What Multifamily Operators Need To Know About Building Energy Performance Standards

What are Building Energy Performance Standards?

In January 2022, the Biden Administration launched the National Building Performance Standards Coalition, with a timeline of implementing these standards and policies by Earth Day 2024. These regulations require commercial and multifamily property owners to measure and report a building or property’s environmental impact, typically measured by greenhouse gas (GHG) emissions or energy use intensity (EUI), with the goal of reducing that impact by a certain percentage. These Building Energy Performance Standards (BEPS) regulations are a continuation of benchmarking compliance laws, which typically precede BEPS and are the mechanism for local governments to collect energy data for analysis and establishment of carbon emission reduction goals.

“Benchmarking compliance is a rolling mandate that obliges property owners to file whole building energy use, and in some cases water use, data with Energy Star Portfolio Manager (ESPM) for the entire fiscal year so that a property owner can continue building the EUI trend of a specific site,” Dimitris Kapsis, VP of Sustainability & Energy Management at RealPage®, explains. “Then, BEPS regulations come in after that to set targets for energy usage reduction, and in turn greenhouse gas emissions reduction, driven by viable energy conservation projects and electrification.” Although relatively new, BEPS-based regulations are building momentum across the country, with eight states and Washington, D.C., already enacting policies across twelve jurisdictions. Of these 12 locales, only four have currently published actual reduction targets, deadlines and associated fines for noncompliance.

The jurisdictions that have BEPS policies in place, their initial building reporting timing and the related compliance deadlines are listed below. The three cities that have published targets with near-term, compliance-by dates are in red:

• California: Chula Vista (May 2023 | March 2026) — action recommended
• Colorado: Statewide (June 2024)
• Colorado: Denver (2024, 2025, 2027, 2030) — immediate action recommended
• Massachusetts: Boston (2025, 2030)
• Massachusetts: Cambridge (2035, 2050)
• Maryland: Statewide (2030, 2035, 2040)
• Missouri: St. Louis (2024, 2027) — action recommended
• New York: New York (2024, 2030, 2035, 2040, 2050) — action recommended
• Oregon: Statewide (June 2028, June 2029, June 2030)
• Washington: Statewide (June 2026, June 2027, June 2028)
• Washington: Seattle (June 2026, June 2027, June 2028)
• Washington, D.C. (2025, 2027, 2030)

The other cities with BEPS policies in place that have not yet published compliance targets will be in the future. The near future.

Measurements, penalties and impact — oh my!

BEPS policies are designed to improve the energy efficiency of, and reduce greenhouse gas emissions from, existing government, commercial and multifamily buildings of 20,000 square feet, or larger. They do this by mandating these buildings to meet an energy use (energy metrics) or carbon emissions (GHG metrics, either total or by square feet) performance target by a set deadline. The most common metric used to benchmark a building’s energy use is the EUI usually measured in kBTU (1,000 BTU) per Gross Square Foot. BEPS regulations are impacting property owners and the multifamily landscape, requiring capital investments, operation changes and system upgrades that may not have been implemented before.

“Multifamily operators will have to start thinking about conservation projects and start putting funds aside for capital improvements, especially for older properties that might require replacement of existing Heating, Ventilating and Air Conditioning (HVAC) equipment. Lighting retrofits and other simpler projects, such as plumbing fixture retrofits and thermostat replacements are low hanging fruit and should be considered first. I would say a sizable percentage of owners have already done some of these projects in the past few years,” says Kapsis. “But to meet some of the BEPS related targets that these cities and, eventually, states are putting in place for future reduction will require a step further than just simple projects, the replacement of HVAC systems, domestic hot water systems, insulation and, possibly, the installation of solar panels might be warranted.”

However, it's likely that owners and operators won’t be the only affected parties.

 “I think it's going to change the investment process,” says Danny Ward, VP of Sustainability, at RealPage. “If somebody is buying in a market that has a known benchmarking compliance law that has not published BEPS policies and targets, the acquisition team is going to understand, ‘I need to look at something, right?’; they’re going to want to see a building’s history with this. I think that will change the acquisition process a bit. It’s going to affect the price of a property that hasn’t made any changes.”

The markets that have published BEPS targets have penalties for noncompliance, and those who have yet to publish their targets have them on the way. The penalties for noncompliance with these policies vary depending on the specific regulations published by those markets and most are based on annual consumption figures. In some cases, it may seem like it’s cheaper to just pay the fine and not make the necessary changes, but these fines are cumulative and are not going to be one-offs.

“There are going to be annual fines if you're not meeting certain standards, and, eventually, you might not even be able to operate in that particular jurisdiction without making some necessary improvements, especially if you want to stay competitive in that market. This is not something that is going to go away,” Kapsis adds.

 However, most penalties are intended to encourage building decarbonization vs. penalizing building owners for failing to meet them.

What to do, when to do it and why do it now

For property owners across the country, it is important to not delay taking action. While only a handful of states currently have policies instated, and even fewer have targets published, these policies and regulations are going to continue to grow across the country.

“We expect these policies to expand across the country,” Kapsis says. “This is not something that is going to be related to just Chula Vista, Denver or New York, where they have policies and targets already in place. Property owners are going to have to take this seriously, and they are going to have to follow certain steps to meet the standards.”

 The steps needed to figure out where a building stands and how to bring it to compliance (or maintain that compliance) can be time-consuming and costly, but they are important, and there is no time like the present to get started for properties in markets with published targets — i.e., Chula Vista, Denver, St. Louis and New York — policies are in motion, and improvements should be underway. Conducting an ASHRAE audit (at least a Level II but a Level III is best for older properties with complex systems) is recommended to identify the projects you need to do to reduce your energy and carbon emissions so your property will meet BEPS targets once published. Depending on the age and condition of your property, substantial energy retrofits may be required. Conducting an audit sooner rather than later will help you better budget and plan for potential regulations. After an audit has been conducted and reviewed, a CapEx budget can be created to prepare for the necessary steps needed to reach compliance. Establishing energy benchmarks and filing that data in ESPM will be paramount to success, as these benchmarks are the baseline for which cities and states will judge compliance going forward. 

How can RealPage help?

With a watchful eye on the landscape and ever-evolving policies, RealPage is ready to evolve with them. Today, RealPage offers benchmark compliance services, ESPM data loading services, data verification services and ASHRAE energy audit services. While RealPage does not conduct all ASHRAE audits in-house, we can connect customers with trusted partners to conduct the audit for them. For customers in markets with published targets, we have a brand-new BEPS target tracking tool coming soon that leverages customers’ data from ESPM and measures that data against their BEPS targets. For current benchmarking compliance customers in any market, the necessary data is already captured and is ready to be leveraged.

Earth Day 2024 is just around the corner! The sooner property owners can start acting, the more successful they will be and RealPage is here to help every step of the way. For more information, we recommend checking out our BEPS landing page and our 2024 Energy Benchmarking Webcast. Current customers can reach out to their account reps to discuss services, and future customers can contact us for more information here.