Multifamily Affordable Housing Decarbonization Toolkit

Utility Cost Burden and Split Incentives

Pathways to Homeownership: NYC Co-op Case Study

Across the regional workshops, RMI invited local leaders in the tenant rights and advocacy space to share their experiences, center conversations on tenants, and ground decarbonization within the broader context of the housing justice movement. Tenant rights extend beyond housing to encompass a wide network of health, economic, and racial injustices. Although the movement to decarbonize the housing stock is critical, numerous underlying pain points exist in the housing landscape that inevitably surface when considering decarbonization strategies, including pressing issues such as rent affordability, health concerns, utility costs, and other socioeconomic burdens faced by households.

In NYC, Cea Weaver, Coordinator for the Housing Justice for All coalition, joined the workshop to share information about a statewide partnership of tenants and houseless New Yorkers united in the fight for housing as a human right. In MSP, participants heard from representatives of two local advocacy groups: Margaret Kaplan, President of the Housing Justice Center, and Michael Dahl, Public Policy Director at HOME Line. These speakers explained the connection between housing justice and decarbonization and highlighted legislative wins that have advanced access to affordable housing and tenant protections in their respective states.

During the ATL workshop, participants heard from leading local housing and energy experts, including Dr. Bambie Hayes-Brown, CEO of Georgia Advancing Communities Together; Abe Kruger, Partner at SK Collaborative; and Adelaide Steedly, Senior Director of Strategy, Policy, and Innovation at Atlanta Housing. Collectively, they illuminated pressing challenges that are straining housing affordability, including increasingly high energy burdens and an insufficient supply of housing. Despite these challenges, speakers provided hopeful insights, stressing the notion that "sustainability is affordability.”

Regional workshop speakers shared valuable perspectives that encouraged participants to think holistically about aligning housing security and climate goals. In facilitated discussions, participants identified these tensions between decarbonization and tenants’ rights and explored potential solutions — such as integrating health and safety measures with decarbonization and solutions to minimize disruption and displacement during retrofits, as further detailed below.

Speakers brought valuable perspectives that applied throughout the workshops, encouraging participants not to isolate decarbonization challenges or solutions from housing justice, but rather to think holistically about housing outcomes that advance financial well-being and stability in communities. Following this level-setting conversation, attendees participated in small group discussions to identify pain points and tensions between decarbonization and tenants’ rights, craft solutions that align housing security and climate goals, and develop strategies to include tenants in decision-making.

Challenges and Recommendations

Tenant Engagement

Often, owners face capacity challenges that inhibit their ability to engage tenants in retrofitting strategies and plans to meet building decarbonization goals. The lack of up-front and consistent engagement can pose barriers later when tenant behavior plays a more significant role in achieving performance targets. The adoption of energy-efficient electric systems remains the technical key to building decarbonization; however, tenants will ultimately be the ones using these systems, and their consumption will be critical to building performance. Engagement efforts can empower tenants with an understanding of building operations, carbon emissions, and the influence over their energy consumption. Solutions that emerged from the workshops to enhance tenant engagement and education efforts include:

Partnering with Community-Based Organizations for Tenant Engagement Efforts: Prioritizing tenant engagement in the planning process of building retrofits is essential to ensuring that upgrades are effectively implemented to meet both tenant needs and decarbonization goals. Engaging community-based organizations (CBOs) in the early stages of the design and retrofit planning process can align tenant expectations and needs with project goals, ultimately fostering more equitable decision-making processes. Establishing trust with tenants is a crucial foundation for effective communication and collaboration. Working with CBOs that have a strong community reputation could lead to more positive relationships between tenants and owners. CBOs can provide support in the following ways:
- Educational Campaigns: To gain tenant buy-in, owners and CBOs can work hand in hand to develop effective communication materials to share with tenants regarding proposed upgrades, timelines, and project benefits that could impact tenants. California’s Solar on Multifamily Affordable Housing Program, for example, partners with the California Environmental Justice Alliance, Asian Pacific Environmental Network, and the Environmental Health Coalition to support owners with tenant education materials relating to the benefits of solar, workforce opportunities, and understanding utility bills after solar installation. The program partners advocate for community priorities that inform program design, serving as a model for how other community-based education programs and organizational support can serve tenants.
- Messaging and Language Access: CBOs can play an active role in supporting owners to ensure that all communication with tenants is clear, inclusive, and accessible. For example, CBOs can work with owners to provide communication materials in multiple languages, engage building staff in cultural competency trainings, and facilitate language interpretation services during important tenant interactions.

Housing Stability

The up-front investment needed for decarbonization upgrades can be concerning for tenants and building owners alike, as there are often tensions between maintaining affordability for tenants and generating operating income for owners to cover ongoing maintenance and repairs. Rent increases or additional fees related to decarbonization upgrades can lead to financial stress and instability among tenants, straining their ability to cover basic necessities, including housing costs, and exacerbating their ability to recover from financial setbacks and ultimately build wealth. Simultaneously, building owners, especially owners of affordable housing that have small operating budgets, need to recover costs and be able to provide ongoing maintenance.

Rent increases or increased fees following decarbonization upgrades can be a result of owners passing costs directly on to tenants. This practice is enabled by existing frameworks, programs, and legislative language supporting decarbonization, which can often cater to property owners and fail to incorporate sufficient tenant protections, especially in unsubsidized housing. For example, the State of New York enacted the Housing Stability and Tenant Protection Act of 2019, effectively limiting rent increases on rent-regulated properties following major capital repairs; however, it excludes unregulated units, which represent a large portion of the affordable housing stock. Solutions to these challenges in multifamily rental units include:

Rent Stabilization Regulations: Rent stabilization can potentially support regional housing affordability by helping prevent tenant displacement. Rent stabilization legislation has historically created tensions for municipalities and states as they attempt to balance the need for affordable housing with the desire to incentivize new development and investment in the housing market. While most states do not have rent stabilization laws or, like Georgia, ban rent control outright, further research is needed to holistically determine community impacts of enacting rent stabilization guidelines. Looking to cities like Los Angles and NYC that have established rent stabilization ordinances can be useful in determining their effectiveness in maintaining affordable housing options for residents.
Knowledge Sharing of Rights: Both owners and tenants should know their rights and responsibilities. Engaging directly with existing tenant advocacy groups and legal experts who are knowledgeable about local laws and regulations will empower owners and tenants to effectively manage their priorities and be aware of their rights and obligations.
Incentivize Affordability in Program Design: Programs and policies designed to incentivize decarbonization upgrades are most constructive when they integrate tenant protection requirements. Affordability covenants, like those that exist today in California, impose restrictions on raising rents and utilities after upgrades are made using certain funding programs. Some local ordinances require rent increases to be tied to the Consumer Price Index, provide eviction protections, and require landlords to offer temporary relocation assistance while upgrades are being made. The Home Energy Rebates programs outline restrictions to maintain affordable rents after decarbonization upgrades. For at least two years following the rebate issuance, these restrictions prevent owners from evicting or increasing rents for low-income tenants, and selling to an owner that doesn’t comply with these same restrictions. Adding criteria to preserve affordability following decarbonization upgrades is critical to minimizing displacement and ensuring decarbonization benefits reach low-income tenants.
Increased Funds for Voucher Program: In May 2024, the US Department of Housing and Urban Development (HUD) announced $30 billion in renewal funding for the Housing Choice Voucher Program. The increase in funding will support 2.3 million families in need of housing. Continued expansion of voucher relief programs will provide much-needed financial support to low-income residents, especially elderly individuals or single-parent households, who could otherwise be at risk of displacement.
Build Pathways to Homeownership: There are various solutions that can improve the quality of housing for tenants while maintaining affordability, including pathways to homeownership. Since most decarbonization incentives are geared toward building owners, tenants often lack agency or aren’t incentivized to make improvements to their rental units. By becoming homeowners, low-income residents gain the opportunity to build financial wealth while taking an active role in improving and decarbonizing their homes.

Right of First Refusal: Since most decarbonization incentives are geared toward building owners, tenants often lack agency to make improvements to their rental units. By becoming homeowners, low-income tenants gain the opportunity to build financial wealth and proactively improve and decarbonize their living conditions. The right to first refusal empowers tenants in multifamily housing to organize a co-op and start accumulating wealth through homeownership. For example, in NYC, the Urban Homesteading Assistance Board (UHAB) supported a group of tenants in taking ownership of their building through a co-op model. Similar policies exist in other locations, including the Tenant Opportunity to Purchase Act in Washington, D.C. These policies should be explored across other localities to reduce potential displacement, foster tenant empowerment, and improve stability across existing affordable housing communities.
Community Land Trusts: Shared equity programs like community land trusts (CLTs), can help reduce costs and create homeownership opportunities for residents. While CLTs are more common in single-family housing, they are increasingly recognized for their potential impact within the multifamily market. CLTs promote housing affordability by acquiring and holding land parcels long-term, protecting low-income residents from rising land values and market fluctuations. For rental units, CLTs can prevent rent spikes by offering building owners lower property costs through stable, long-term land leases. CLTs can also support homeownership through co-op models, where tenants buy shares of the multifamily building to own their unit, while leasing the land on long-term, low-rate terms. By separating the cost of the parcel, housing costs can be kept more affordable.

Tenant Displacement and Disruption

Renovations can create noise, potentially cause health concerns, and limit access to essential spaces such as bathrooms and kitchens, causing disruption or displacement. Long-term or permanent displacement can come from nonrenewal of leases or eviction if tenants raise concern during renovations because of an inability to pay increased rent or utility costs. Short-term displacement can require tenants to seek temporary alternative housing, arranged independently or by the building owner, which can lead to potentially higher costs for transportation and storage expenses during renovations. Covering these incremental costs eases the burden of relocation, although other opportunities to minimize disruption altogether should be prioritized. Recommendations to address displacement challenges at the time of a retrofit include:

Tenant-In-Place Retrofits: To mitigate the risk of displacement during retrofits, tenant-in-place retrofit strategies can be explored. Robust communication and tenant involvement in decision-making processes will be needed for this approach to be successful. Timelines, necessary upgrades, and potential disruptions should all be disclosed and discussed with tenants up front, and alternative spaces for tenants to use for work or living should be made available during construction.
Tenant Relocation Support: In cases where tenant-in-place retrofits are not feasible, it is important to offer relocation support. For projects leveraging public funding, there are more direct opportunities to require this support. In many states, including Massachusetts, the use of public funding for renovations requires owners to cover any incremental costs incurred by tenants during temporary relocation, such as storage, rent increases, and movers. Similar frameworks can serve as guidance for other localities. With a growing number of decarbonization and housing upgrades on the horizon for many cities needing to meet their climate action goals, establishing city-wide guidelines and regulations for owners to follow — such as those in Massachusetts — will help to standardize and streamline the retrofit process.

Utility Cost Burdens and Split Incentives

The risk of utility costs being passed onto tenants, either through new metering arrangements or higher electric loads, is an ongoing concern with decarbonization efforts. During decarbonization upgrades, a building’s electricity load generally increases as mechanical systems are electrified or new systems are installed that were not previously accounted for, such as more robust ventilation systems or centralized cooling. In many regions throughout the United States, electricity rates are more expensive than their fossil fuel counterparts, emphasizing the importance of maintaining affordability and mitigating the cost burdens of electric upgrades. These challenges further reinforce the delicate balance that must be maintained to address existing utility burdens to tenants while acknowledging the competing costs that owners face. Proposed solutions to support owners and tenants in managing and preparing for these changes include:

Pairing Weatherization with Electrification: Prior to undertaking a building electrification retrofit, it is critical to adequately implement energy efficiency measures such as envelope weatherization and on-site renewables, when appropriate, to effectively lower building energy loads and mitigate spikes in utility costs. Despite current cost disparities between electric and gas rates, the integration of efficiency and weatherization upgrades, such as air sealing or adding insulation to the building envelope, can significantly reduce energy loads and associated costs long term.
Solar Ownership: Property owners can play an active role in reducing tenant utility costs by installing on-site solar. With existing federal solar tax credits and other local incentives, such as New York State Energy Research & Development Authority’s (NYSERDA) NY-Sun Initiative Megawatt Block Program, building owners can leverage financial incentives to make solar installations more cost-effective, while helping tenants reduce utility payments.
Income-Based Utility Rates: Introducing an income-based utility rate, administered by utilities, can help offset additional cost burdens for low-income tenants. Successful regional initiatives, such as legislation recently passed in California that mandates utilities to craft a comprehensive plan for implementing an income-based fixed charge on household electric bills, could provide a blueprint for other localities across the United States. The strategic deployment of income-based utility rates could significantly reduce economic strain on lower-income customers and mitigate the risk of raising utility costs.
Utility Bill Assistance: Existing federal utility bill assistance programs, including the Low Income Home Energy Assistance Program (LIHEAP), and more localized energy assistance programs can address housing affordability challenges and reduce energy burdens following decarbonization upgrades.
Profit-Sharing Agreements: Developing profit-sharing agreements can ensure that both landlords and tenants share any profits generated from decarbonization upgrades. If a building is master metered, profit-sharing agreements can be used to ensure that tenants receive saving benefits in the form of reduced utility bills, stabilized or lower rent.
Community Ownership Models: Community ownership models empower community members to collectively own and manage their energy resources. By pooling resources, households can access reduced utility costs, promote sustainable community practices, and through economies of scale, take advantage of lower shared up-front costs.

Community Solar: Both property owners and tenants can invest in community solar projects to take advantage of solar ownership without the burden of installation and maintenance costs. Energy generated from community solar not only decreases energy expenses but can also help owners meet their city’s greenhouse gas reduction requirements. The US Department of Housing and Urban Development’s (HUD) recently updated guidance regarding community solar projects now provides even greater incentives to HUD Multifamily Assisted Housing programs that participate in community solar programs.
Community Microgrids: Microgrids are small-scale energy generation and distribution systems that are independent, or can be operated independently, from the larger grid to provide neighborhoods with access to a clean, reliable energy supply. With the support of private financing, community microgrids can provide a more resilient power system with stable and more affordable energy rates to help reduce energy burdens. A community microgrid project in Park Slope, Brooklyn, is just one successful example of how microgrids are being leveraged within communities to establish energy independence, support community reinvestment efforts, and build a more resilient future.

Tenant Health and Safety

Prioritizing tenant health and safety during and after renovations is of utmost importance. Since decarbonization upgrades carry the potential for increased cost burdens, the financial strain felt by tenants can leave them at risk of inadequate temperature control or utility shutoffs if housing costs become unaffordable. Policies that regulate these risks are critical to ensuring occupant well-being. Potential solutions to address this challenge include:

Temperature Control Ordinances: Ordinances in MSP and NYC require that building owners maintain minimum indoor air temperatures in the winter but lack guidelines for cooling in the summer. With summer temperatures rising and extreme heat events becoming more frequent, cooling needs are becoming a necessity. Mandated air conditioning or indoor temperature requirements, paired with cooling assistance programs, should be adopted, as various US cities, including Dallas and Phoenix, have already done.
Utility Shutoff Bans: Banning utility shutoffs, especially during extreme weather events, will protect tenant health and safety during dangerous climatic conditions. Today, many states, including Minnesota, have enacted a Cold Weather Rule, protecting customers from utility shutoffs between October and April. However, even across federally issued programs, prohibiting utility shutoff bans during summer months remains a gap. For example, LIHEAP provides funding assistance only for heating, which helps avoid shutoffs in the winter but often fails to prioritize cooling needs in the summer when temperatures can reach deadly highs. State and local governments can consider enacting utility shutoff bans during hot weather months and explore ways to extend these protections as climate change continues to create more irregular and unpredictable weather and temperature patterns.
On-Site Battery Storage: On-site battery storage systems serve a dual purpose by providing essential backup power and establishing resilient community hubs during extreme weather events. These systems contribute to enhanced disaster preparedness and foster a sense of community resilience by providing tenants and community members with functional shelter and basic needs during extreme weather events.

Pathways to Homeownership: NYC Co-op Case Study

Discussions about housing affordability are frequently centered on lowering costs for tenants, which although critical, can overlook strategies that enable tenants to build wealth through homeownership. In NYC, an affordable co-op model for homeownership has become a viable option for tenants to build both personal and generational wealth, as well as contribute to community well-being by stabilizing housing affordability. The Urban Homesteading Assistance Board (UHAB), a city-wide nonprofit housing and tenant advocacy group, has demonstrated the success of this model by supporting tenants on their pathway to homeownership in a Bronx apartment building.

The Background: In 2017, a new owner purchased 700 East 134th Street and alerted tenants their rents would go up significantly. Tenants organized and discovered that their building was rent stabilized, despite the owner’s claim that the building had been substantially rehabilitated under previous ownership and was therefore exempt from the building’s previous rent stabilization laws and guidelines. Recognizing the potential risk of displacement or eviction, the tenants, with support from housing advocacy groups, initiated a legal case to keep the building rent stabilized. The Housing Stability and Tenant Protection Act of 2019 supported the tenants’ case against deregulation, making it almost impossible for the owner to sell the building at a profit and providing an opportunity for the building to be bought at a more affordable price.

In 2019, the tenants started working with UHAB, leveraging their financing expertise to make an offer on the property and make this co-op model a reality. As UHAB established a viable financing structure, the tenants developed the strategy, vision, and case to ensure long-term stabilization of the property.

The Financing Structure: Due to the onset of the COVID-19 pandemic, more flexible and nontraditional funding sources were needed. The acquisition of the building, requiring $3 million in funding, was successfully secured through a flexible term, low-interest loan provided by a private, anonymous family foundation. The loan has a 1% interest rate that started accruing after one year. Once the building converts to a Housing Development Fund Corporation (HDFC) co-op, the loan will be refinanced through a HUD Federal Housing Authority (FHA) 223(f) multifamily loan participation with the New York State Department of Home and Community Renewal (HCR) Affordable Homeownership Opportunity Program, which will repay the acquisition loan and fund capital improvements such as a new roof, façade repairs, and some plumbing upgrades.

HDFC co-ops are legally designated as affordable housing for low- to moderate-income individuals. Within this structure, shareholders benefit from collective ownership of the building and individual rights to their respective unit, utilizing a participatory governance structure that prioritizes resident decision-making. Prior to HDFC co-op conversion, tenants pay stabilized rents ranging from $1,000 to $1,500, which become maintenance fees at co-op conversion to cover building operations and debt service on the FHA and HCR loans. Since the building uniformly comprised of studio apartments, maintenance fees will be distributed evenly across shareholders.

Currently, over 60% of the building’s units are occupied by tenants who were able to purchase their units for $2,500. The remaining units will be made available for income-qualified individuals to purchase at an affordable price through the New York housing lottery. To ensure long-term affordability, future sales must be made to income-qualified purchasers with the sales price capped at 80% of Area Median Income per New York State Affordable Homeownership Opportunity Program requirements. The building will be supported by a full Article XI tax exemption, set to be awarded by NYC Housing Preservation & Development (HPD) in conjunction with a regulatory agreement, which will keep the building affordable for at least 40 years.

Whereas this project used a combination of private and state sources, most new HDFC co-ops are created for buildings in city ownership or those that go through a third-party transfer program after foreclosure. Typically, an HPD mortgage program is paired with a higher interest rate private loan from a community development financial institution, as a participation loan agreement for building rehabilitation and permanent financing. HCR funding can allow more buildings to take advantage of similar financing opportunities.

Looking Forward: Homeownership is not the only aspiration these residents have for this building, as there are still steps to be taken toward achieving affordability and decarbonization of the building. The building is currently in the federal building weatherization assistance program, and with the utilization of IRA funds, is set to undergo a substantial retrofit, including new windows, in-unit heat pumps for heating and cooling, a hot-water heat pump for the building, and induction stoves. These renovations are made possible by the federal weatherization assistance program, which covers several million dollars in electrical upgrades necessary to accommodate the new equipment, leaving just $99,000 of the final cost for the co-op to cover.

While homeownership allows individuals to generate personal financial wealth, build intergenerational wealth, and establish long-term stability within their communities, keeping tenants in their homes is still an issue as the cost-of-living skyrockets in NYC. To further reduce the cost of living for residents, one of the primary objectives moving forward is to advance social service support, primarily in the form of securing voucher relief to ensure financial stability and avoid future displacement at this property.

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