Carbon Neutral Property Management. Is it possible?

• We look at the likelihood of achieving a net-zero carbon industry by 2050

• The government needs to help landlords and we have ideas on how this could work

‘Ok boomer!’ How big is the carbon footprint that the residential rental sector in New Zealand leaves behind and more importantly, how do we reduce it? I am not attempting to offend an entire generation of landlords here, but the comments from Millennial Green MP Chloe Swarbrick after she was heckled by an MP during her speech to Parliament earlier this month have certainly grabbed attention, so I thought I’d try the same approach.

Behind the rhetoric, the disdain and all the media scrutiny that the now-infamous comments received, the attention deflected away from a significant bill that was passed in early November that will have a major impact on every business in New Zealand. This includes the Property Management industry and we will have a monumental challenge in front of us if we are to achieve its target. A net-zero carbon footprint for our industry.

On the 13th of November, Climate Change Response (Zero-Carbon) Amendment Bill was passed. This means that by the year 2050, New Zealand will have a net-zero carbon footprint. What does this mean for renting and Property Management in New Zealand? By my calculation, I will be 78 years old so hopefully, I will still be here to witness it. I certainly expect my kids and future grandkids to be around to see it happen.

Ever since Jacinda Ardern became Prime Minister, I have argued that many of the changes her Government are making around the residential rental sector are motivated partly by reducing the carbon footprint of rental properties. What was it she said in the lead up to the last election? ‘Climate change is my generation’s nuclear-free moment’. 

Who can blame her, it is an easy target? The condition of housing in the rental sector is notoriously poor and trying to keep your rental home warm in winter can be a costly exercise. The bigger the cost, the larger the carbon footprint. For Labour, targeting landlords is easy as many of them will not be Labour voters and it plays into the hands of their support base as well as coalition partners the Green Party. Not only is it costly to run a typical rental property, but the carbon footprint will be substantial. Probably a lot more than your typical owner-occupied property. What percentage of rental properties will have double glazing or have solar panels? I would be surprised if it was more than 1%.

Landlords have had a lot to grumble about recently, and many feel with some justification, especially after the latest set of proposed reforms announced by Associate Housing Minister, Kris Fafooi early this month. All of a sudden, getting rid of bad tenants just got a whole lot harder. However, as an industry, we have to accept the fact that the carbon footprint rental properties leave behind needs to be reduced and we need to start having serious conversations about how we can do this. For all of the apparent landlord bashing that many claims this Government has been guilty of, few can complain about that the Healthy Homes standards we are currently working towards. 

The Healthy Homes standards, for all of its faults around implementation and timeframe, is a step in the right direction towards building a more sustainable and healthier industry. Better insulated homes with less costly heating appliances will certainly help, but what more can be done?

One company leads by example

One company is certainly trying to make a difference. In September at the LPMA Conference held in Auckland, Natalie Wendell, the General Manager of Wendell Property Management spoke at length about their commitment to build a more sustainable and environmentally friendly industry. Her husband and head of LPMA New Zealand, Ashley Giles, also shared his insights into this in a recent interview we did with him before the conference. They are clearly committed to making a difference, Wendell Property Management makes a bold statement on their website with the aim of being completely carbon neutral by 2020. Not much time to get that done! However, it is refreshing to see a company within our industry making such a commitment. We all have to start somewhere.

So what does a carbon-neutral Property Management business look like? It can clearly happen, but who pays to make the properties more environmentally friendly and what else is involved to make it possible?

Firstly, you can look at your own footprint as an office and a company. The paperless office is a bit of a buzzword and I have yet to walk into an office without seeing lots of paper on desks but realistically, there is no reason why anything really needs to be printed. Digital signatures are becoming more and more common and widely accepted within the industry. There is no reason why Tenancy Agreements, Bond forms and Management Authorities need to be printed. Surely even the Tenancy Tribunal will move into the 21st century and move away from printing ream after ream of photographs and turning up with three printed copies of evidence.

Other things that can be done in your office are things such as installing solar panels and LED lights. This will also go a long way to reducing your footprint. Change the company car to EV’s rather than drive around in petrol vehicles is also a great way to reduce emissions. Wendell has already done this which is a great statement to make. 

Maybe one day, we will see Property Managers rushing to inspections and viewings on E-Scooters!

Natalie Wendell’s tips on a more sustainable industry

• Provide tools so people can assess their own usage. Click on FutureFit to assess your carbon footprint.
• Moving your Property Managers to EV’s has greater savings on fuel consumption.
• When renovating, look at restrictions about the materials that you use and look for more sustainable and energy-efficient appliances
• Encourage longer tenancies as they are better all round for everyone. Less movement means less carbon footprint
• Waste management in rental properties. Ideas such as worm farms are a fun way to educate tenants and reduce landfill

What about the properties?

All of these small commitments to reducing your own carbon footprint will help, but the real issue is with the properties that we manage. It has been hard enough trying to get all of our landlords to invest in insulating their properties and we are going to spend the next two years battling with some landlords around the implementation of healthy homes standards. Can you imagine the response when a millennial Property Manager calls the baby-boomer landlord to inform them that their student rental in Dunedin leaves too big a carbon footprint and they had to reduce it? I suspect the response would be less than diplomatic!

With over 600,000 rental properties accommodating over one-third of the population, trying to make all these properties carbon neutral will take a monumental effort and it will also need a collective buy-in. Try getting every baby-boomer landlord to start investing in solar panels and double glazing for their rental properties. See how far you get before you start seeing them either sell up or move to another company. Getting a collective buy-in, will be nigh on impossible, especially whilst the majority of rental property is owned by the Boomers. This is why we need to start discussing how we do this now. All the issues that this Government has faced in terms of dealing with Kiwibuld and the housing crisis are not going to go away anytime soon as a lack of builders, expensive materials, costly and time consuming resource consents, as well as the current condition of the majority of rental stock are all issues that we will have to contend with for decades to come.

Millennial landlords will probably be more receptive to change, after all, it is their generation that is going to have to live with the effects of global warming. The reality is however, we simply cannot wait till the Boomers depart and leave it to the next generation of landlords. So what can be done?

Doing our research and talking with Wendell, the typical property in New Zealand will use approximately 8,000 to 10,000 KwH per year. Getting this down to zero is not going to happen in the short term but as an industry, we should be looking at ways we can reduce the usage. As it is highly unlikely that landlords will start retrofitting houses with double glazing, LED lights, solar panels and wind turbines, what can be done to help convince them that doing some or all of this is not only a good idea, but there are incentives to get them to do so?

Subsidise landlords to invest in renewable energy

As Christmas approaches, I cannot think too many landlords will be wanting to send Jacinda Ardern a Christmas Card. Many think that the Government is trying to force landlords out of the market. However, we need good landlords more than ever as what the last two years have demonstrated is that if you target landlords with extra compliance and cost, all you do is drive up rents and reduce the stock. This strategy has simply failed as twice as many families are now seeking emergency accommodation compared to when National was in power. Rents in some regions have gone up over 20% in two years and this is typically for a substandard product. Hammering landlords simply does not work. 

One idea we believe warrants exploring is subsidising landlords who invest in making housing more energy efficient. If landlords invest in solar panelling or double glazing, the Government could be able to offer them interest-free loans to get the work done. The landlord has to commit to renting the property for a minimum period of say seven to ten years to get the interest free loan and if they sell the property or move into it during that period, then they are charged interest on the loan. The benefits of this scheme are that landlords are committing long term to rent out their properties which give added security to the tenants. The other obvious benefits are that the property will be cheaper to run meaning that tenants will have the extra money in their pocket whilst the carbon footprint of the property is reduced.

As landlords can no longer offset losses on their rental property after the Government changes rules on negative gearing, this is an added sweetener and the savings the Government make on more tax will simply be reinvested in the interest-free loans. The property will increase in capital value whilst tenants will be healthier which means there will be further savings in medical bills and less of a strain on the system.

Focus on smart home devices to track consumption

One thing that the Healthy Homes standards have led to is the increase in companies conducting inspections in regards to what is required to meet the standards. One such company we had the pleasure of meeting was the Sustainability Trust in Wellington. This is a not for profit organisation committed to improving the quality of housing by making them more efficient. They are especially focused on the rental sector and their new tool for reporting on Healthy Homes is excellent. 

We will also see an increase in smart devices such as Tether which measures temperature, ambient light and Co2 emissions. Tapi with its artificial intelligence will make reporting and fixing maintenance issues more cost-effective and quicker. In short, it won’t be long before houses can talk and transmit messages to their Property Manager when there is an issue. Tenants will have devices that tell them how much power they are using in dollar value in real-time. All properties will be marketed with energy-efficient star ratings on them and if they fall below a certain star rating, then the landlord will be in breach of Landlord’s Responsibilities. All of this will help see houses run more efficiently leading to a reduction in the Carbon footprint.

Plant trees to offset emissions

This all sounds very exciting, but reducing every rental property in New Zealand to zero emissions is not going to happen soon. I struggle to see how it can happen by 2050 so what else can we do? 

Apparently, 10,000 KwH equates to approximately 7 metric tonnes of Carbon Dioxide emissions. With approximately 6 trees required per metric ton, that means the typical rental property will need about 40 trees to absorb the Co2 emissions. When I interviewed Ashley Giles and asked him what can we do to be Carbon neutral, I was half-joking when I suggested we just plant trees for every property we manage. I could tell by his response however that he was deadly serious when he said that this is exactly what we should be doing. 

His wife, Natalie in her LPMA presentation also made the suggestion that as an industry, wouldn’t it be a great initiative if we pulled resources together and started planting trees for every house we managed. A quick estimate would mean that we would have to plant about 10,000,000 trees to offset the Co2 emissions of 250,000 premises that the industry manages in New Zealand.

If however, we were able to work smarter and gradually reduce emission from say 10,000 KwH per annum down to say, 5,000 KwH within the next decade, then down to 2000 KwH by 2040, then we could be on our way to having a zero net gain in emissions through exciting initiatives such as tree planting to balance the effect of running a rental property. 

By this time, Millenials will be the landlords and they will understand the importance of providing an environmentally sustainable property to their consumers. Future tenants will simply demand it and the landlord will have a legal responsibility to provide it. Maybe, just maybe, Wendell are onto something. Every movement, every idea has to start somewhere and I firmly believe that to achieve great things, sitting in your comfort zone is not going to get you there. Many landlords currently will not buy into this, but when Greta Thunberg’s generation become landlords and enter the workforce, they certainly will.

Well done Wendell for starting the discussion, I’ll plant a tree or two to that!