Real estate actors across the United States are at the precipice of a major climate opportunity. The recently passed Inflation Reduction Act (IRA), and the increased focus by investors, lenders, regulators, and policymakers on building decarbonization, positions the sector to take meaningful action.

To inform this opportunity, RMI conducted a bottom-up carbon analysis of the US building stock to determine the relative operational emissions for each segment. To the knowledge of RMI, this is the most detailed US buildings emissions model created to date. This report provides a breakdown of US building carbon emissions by segment, subsegment, and building size and identifies the building types with the greatest opportunity for emissions reductions. The report also proposes actions that lenders, investors, and regulators can take to increase the flow of capital to segments responsible for the greatest proportion of emissions.

Key report findings:

• Building operations generate 23% of US annual carbon emissions.
• Existing buildings represent the majority of US building emissions. The annual rate of addition or renovation to the existing building stock is less than 1%.
• Single-family homes contribute 58% of US building emissions.
• Commercial buildings contribute 37% of US building emissions. Over half of these emissions (56%) are from small and medium-sized buildings.
• Green capital flows are nowhere near what is required to decarbonize the sector.

These findings lead us to the following conclusions:

• Investors, lenders, and regulators seeking to decarbonize the real estate sector should target dollars toward the retrofit of existing buildings.
• Decarbonizing single-family homes is critically important to reaching US climate goals and this sector should attract a larger share of climate-aligned investment and financing support than it currently receives.
• Although large buildings in the commercial sector currently attract the most climate-aligned investment and capital, more climate-aligned investment should target small and medium-sized commercial buildings to produce meaningful reductions in US real estate carbon emissions.