When it comes to energy efficiency programs for renters, it’s worth taking a fresh look
The share of U.S. households living in rental homes has grown in recent years, and renters currently occupy 36% of the 122 million dwellings in the United States . Despite the fact that rental homes are 15% less energy-efficient than others, on average , they have proven hard to reach with utility energy efficiency programs.
In this blog, we share how Enervee’s Online Retail Eco Financing program is engaging renters and what this tells us about our understanding of the renter segment and how to scale efficiency improvements in rented dwellings.
Spoiler: There are some widely-held views about renters that may need updating.
Let’s begin by taking a look at the renter segment. The following data are derived primarily from two sources: 2020 census estimates  and a 2021 Smart Energy Consumer Collaborative (SECC) report on renters . Did you know that:
Let’s begin with an example of Enervee’s Online Retail Eco Financing program, specifically a marketplace serving gas utility customers in Southern California. People can shop for efficient appliances on an online marketplace and have the option of paying by either credit card or with an instant Eco Financing loan. With Eco Financing, a $1,000 appliance can be purchased with affordable monthly payments of under $25.
For this example, financing is available on four major domestic appliance categories (ranges, clothes washers, gas clothes dryers and dishwashers), with more to come. In Q3 2022, we’ll also be launching an all-electric Online Retail Eco Financing program featuring two dozen product categories.
The following chart shows that the share of California rental properties that have ranges (also known as market saturation) is roughly the same as for owner-occupied homes and approaches 100%, but renter-occupied units are less likely to have washers, gas dryers and dishwashers . In the case of laundry appliances, only about half as many rentals have in-unit washers and gas dryers.
Despite the commonly held belief that tenants generally don’t purchase large appliances that cost hundreds to thousands of dollars themselves, the following chart shows that 26% of Eco Financing loans have gone to renters, on average, which is identical to the aggregate share of these four appliances in the installed base in rentals in California .
Eco Financing is over-proportionately serving renters buying gas dryers and clothes washers. There is a $70 rebate available on gas dryers, but we cannot explain why renters are so disproportionately financing gas dryer and clothes washer purchases. Even though only 17% of rental properties in California have gas dryers (and the share is 47% for owners), over 80% of financed gas dryers are going to renters. Note that the data on ranges cannot be directly compared, because the statewide data point includes all cooking appliances (cooktops, stovetops and ranges), while Eco Financing is ranges only.
The fact that the Online Retail Eco Financing program is reaching renters roughly in proportion to the total share of these four appliances found in rented homes is a surprising, welcome and impressive result for an energy efficiency program that didn’t target the notoriously hard-to-reach renter segment.
These results suggest that some of the things that we’ve been assuming about the renter segment may need to be rethought. Here we highlight some of these myths:
Let’s begin with the fact that the case study data presented above disprove this assumption. In fact, renters are financing major appliance purchases with a cart value of just under $1,400 on average. One reason provided by the SECC report is that “In some markets, more affluent tenants don’t mind and might even try to find ways to improve energy efficiency in their own unit.” While that may contribute to the 15% of purchases made with credit cards, 70% of Eco Financed loans have gone to low- and moderate-income borrowers.
The data from our SoCal program in the following pie charts suggest that the availability of financing triples the rate of renter participation.
One hypothesis is that many renters may not be able to afford the up-front cost of buying new energy efficient appliances, while Eco Financing – which results in affordable monthly payments – empowers them to make efficient purchases they otherwise would not be able to.
The following chart shows that well over half of renters have household incomes below $50,000 per year, and 85% live on less than $100,000. Market research conducted by Enervee in California and New York, for example, revealed that 40% of low- and moderate-income consumers often buy used products.
Lack of access to other forms of capital can also be an explanation, such as having no credit history (typically younger consumers) or a credit score that is too low to obtain a credit card. Paying with a credit card may simply not be an option.
It has also been stated that renters are not participating in energy efficiency programs, because they are not authorized to invest in efficiency upgrades, and owners have no incentive to do so. But these barriers largely apply to making physical upgrades or structural improvements to residences.
What people too often forget is that the largest electric efficiency opportunity is not with such major upgrades, but rather with efficient appliances and other devices that simply plug in to an electric outlet (refer to my blog on plug loads for data to back up this statement). According to a market characterization study performed for Marin Clean Energy, 72% of single-family renters said they did have authority for appliance purchases, along with 26% of multi-family renters . Plug loads account for the majority of residential electricity consumption nationwide, so this is a large, untapped opportunity.
The SECC also made the point that financial incentives will be needed: “Since aging legacy units will likely remain the primary options for middle-income and low-income customers, programs that include subsidies, rebates, and free technology giveaways will be needed.” While this may be true for whole building approaches and certain customer segments, Online Retail Eco Financing program data show that financial incentives are not necessary to serve all renters, including low- and moderate income renters.
Finally, many believe that renters move too frequently to make it worth it for them to invest in energy efficiency. There are two things to consider when evaluating this blanket statement:
The fact that renters are participating in Eco Financing suggests that an affordable loan with a term of 5 years can meet the needs of many renters, including those who are low- and moderate income. A full 70% of borrowers in the SoCal program meet the State’s LMI definition.
Delivering financing through the online retail channel also overcomes a number of barriers that have been identified for renters :
Another interesting and relevant point from the SECC report when thinking about how to better serve the rental market with energy efficiency programs is that individuals own the vast majority of single-family rentals (76%) and small apartment buildings with 2-4 units (77%), not institutional investors, partnerships or limited liability companies, which dominate large multi-family .
This means that those making appliance replacement decisions for all but the largest rental properties are individual consumers like you and me. And 60% of renters live in these individual-owned properties. Influencing individual buying decisions is therefore critical with respect to both the owner-occupied and rental residential building segments.
And, unlike major building upgrades, which may require tenants to be relocated and can be hard for an individual landlord to justify without raising the rent, these individual building owners do not necessarily have to pay more for the most efficient plug loads. Even if they do, financing can help. Lack of cash flow to cover the upfront cost of the upgrade was cited as a barrier for smaller, for-profit property managers, who were receptive to the idea of financing options .
Several conclusions can be drawn from this discussion:
Renters are a diverse group and have different needs. While Eco Financing will not be right for all of them, it has proven effective at driving renter purchases of energy efficient products without incentives, including low-income renters.
 Census 2020 ACS 5-Year Estimates
 ACEEE, Energy Equity for Renters
 Smart Energy Consumer Collaborative, Understanding the Needs and Wants of Renters
 Harvard Joint Center for Housing Studies, America’s Rental Housing 2020
 California Energy Commission, 2019 California Residential Appliance Saturation Study
 Apex Analytics, MCE Residential Market Assessment: Final Report
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