By Stacy Wennstrom
Five 2013 Dow Fellows from across the University of Michigan have partnered with the City of Ann Arbor to create financial incentives for landlords and renters to increase energy efficiency. This pilot project seeks to overcome disadvantages that members of the residential rental market (landlords as well as renters) face when seeking to finance energy efficiency projects in their units. Funded by Dow, the Fellows are graduate students Cassarah Brown (Ford and Engineering); Alicia Chin (Ross); Amy Eischen (Ross); Efrie Friedlander (Taubman); and Emily Taylor (Erb Institute: SNRE and Ross).
There are benefits for both property owners and renters to invest in energy efficiency, as $50 million is spent on utilities annually in Ann Arbor and Ypsilanti. Property owners benefit from higher property values, higher rents, lower energy costs, and better tenant retention, while renters benefit from lower utility costs and greater comfort.
Ann Arbor is an ideal location for this type of project. The City is actively seeking to reduce greenhouse gas emissions of which 22% come from the residential sector alone. Also, 55.2% of the residential units in Ann Arbor are rentals, and 90% of these rentals have three units or fewer. Rental units are not eligible for the Federal Residency Energy Efficiency Tax Credit or the Michigan Saves Home Energy Loan Program, and rental units with fewer than four units are ineligible for the Property Assessed Clean Energy (PACE) assessments and funding.
Following the success of an earlier project with Zingerman’s (HEAL- Home Energy Affordability Loan) they are seeking to create a similar model at the city-wide level which, unlike the HEAL program, will include smaller rental units. Their solution, the A2Energy Rental Fund, is a revolving loan fund that will provide property owners with low-interest capital to make energy efficiency improvements to their units.
The A2 Energy Rental Fund will:
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Work with the City to develop the structure of the fund and process for issuing energy efficiency loans. Identification of financial structure will be based on focus group results with property owners.
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Identify who will administer and manage the funds.
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Define eligibility criteria, applications, and fund distributions.
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Turn over responsibility to the City of Ann Arbor by April 2014.
The process for the loan will be:
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Property owner signs the green lease and applies for the loan
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City approves the amount based on improvement type
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Property owner hires approved contractor to make improvements
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Contractor bills the City
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The City bills the property owner in installments
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Property owner repays loan with interest
To ensure accurate loan estimates, the Dow Fellows will solicit quotes from local contractors for various energy efficiency projects. $60,000 has been requested to establish the Fund, which would fund approximately 10 to 15 projects at a time, with the estimated cost of each project ranging from $5,000 to $10,000, and 75% of each project being financed with the loan. There may also be the potential for the City to supply matching funds from their HUD grant, increasing the number of efficiency improvements that could be granted. Loan opportunities will be advertised to property owners by March 2014.
An important element of the A2Energy Rental Fund is the green lease, an agreement between property owners and renters. The green lease is a prerequisite for access to the A2 Energy Rental Fund, illustrating the property owner’s commitment to improvements such as energy efficient appliances or added insulation, as well as the renter’s commitment to energy efficient practices.
Another essential part of the A2Energy Rental Fund involves renter empowerment. When the Dow Fellows worked with Zingerman’s, they developed tools, which include an energy efficiency workbook, energy efficiency best practices for renters, a checklist for energy efficiency actions, and a green lease template. These are available on the Ann Arbor website, as of January 2014. In addition, the educational sessions with Zingerman’s will be available to Ann Arbor residents on YouTube.
Energy efficiency programs are often suspended due to lack of funds and education. By helping property owners overcome financial obstacles to efficiency improvements and by empowering and educating renters, the Dow Fellows and the A2 Energy Rental Fund are leading the way for a more sustainable future.