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Jun 22, 2023

Your landlord may be the biggest obstacle to better energy efficiency

When Jake Douglas moved into his new apartment in North Bend, Wash., in 2021, he

When Jake Douglas moved into his new apartment in North Bend, Wash., in 2021, he asked his landlord if the building could install electric vehicle chargers. Douglas had an electric car and wanted to make sure he’d be able to refill the battery at home. The landlord said that EV charging was in the works, and Douglas tried to help by researching different vendors and prices.

"He just kept saying it was going to happen, and after a year and a half, two years — nothing," Douglas said. The 35-year-old software engineer also hoped to have a heat pump installed in his apartment, which had an old-school electric resistance heater and no air conditioning. No luck there, either. Faced with increasingly hot Pacific Northwest summers, Douglas crammed a leaky air-conditioning unit into one window and tried his best to seal it up against frequent wildfire smoke.

"It's a constant back and forth between trying to provide the cooling and trying to keep the smoke level down," he said grimly.

Douglas is one of a growing number of Americans who want to lower their carbon footprints — but are stymied by their landlords. Homes and apartments burn oil and gas, suck up electricity, and account for about one-fifth of the United States’ total greenhouse gas emissions. But current attempts to green America's homes, including billions of dollars in tax credits for energy efficient appliances and retrofits, seem aimed at the affluent owners of detached, single-family homes — in short, Mad-Men-style suburbias.

In reality, about one-third of the country's households live in rented apartments or houses. These nearly 110 million Americans are more likely to be Hispanic or Black; they are also more likely to be in the bottom half of income and net worth. And they generally do not have the spare cash — or the permission from their landlords — to make environmental upgrades.

Part of the issue is what's known in economics as the "split-incentive problem," or the "landlord-tenant problem." Roughly 75 percent of tenants in the United States pay their own utility bills; that means they have a strong incentive to try to conserve electricity, water, or gas to save cash. But their landlords, who have to pay for installing and replacing those appliances and heating systems, don't. They benefit from renting out their properties as quickly and cheaply as possible.

"In a normal circumstance, when someone owns or uses a property, there are lots of energy efficiency investments that make financial sense," said Russell Unger, principal for carbon-free buildings at the energy think tank RMI. "The problem arises in rental situations when the landlord isn't paying the bill."

Renters, therefore, are often stuck with leaky housing, inefficient appliances and ancient heating systems. According to one study from 2018, renters use almost 3 percent more energy than homeowners thanks to the split incentive problem.

And it's not easy for renters to find more efficient places to live. Other research has found that renters are more focused on the monthly rental price than the potential cost of utilities; it's also easy for landlords to hide the true cost of utilities from potential tenants. Meanwhile, the country faces a shortage of affordable housing that makes any choice out of reach for some Americans.

"If you’re a low-income household, you just may not be able to take anything into account other than the raw rental price," Unger said.

Meanwhile, President Biden's signature climate bill includes an estimated $37 billion in tax credits to help households switch to efficient heat pumps, water heaters, or to seal up and insulate their homes. Those credits are applicable to individual homeowners or renters — but not landlords. According to IRS guidance, "the credits are never available for a home that you don't use as a residence." And few renters are going to want to spend thousands of dollars on a heat pump that they’ll have to leave behind when they move.

A few landlords are taking the plunge. Katie Jones, a property owner in Minneapolis who works in sustainable energy, removed her triplex's gas boiler when it failed in 2018 and installed heat pumps on every floor of the house. The project ended up being more expensive than she had hoped, also requiring her to shell out money to tightly insulate the 1893 building. Still, Jones said she is happy that she did it: Her tenants now have air conditioning as well as heat, and, she says, she couldn't justify being reliant on fossil fuels for another 20 years. "We’ve reduced the carbon footprint of our house by about 79 percent," she said.

Even when tenants offer to help pay some of the cost, some landlords hesitate. Pierre Chrzanowski, an analyst of climate and risk data, emailed his landlord last year to ask that she change the heating system in his Maryland townhouse from fuel oil to a central heat pump. Four percent of homes in the United States are still heated by fuel oil, which has to be delivered on a truck; it's also one of the most carbon-intensive ways to heat a home. Chrzanowski, who is 39 with two children, offered to pay higher rent to help compensate for the switch.

"Replacing the heating system is not a good option for me," his landlord responded via email. "And I know that the electricity ... a heat pump would use ultimately comes from coal." (In fact, Maryland only gets around 9 percent of its electricity from coal-fired power plants.)

After reading her response, Chrzanowski gave up on his efforts, at least temporarily. "I don't think it should be on the renter to do this," he said.

If the landlord problem isn't solved, millions of less wealthy Americans could be left out of the green transition — and will be stuck with higher energy bills. For example, even in the same income bracket, homeowners are almost three times more likely than renters to own electric vehicles — largely because renters lack home charging.

There are programs, including some in America's giant climate bill, that could change this. The Inflation Reduction Act includes $4.3 billion for homeowners in Home-Owner Managing Energy Savings rebates. The amount of the rebates depends on the energy savings, and the maximum rebate doubles if the property serves low- and moderate-income Americans.

The law also includes the High Efficiency Electric Home Rebate Program, which provides another $4.5 billion in rebates for low-income homeowners or landlords of buildings where at least 50 percent of tenants are low- or moderate-income.

"I’m seeing more affordable housing developers who are interested in going electric," said Jamal Lewis, director of policy partnerships and equitable electrification at the nonprofit Rewiring America. "We’re seeing this breadth of momentum, and it's really exciting."

Still, those programs haven't launched yet and aren't expected until at least late this year. And even though renters make up one-third of American households, they’re still getting less investment; the tax credits for homeowners are uncapped. The federal government could end up spending well over $50 billion on homeowners, and about $8 billion on renters.

Most renters remain at the mercy of their apartment managers and landlords. Douglas, the Washington software engineer, says he often looks across the street at a set of townhouses that have built-in heat pumps and garages where he could easily install EV charging. But the townhouses are about $1,000 per month more expensive than his housing.

"Landlords will be landlords," he said.