Sustainability in Affordable Housing
An examination of how sustainability initiatives help one firm drive ROI for affordable housing investors.
When it comes to effective apartment housing property management, it’s no secret that implementing sustainability measures can have a tremendous positive effect on an owner’s bottom line. Nowhere is this more strongly experienced than in the affordable housing sector, where the execution of sustainable practices not only can minimize operating costs on behalf of the owner, but also ensure a community’s long-term affordability for residents.
In addition to the ancillary social benefits achieved by conserving natural resources, there is a measurable fiscal benefit to practicing sustainability.
As an affordable housing investor that oversees and manages more than 41 communities totaling over 7,000 apartment homes throughout the United States, Avanath Capital Management has implemented several strategies that have resulted in major cost savings, ultimately boosting the overall profitability of each community, while maintaining affordability for residents.
Landscaping
With dwindling natural resources and rising utility costs, owners must constantly evaluate and monitor each property’s water consumption to minimize excessive operating expenses that can significantly affect an asset’s performance over time.
This is especially true for multifamily housing properties throughout California, which continues to deal with severe drought.
Most owners understand that drought-tolerant landscaping can minimize overall water usage. But how does this strategy affect the bottom line?
At Natomas Park Apartments, a 212-unit affordable housing community in Sacramento, Avanath saved approximately $9,840 annually by replacing 12,600 square feet of turf with drought-resistant plants. Based on these numbers, the initial turf investment was paid back within two and a half years, and overall water usage was reduced by 30 percent.
At Northpointe Apartments, a 528-unit affordable housing community in Long Beach, Calif., Avanath replaced 14,450 square feet of turf with drought-tolerant plants and installed artificial turf in front of the pool and recreation building.
These substantial improvements resulted in approximately 750,000 gallons of water savings a year, which translate to a 40 percent reduction in water usage from the landscaping alone—a figure that significantly exceeded the local district’s water conservation goal of 20 percent.
These results demonstrate the tremendous impact that drought-tolerant landscaping can have in ensuring long-term cost savings through water reduction and lower maintenance costs.
Irrigation
While sustainable landscaping can have a dramatic impact in curbing water consumption, it is equally important that property owners invest in efficient watering systems to maintain long-term conservation and cost-savings.
Owners who invest in drip-irrigation systems typically find that the long-term benefits far outweigh the short-term costs associated with the initial investment.
Drip-irrigation systems can be far more effective than sprinkler systems because they directly supply water to the landscape without the risk of water loss stemming from runoff or evaporation. According to the Environmental Protection Agency, drip-irrigation systems utilize 20 percent to 50 percent less water than conventional sprinklers, saving as much as 30,000 gallons of water.
Beyond these environmental benefits, the bottom-line cost savings are substantial.
At the aforementioned Natomas Apartments, an upgrade of 196 water-efficient fixtures resulted in a savings of nearly $10,000 annually.
By investing in effective irrigation systems, owners can ensure that their apartment housing assets are well-positioned to sustain changes in weather, as well as rising utility costs associated with diminishing natural resources. With a relatively minimal capital investment and an anticipated two- to four-year payback period, owners can equip their communities with the resources to lower operating expenses on an annual basis for years to come.
Solar Panels
One of the most effective ways to maximize a property’s energy efficiency while saving costs is through the installation of solar panels.
Solar panels can be utilized in combination with existing appliances to reduce the impact on a property’s electric utility bill. Much like a hybrid vehicle, these energy-efficient models can substantially lower operating expenses while also minimizing an apartment community’s effect on the environment, thereby preserving the asset’s affordability and sustainability for residents.
At Castelar Apartments, a 101-unit affordable community in the heart of Los Angeles, Avanath mounted 48 hot-water solar panels on roofs to trap and retain sunlight, ultimately producing centralized domestic hot water. With a boiler system as their backup, the solar panels provide an added value to both the property owner and residents by limiting the electricity required to heat water throughout the property.
Solar panels’ benefits extend beyond electric savings and can directly reduce water consumption as well. Utilized in conjunction with sprinkler systems, solar powered sprinkler timers interpret data from weather stations to determine when and how much to water.
For example, at Natomas Park, Avanath installed three solar-sync weather stations tied to sprinkler timers with the goal of reducing turf water consumption. These self-regulating timers monitor changing weather conditions and measure sunlight, temperature and precipitation factors to optimize water usage, further contributing to significant water savings.
With Sacramento bearing the brunt of California’s water crisis, Avanath was able to successfully combat the drought and take advantage of the excess sunlight simultaneously by integrating these solar-activated sprinkler systems. The initial investment of $2,910 for a total of three solar stations significantly contributed to the property’s total savings of more than $9,000 annually.
Local Rebates
Many municipalities, especially in districts that are affected by extreme weather conditions, offer incentives to encourage sustainable practices.
The city of Sacramento, for instance, provides a host of residential rebates for apartment housing owners. From water-efficient landscaping to low-flow toilets, all the way to high-efficiency washing machines, there are rebates that cover a portion of the initial installation costs.
The Bottom Line
Avanath’s Natomas Park received a $2,500 rebate from the City of Sacramento to implement the energy-saving strategies described above, reflecting a savings of approximately 8 percent on the capital investment. Rebates reward socially conscious owners and provide an added bonus to the long-term savings that can be achieved from making this commitment.
Overall, there is no question that sustainability can improve a property owner’s bottom line. By installing drought-tolerant landscaping, drip-irrigation systems and solar panels, apartment owners can maximize savings and minimize the impact on their profitability. While sustainability does require an initial investment, end results are prodigious, generating substantial year-over-year returns that will ultimately benefit owners and investors.
Jun Sakumoto is Partner & Chief Operating Officer of Avanath Capital Management. Contact him at [email protected]