New study aims to solve energy efficiency stalemate in rentals

The Climate Solutions Accelerator of the Genesee-Finger Lakes Region has initiated a feasibility study with the Urban Institute to investigate solutions to what many call the split incentive. The organization aims to explore ways to implement them in Rochester and create a cleaner energy footprint. 

Across the nation, tenants and landlords often find themselves at odds over energy-efficient upgrades to their residences. Renters want lower bills, and landlords are unsure whether they want to invest in costly upgrades.

A split incentive typically occurs when the end user, a tenant, is responsible for their electric bills. A landlord might not be financially incentivized to invest in electric efficiency when a tenant would be the primary beneficiary.

“The majority of people in the city live in rental properties,” says Graham Hughes, policy director at the nonprofit Climate Solutions Accelerator. “It’s a huge need and a big barrier.” 

Tackling this split-incentive issue is essential not only to improve affordability and indoor air quality but also to reduce carbon emissions, as noted by the city of Rochester’s Climate Action Plan. It is also a goal for New York as outlined in its Climate Leadership and Community Protection Act. 

Rochester’s Community & Municipal GHG Inventories report in 2019, the latest information available, found that residential buildings are responsible for 28 percent of the city’s greenhouse gas emissions, an increase of 6 percent since 2010, and the second largest greenhouse gas emitting sector behind commercial buildings (35 percent), making them a key target for decarbonization efforts. 

Hughes points to several potential solutions to the split-incentive problem such as minimum energy efficiency standards in building codes, green leases, and on-bill financing. 

By implementing minimum energy efficiency standards in building codes, landlords would be required to have their buildings meet the set minimum standards to avoid fines and obtain a certificate of occupancy. 

“In policy terms, you can think of this as a stick,” Hughes notes. “‘If you don’t do this, we’ll punish you.’”

The other two ideas are more of a carrot, allowing both the landlord and the tenant to benefit immediately from energy-efficient upgrades. 

A green lease is a lease agreement that estimates, over the course of a year, the average monthly savings that the landlord expects the tenants to achieve once energy-efficient upgrades are made and stipulates that a portion of that savings will return to the landlord in the form of increased rent. On-bill financing works similarly, with the landlord and tenant working with their utility company to have a set percentage of their monthly energy bill savings sent to the landlord.

The year-long study with the Urban Institute is still in its earliest stages. Its main goal right now is to survey approaches that cities like Rochester have implemented to address the split-incentive issue.

The Climate Solutions Accelerator administers one of 12 Clean Energy Hubs statewide, which through increased electrification aims to boost access to clean energy technology in the Finger Lakes region. 

Increased electrification often is cited as a path to decarbonization, especially in Upstate New York, where electricity generation is nearly 90 percent emission-free and is anticipated to be 100 percent emission-free by 2030.

Energy efficient and electrification upgrades include:

■ installing an electric stove (key for improving indoor air quality);

■  improving insulation and sealing; 

■ installing a heat pump; and 

■ upgrading doors and windows.

The Clean Energy Hub (also known as Amped), run by Jenna Lawson, often engages with community-based organizations to improve outreach and collaboration in historically underserved areas.

The hub’s energy advisors take calls from Finger Lakes residents—landlords, tenants, and homeowners—and can help them navigate accessing grant opportunities, tax incentives and credits, and finding qualified contractors to perform upgrades. 

“This is all done mostly through calls and emails,” says Lee Klein, the designated multifamily and mobile home energy adviser. “We discuss things like ‘Is your home drafty?’, ‘Is your furnace about to die?’, ‘Are you interested in learning about a heat pump?’, and we’ll walk them through the funding process with as much or as little assistance that they need.”

Last year, the team of energy advisers received 268 calls, which led to over 70 residential and commercial installations to enhance energy efficiency, comfort, and safety. 

One of the most common programs Lawson and her team connect people with is EmPower+, which allows eligible low- and moderate-income households in New York to access free home energy assessments and direct install improvements noted in the home assessment, and receive partial funding of other various energy-efficient home improvements. The program is also open to renters. However, any large changes require the landlord’s permission. 

“Financing these upgrades to their homes (is) not only important to meeting the emission goals (set out in the CLCPA), but to help lower their energy bills and lower their risk for respiratory illnesses,” says Paul Henry, a 2024 Climate Justice Fellow at the accelerator.

“It’s not just a climate justice issue,” he adds, “it’s a social justice issue as well.” 

Sarah Woodams is a recent University of Rochester graduate who works in climate technology.

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