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AE report: Energy rebates do not lead to rent hikes

Thursday, May 16, 2013 by Michael Kanin

Members of the City Council are collecting data associated with an Austin Energy program that offers energy efficiency rebates to multi-family apartment owners in order to determine whether they should mandate a rent freeze as a condition of receiving those rebates.


In a May 7 memo, Austin Energy general manager Larry Weis tells Council members that the freeze could have a negative effect on the community it was designed to aid. “A review suggests that attaching a conditional rent-freeze to the multifamily program could have unintended negative consequences on the customers this program seeks to benefit,” Weis argues. “Due to the relatively larger energy (cost) burden for many living in rental communities, reducing energy bills has a larger and more positive impact on disposable household income.”


Weis’ memo was prompted by a December 2012 Council resolution that called on City Manager Marc Ott to explore the possibility of conditioning participation in Austin Energy’s energy efficiency rebate program on a potential freeze in rent increases. Affordability advocates pressed for the moratorium.


“The problem is this is money that is being provided by the community (for the rebates). And in return for this investment, I think that we should be assured that we will receive certain benefits for the community as a result of making that investment,” Texas ROSE Executive Director Carol Biedrzycki told Council members at the time. “So I think it’s important to look at what do we want to require from landlords who receive big incentives for energy efficiency, and I think that a moratorium on rent increases is a very good option to pursue here, number one because it’s needed.”


For his part, Council Member Bill Spelman worried about the negative impact of a rent freeze. “If we eliminate the capacity to make that money back, to close the loop, then the tenants get the free ride of lower energy bills and the landlords would have to bear the whole brunt of the costs, and as a result apartment owners aren’t going to do it,” he posited.


Mayor Lee Leffingwell agreed. “I think it’s going to be detrimental to the goals that we’re trying to achieve which are obviously energy efficiency,” he said at the time.


Weis’ memo appears to back that theory. “According to the Austin Apartment Association, there is no evidence that rent increases are the result of energy efficiency program participation,” he wrote. “Rent increases are based more on market fluctuations and less on internal upgrades to individual complexes. Additionally, rent increases are not uniform, but are based on tenant occupancy and length of lease.”


Weis later notes, “Based on (a) sample…rents are higher at apartments with no energy efficiency rebate participation.”

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