Wednesday
August 31, 2016

Renters Say They’ll Pay More for Green

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Renters Say They’ll Pay More for Green

It may not be surprising that renters are revealing more of a preference for apartment buildings with sustainable design features, from energy-saving appliances to bike rooms. The real news—according to a new survey from the National Multifamily Housing Council—is that they’re willing to pay extra for them.

Renters told NMHC researchers that they’re willing to pay an average of $32.64 a month more to rent in a building that has earned a “green building” certification such as LEED. About 75 percent of all respondents said they were “interested” or “very interested” in the green certifications of the building they live in. That said, the $32.64 extra they are willing to pay per month is less than the $41 they said they’d pay to have a fitness center. Still, it’s more than the $32 per month extra they said they’d pay for parking.

The NMHC survey also found that renters are willing to pay an extra $31 a month to live in a building that includes “sustainability/green initiatives.” Also, they will pay an extra $26 a month to live in a building that recycles.

The study also found apartment communities are smart to market green features of their buildings. About 43 percent of survey respondents said they’d be lured to websites that include information on how sustainable features are used in the building.

Learn how LEED certification is slowly becoming a de-facto requirement in commercial real estate.

Of course, multifamily builders have been putting more focus on environmental friendliness in new buildings for years, but much of that is due to regulation, rather than market demand. Many of the latest building codes mandate that new apartments be more energy-efficient than older buildings. Hence the interest in sustainable design features such as extra insulation and “green” windows.

“In most cases, just following local building codes gets you to the equivalent of some sort of green certification,” says Greg Willett, chief economist for the apartment market intelligence firm MPF Research. “We’re not really building new product that isn’t highly efficient.”

Sustainable development is more than insulation, however. For example, being within easy walking distance to transit or amenities might not be mandated, but it's winning over more renters’ hearts. A study by the data firm Axiometrics found that sub-markets with the highest-ranking Walk Scores in the area tend to have the highest average rent per unit.

“I definitely believe renters will pay for a high Walk Score,” says John Sebree, director of the national multi housing group with brokerage firm Marcus & Millichap. “An increased number of tenants [wants] to live close to shopping, jobs, and entertainment.”

Source: “Are Apartment Renters Willing to Pay More for Green Features?” National Real Estate Investor (March 22, 2016)