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That's what she said

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Blue Line Poll: Smart Regs


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Landlords clashed over the likely effects of the City of Boulder’s proposed SmartRegs (which will be debated by the City Council at a second reading on July 6)  at a PLAN-Boulder County forum on the subject on June 21. Francoise Poinsatte, a forum panelist, rental property owner and former member of the Boulder City Council, claimed that compliance with the proposed regulations would be relatively easy and inexpensive for landlords and enhance their property values. In contrast, Sheila Horton, an audience member who is the executive director of the Boulder Area Rental Housing Association, argued that the regulations would create major financial burdens and no benefits for landlords.

Francoise declared that she has always taken pride in the physical condition of her rental properties. She said that she has already made significant improvements to them, including energy efficiency improvements, and welcomes the prospect of improving them still more. She noted that the proposed regulations emphasized relatively inexpensive measures–such as insulating walls, attics and under-floor crawlspaces, and stopping air leakage. She recounted that she had enlisted her 19-year old son to install insulation in some of her rental homes and that the insulation material itself had been fairly cheap to buy. She also observed that a high proportion of Boulder’s rental housing stock is constructed in the same way and that consequently energy improvements could become relatively standardized, thereby perhaps reducing costs. Francoise asserted that the re-sale value of her properties will rise as they use less energy.

Sheila, however, implied that the re-sale prices of rental properties are determined only by the gross amount of rents they can command in the market and contended that rents have been under severe pressure in the City of Boulder recently. She said that 2,500 units of rental housing had been built in the City during the past two years. That increase in supply has depressed rental rates. She claimed that landlords could not pass on the costs of compliance with SmartRegs to their tenants, even when the tenants’ utility bills fall, because market competition with their peers would not allow them to do so. Sheila also asserted that landlords around the nation are reeling from the expense of complying with new regulations on lead-based paint, which the Environmental Protection Agency put into effect in April, 2010, and apply to buildings constructed before 1979.

Another panelist at the forum, Yael Gichon, who is a member of the City of Boulder’s Environmental Affairs Office, said that the proposed SmartRegs have been designed to promote the energy efficiency measures that produce the most benefit for the least cost. She said that they had been devised after a City consultant had conducted case studies of seven different types of rental housing. The proposed regulations would require each rental unit to obtain a “score” of 100 over two rental licensing cycles and at least 50 during each cycle. Each rental licensing cycle last four years. Yael asserted that every rental unit in the case studies already qualified for a “score” of at least 50. She also stated that the regulations may provide for a yearly spending limit on energy improvements by landlords and that they will allow exemptions for two types of “hardship”: financial and technical.

A third panelist, Tim Hillman, a tenant, claimed that a “market failure” has occurred in rental housing, because the tenants typically pay the utility bills, while only the landlords have the legal authority and the incentive to spend money on the housing to improve its energy efficiency. Consequently, regulation is needed to correct the market failure. He also observed that over 50 percent of the City’s dwelling units are rental, which percentage makes the energy impact of the market failure significant. He predicted that the proposed SmartRegs, if they are passed, will stimulate the local economy.

Tim cautioned that the behavior of tenants, as well as landlords, needs to change to reduce the waste of energy. He said that tenant education would be helpful, and he commended the University of Colorado for energy educational programs it has conducted for students. However, he recognized that education alone requires time to change behavior. He enthusiastically endorsed close cooperation between landlords and tenants to conserve energy.

The fourth panelist, Ann Livingston, who is Boulder County’s Sustainability Coordinator, said that rental properties in the City of Boulder qualify for Boulder County’s Climate Smart loan program, as well as for Xcel’s energy rebates.  Neither credit scores nor loan-to-value ratios are considered by the County in issuing a Climate Smart loan. The minimum size of a Climate Smart loan is $3,000 and the maximum is $50,000 or 20 percent of the assessed value of the property, whichever is lower. The loans may only be used to pay for fixtures, not appliances. They bear the same interest as the bonds which Boulder County sold to finance them, plus a small administrative fee; and they are secured by a lien on the improved property, which becomes due at the time of sale.

Ann reported that Boulder County has issued $10 million in Climate Smart loans during the past 12 months. The average cost of energy improvements per dwelling unit has been $4-5,000.She cautioned that both Fannie Mae and Freddie Mac, the gigantic, Federally sponsored mortgage insurers, have recently raised objections to the way that Climate Smart loans are secured.

She also noted that the County’s PACE energy program provides “micro-loans” from $500 to $3,000 for terms of up to three years at low or no interest. Ann disclosed that Boulder County is currently considering applying for a $20 million block grant, $8 million of which would be reserved as a pool to help finance residential energy improvements. According to Ann, the County is planning to participate with the City in the much-anticipated “Two Techs and a Truck” program. That program is expected to be inaugurated in the next few months and will be available for rental, as well as owner-occupied, properties.

What do you think?  Should landlords be required to make energy efficiency upgrades to their properties? Vote in the Blue Line Poll today!

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3 Responses to “Blue Line Poll: Smart Regs”

  1. Mark Gelband says:

    Now that climate smart loans aren’t an option, isn’t it time for the Anne Livingston and the city to update their data? And with the winds of energy change blowing Xcel and our franchise agreement out the door, who will be “paying” for those rebates?

    Even with a $25,000 rebate and a $9,000 dollar federal tax credit, the payback on my recently installed PV system will be about 6-9 years. For three months I have produced more electricity than I use, but who in our community can afford a system without those credits and rebates? Even with them it’s a big outlay and small return on investment. That doesn’t even consider that the panels are manufactured in China, and the environmental impact of productiona and import?

    Which brings me to Ms. Poinsatte, whose article about upgrading her rentals I have read. If the insulation she used from Home Depot were fiberglass batting, which seems likely since she is claiming it is relatively inexpensive, her choice in insulation and store are both questionable choices for one who is concerned with the environment and local economy, but not so for one who cares about her personal wealth. More environmental choices in insulation – soy-based spray foam or recycled cellulose, paper or cotton, are considerably more expensive.

    And Yael asserted that all the units studied scored 50 already, did she mention that two of the seven they retrofit never made it to 100 points? When Mr. Hillman talks of behavior, are we going to make it illegal for folks to open their windows in the winter with the heat on?

    Ultimately, conservation is a matter of personal choice. And even the proponents of more mommy government regulation could turn off their sprinklers, live in more modest homes, recycle more, consume less, hang their clothes to dry, etc. Do we really want to live in a community that dictates what others do without first looking in the mirror?

  2. […] This post was mentioned on Twitter by Mathew Kenney. Mathew Kenney said: Blue Line gives the skinny on the SmartRegs forum. Check it out! http://fb.me/w45yIQDm […]

  3. Zane Selvans says:

    This is a classic example of split incentives. Landlords will never make improvements (such as energy efficiency measures) which only benefit tenants and not themselves of their own accord. Applied uniformly, these higher standards will result in higher rents, but lower utility bills for renters (and less energy used overall), which is exactly what we should be aiming for. Hopefully we can find a financing mechanism which will work, even with the mess that the feds have foisted on us through Fannie and Freddie and the ClimateSmart loans.

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