Climate change, indoor air quality, healthy homes and energy efficiency are all hot topics. Studies show that 39 percent of global carbon emissions come from buildings and construction. Residential and commercial property owners have become more interested in sustainable building upgrades. Often, they need a little help when it comes to financing these upgrades.
Enter various public and private options, including “green leases.” These are also referred to as aligned leases, high-performance leases, or energy-efficient leases. Both landlords and renters can benefit from a green lease.
What is a green lease?
In a green lease, a tenant would share the cost burden of sustainability upgrades with the building owner. These are things such as water and energy conservation, waste reduction and recycling. Green leases have the potential to reduce energy use and reduce costs for renters.
According to a 2017 report by the American Council for Energy-Efficient Economy, multifamily energy efficiency could save $3.4 billion a year.
Why bother with a green lease?
A green lease may cost a tenant more in monthly rent. But it could make a rental more affordable; e.g., you could save money on utility bills. There are many other benefits renters of green leasing:
- More comfort: Warmer and less drafty in winter, cooler and less humid in summer.
- Healthier: With better Indoor Air Quality (IAQ), you and your family will be less prone to the effects of indoor air pollutants such as allergy and asthma issues, headaches, fatigue and dizziness.
- Higher productivity: According to recent Harvard University research, improved ventilation showed an 8 percent increase in productivity in study participants.
- Emotional lift: For many people, “going green” is meaningful and rewarding. It makes them feel positive: They’re doing something good for themselves and others.
What is in a green lease?
According to Mashvisor, here’s what is in a green lease:
- The things a property owner would do to reach energy efficiency and sustainability goals. These include indoor temperature regulation, water use and materials used to maintain the property.
- How tenants and landlords will cooperate to achieve these measures
- Which party handles monitoring the compliance with these measures
- What happens if there’s a failure to meet the targets
- How are costs and benefits allocated between the landlord and tenants
[contextly_auto_sidebar]
How might a tenant’s responsibilities work?
Think about it from a landlord’s perspective. They pay for the improvement. You, the tenant, reap the benefits. A green lease can address this problem known as a “split incentive.”
In a green lease, your landlord would calculate and include monthly utility costs in the rent. If you use less than the monthly baseline, your landlord will share the savings with you.
Let’s say your utility bill for February was $150, but the baseline typically is $200. You might get a check for $25 and the landlord also would get one for $25. Win-win!
What is the landlord’s responsibility?
A landlord must make sure their properties are safe, livable and clean. They are also responsible for property maintenance. It’s in their best interest to upgrade properties to follow any state or municipal codes.
A green lease also can help a landlord improve their building’s energy efficiency. In turn, this helps them create a valuable investment asset.
Looking for a green lease?
Green leases are most often found in commercial real estate properties like office buildings and hospitals. Still, many multifamily buildings are coming on board.
Green leases are more available in towns and cities that strive to meet high energy-efficient building standards.
Boulder, CO, for example, adopted the SmartRegs program, which requires licensed rental housing to meet a basic energy efficiency standard. Reno, NV, recently enacted the Energy and Water Efficiency Program, targeting commercial and multifamily building performance. Meanwhile, Washington, D.C., requires buildings with a floor area of 50,000 square feet or more to meet certain energy performance standards by Jan. 1, 2026.
Additionally, six U.S. cities and the District of Columbia are members of the Carbon Neutral Cities Alliance, a group of global cities working to achieve carbon neutrality in the next 10 to 20 years.
Green leasing might be coming to your city
As more cities work to achieve higher energy standards and mitigate the effects of climate change, it may become easier for renters to find a green lease.
