
Laundry facilities are the nexus of four utilities: electric, gas, water, and wastewater. Unfortunately, owners and leasing companies have largely overlooked benefits to upgrading laundry equipment. Across the country, most multifamily housing properties lease laundry equipment instead of buying equipment. Stewards of Affordable Housing for the Future (SAHF) and Natural Resources Defense Council (NRDC) assessed opportunities in twelve Energy Efficiency for All (EEFA) states and found that California has the greatest potential for both savings in multifamily affordable housing properties. Rebecca Schaaf and Ruchi Shah from SAHF share how affordable housing owners can get the most out of new laundry lease agreements. You can read the full report and join a free webinar on Wednesday April 12th, 12pm PST.
Multifamily affordable housing owners can benefit from upgrading to efficient laundry equipment because they pay for common area utilities including laundry. What has prevented owners from making this change?
Across the country, 50-90 percent of multifamily housing properties lease laundry equipment from a third party known as a “route operator” instead of buying equipment. Leasing creates a split incentive where route operators pay for the equipment while owners benefit from utility savings. Further, it is difficult to assess potential utility cost-savings because common area laundry facilities are often connected to the master common area meter.
Which upgrade scenarios did you consider and how were they analyzed? What did you find?
Owners have the most leverage when renegotiating a lease agreement. We focused on the incremental cost for three upgrade scenarios: (1) Top-load to efficient front-load, (2) Top-load to highly efficient front-load and (3) Efficient front-load to highly efficient front-load. Switching from a top-loader to a highly efficient front-load machine requires the largest up-front investment, but also offers the highest potential for annual cost savings. Top-loaders tend to meet the required federal efficiency standard but not exceed it. Front-loaders on the other hand have a wide range of efficiency levels and commonly even exceed the Energy Star standard. A switch from a top-load to a more standard, but still efficient, front-load machine would also achieve significant cost savings.
|Annual Cost Savings
|1) Top-load to efficient front-load
|2) Top-load to highly efficient front-load
|3) Efficient front-load to highly efficient front-load
Each scenario creates utility savings for the owner, but the route operator will need a greater share of revenue to recoup its costs for more efficient but expensive equipment. Do utility savings justify higher upfront costs? Can owners afford to reduce their share of laundry revenue, or could they negotiate a longer contract period to retain the same revenue split but with longer payback time for the route operator?
In California, both Scenarios 1 and 2 above offer a “win-win” on savings, but in Scenario 3 the owner’s utility savings are less than the additional cost to the route operator. Coinbox revenue (the quarters in the machine) is often split 50/50 or 60/40 between the owner and the route operator. The route operator could take a larger share of the revenue split to pay for more expensive equipment, but owners may be reluctant if utility savings are low. A longer contract term could help owners maintain the same revenue split, but would also lock them into outdated equipment. Route operators prefer five to seven-year contract terms because it takes four to five years to pay off their investment. They claim that maintenance costs go up as equipment ages which eats into revenue during those later years.
The lower upfront cost may attract owners to replace top-loaders with efficient front-loaders even though the highly efficient front-loader offers more utility savings. Incentive programs can decrease the upfront cost of more efficient equipment. What programs are available to multifamily affordable housing in California?
Most incentive and rebate programs target residential laundry equipment that is purchased by the utility customer but do not specify if multifamily properties are eligible. They are offered to utility customers (owners and tenants) but rarely available to route operators. Pacific Gas & Electric (PG&E) has partnered with various water districts to offer incentives for leased laundry equipment. An ideal program would address the leasing situation, offer incentives based on equipment efficiency and offer enough of an incentive to prompt owners to choose a more efficient model.
Please share any final thoughts on the report and its findings.
Upgrades to laundry equipment offer combined energy and water savings. Water savings emerged as a big component for owners – especially in California due to rising water costs and ongoing drought conditions. On a dollar basis, water savings are the greater share of savings from the start. With energy costs projected to increase one percent annually and water six percent annually, the disparity only grows over time. Water conservation is going to be an important part both of preserving the affordability of our housing and protecting the environment.
Stewards of Affordable Housing for the Future (SAHF) is a nonprofit collaborative of thirteen exemplary multi-state nonprofit affordable housing providers who own more than 130,000 affordable rental homes. SAHF’s mission is to lead policy innovation and advance excellence in the delivery of affordable rental homes that expand opportunity and promote dignity for residents.
The Natural Resources Defense Council works to safeguard the earth – its people, its plants and animals, and the natural systems on which all life depends.
CHPC’s water conservation work is generously made possible through the California Water Foundation. To learn more about CHPC’s water conservation advocacy efforts, contact Collin at firstname.lastname@example.org or (213) 785-5734.