In this brief, we examine how cities are using incentives and requirements to promote energy-efficiency upgrades in rental housing. The brief highlights key challenges and lessons learned that can help cities as they consider formalizing such incentives or requirements.

Why This Matters

Across the country, local governments are grappling with issues of energy inefficiency in residential buildings, especially in aging rental stock. Inefficient energy systems and unweatherized housing can lead to higher energy consumption, higher energy bills, and unsafe living conditions, increasing the chances of renters experiencing poor health and housing insecurity. Pursuing energy-efficiency upgrades in rental units can be difficult because landlords may not be motivated to pay for energy upgrades for which they will not receive the benefits of lower bills and more comfortable spaces. Some cities have developed programs and policies that begin to address this issue, but they are few and far between and are still evolving.

What We Found

Through a document review of existing programs, interviews with local government staff, developers and contractors, housing advocates and nonprofit organizations, affordable housing providers, landlords, and utilities, and renters, we gathered a wide range of perspectives. We also conducted an in-person community data interactive to deepen our understanding. Together, these sources offer insights into potential interventions that could lead to higher quality rental housing, lower expenses, and improved safety for renters. Our analysis focuses on four overlapping and reinforcing pathways:

• Assessment: Assessments of housing quality help stakeholders better understand upgrade needs and technical barriers to upgrades. They can also increase transparency around housing quality to inform residents making lease or purchase decisions about their full housing costs, including energy bills—and about what comfort or safety issues they might expect.
• Education and engagement: Targeted education and outreach tailored for different audiences can promote understanding of what’s at stake in relation to housing quality and energy efficiency and build support for adopting measures that address safety, health, and affordability challenges. Renters, landlords, and contractors can all benefit from information about what interventions effectively reduce energy bills, and about programs available to support improvements to building envelopes and purchases of energy-efficient equipment and appliances. Those pursuing upgrades also benefit from information about vetted contractors to carry out the work.
• Incentives: Programs designed to encourage upgrades and retrofits to existing rental stock—such as improved insulation, air sealing, more energy-efficient appliances, and better HVAC systems—are typically supported by monetary incentives, including capped grants or matching grants. Existing incentive programs can help guide property owners in prioritizing improvements, since incentives can be structured to encourage the most cost-effective or most efficient improvements. Some programs focused on rental properties also incorporate affordability clauses to prevent grant recipients from raising rents.
• Energy-efficiency requirements: Energy-efficiency requirements are enforceable standards that builders and property owners must meet. They are often enforced through inspections and penalty fees. They can be designed prescriptively to require specific upgrades or can be performance-based, setting limits on emissions. Requirements are usually paired with incentives to support the necessary upgrades.

Looking across cities, there are many lessons related to assessment, education and engagement, energy-efficiency incentives, and energy-efficiency requirements that towns and cities can draw on when designing incentive programs or requirements to improve energy efficiency in rental housing.