Finding Energy Saving Strategies That Make Economic Sense

There are many strategies – and price points – that will reduce energy consumption in a building, and Stuart Halper, vice president of Impact Management, emphasizes an economically sensible approach. For many, there is a mismatch between New York City’s regulations and a building’s financial capabilities. In this interview conducted by Habitat’s Emily Myers, Halper reviews the steps that the majority of his clients are taking.

How To Run Your Building: For Co-ops and Condos

Transcript

Emily Myers: Welcome to How to Run Your Building, a conversation with New York's leading property managers. I'm Emily Myers with Habitat Magazine and my guest today is Stuart Halper, vice president and co-owner of Impact Real Estate Management. Co-ops and condos, many with centrally located boilers and no central air conditioning, are looking for practical strategies to improve energy efficiency. The focus is on lowering emissions to comply with Local Law 97 and saving on energy costs. But the decision making that goes into implementing these initiatives, importantly, needs to be done within a building's financial constraints.

Stuart, how are you supporting the buildings in your portfolio with this process? 

Stuart Halper: We're moving forward slowly. The landscape is evolving. The co-ops, condominiums and HOAs are currently under massive financial pressure dealing with items other than this. So when it comes to this facet, we're taking a very slow approach.

Now, what really is driving everything , as you said , is the economics and what makes sense financially in terms of what the properties can afford to do and what they need to. Clearly all of the low hanging fruit, the things that make economic sense and are required by law, we're certainly doing.

When we first started approaching this issue, the first thing was the banning of number six heating oil in the buildings. So we did an analysis and basically at that point you had two choices. One was to convert to burning number four and number two, and the other alternative was going to a burn of natural gas.

We did the analysis most of the time, I'd say 90% of the time, the analysis made sense economically to convert to burning natural gas. To this day, burning natural gas is much less expensive. The cost of converting the equipment, the payback period was between one year and maybe three years, most. All have achieved economic benefit by this move, the ones that converted to four or number two oil, which number four is gonna be phased out in a few years. Those situations, we set ourselves up so that the burners when gases available, 'cause that was the only thing that really prevented us from converting to gas, where we didn't have gas availability. We simply set it up so that when the gas does become available, we can convert to that.

So that's the type of approach that we're trying to take as we move forward into this landscape now. 

Emily Myers: Okay. You mentioned low hanging fruit, and by that I think you mean LED lights, perhaps heat and light sensors. What you're saying is that perhaps one of the most popular steps older buildings can take to mitigate Local Law 97 penalties and save energy is moving away from oil to gas. And of course with number four fuel oil being phased out, it's becoming increasingly urgent to do that. 

Stuart Halper: Correct. Virtually all of our properties have converted to LED lighting, and that was a slow process when we first started approaching this even before the government requirements 15 years ago, these bulbs were prohibitively expensive. The economies of this new technology as they became mass produced and also the phase out, you can't buy incandescent bulbs for the most part today, except for a few exceptions, where they don't make the LED lights. Then simply the bulbs became incredibly inexpensive. So it made complete sense even before government regulation to convert. 

Everything is driven by economics. It's the mandates by the government and how fast they ultimately move will clearly be born by how fast it could be implemented based upon a financial basis. The city is gonna have a major problem if the mandates ultimately of what they want to do in the long run, which is essentially to phase out all fossil fuel use by these buildings and to convert to 100% electric.

That mandate will bankrupt buildings and will destroy the housing stock. An idea that was first promoted to save energy and to save the environment was congestion pricing. This just happened and the economics, the political pressure, less than 30 days till it was to be implemented and the spending of $500 million by the MTA, it's on hold now indefinitely.

Emily Myers: And that was a decision that left everyone reeling.

Stuart Halper: Right. Now in the same vein, I heard a report this morning about the saturation of electric vehicles. That's plateaued at 7%. Hybrids are 9%, approximately 63% are still gas powered vehicles, and there are just natural obstacles for the implementation of what government wants,

not its constituency and not affordable and also not practical. To convert a building to a complete electricity. Where's all the electric coming from? The use of electric vehicles. This report basically stated that the problem is you don't have the structure being built out for charging stations. We manage 110 properties. Not one of our properties has had an installation for electric vehicles. 

Emily Myers: What you're saying is there's a mismatch between the regulations and the ability of buildings to meet these requirements. Might I just ask you about dual fuel, because that's also an option for buildings with oil fired boilers.

Is that a popular choice? 

Stuart Halper: Without a doubt. Most of the time, I'd say probably 60 to 70% of the time you are going to dual fuel. But what dual fuel really means is that you are burning gas 95% of the time, and then in the wintertime when the temperature goes to a low amount, generally below 20 degrees for a number of days, we get a mandate to switch to burning oil. Yes, we have to maintain both, but in the end, you're really not burning much oil at all, and that's simply for a capacity issue. We don't have enough. It's great to change to gas. It was great for the environment, great for the health of individuals, a cleaner burn and less expensive.

But the problem is we can't get enough natural gas piped down to New York City, which is a whole nother political issue of bringing the gas in and the political infrastructure blocking it. It was even a moratorium for a while where the gas companies were not allowing any more gas conversions because of the government's refusal to allow the expansion of the gas delivery pipelines.

On one hand they want, but they don't give and it becomes an impossibility. So that's why we've taken a very slow approach. Government mandates are great, but essentially what they are, and we were at a symposium about three weeks ago, once given by the city and the energy companies, and we were the last ones to speak because we were brought in for the reality check of what's really happening. And in the end, yeah, it's great. I'd love to see solar panels on every building in New York City. It will make sense at a certain point. It doesn't now because the economics are not there. You will see it, it'll come, but it has to make sense. 

Emily Myers: Okay. Changing out mechanical systems is an obvious step, and you've talked about some of the challenges there.

But in terms of energy efficiency, there are other strategies that include envelope improvements, and by that I mean adding insulation, upgrading windows. Are your buildings seeing benefits and perhaps significantly a return on investment from these kinds of improvements? 

Stuart Halper: Some. Some not as great as the lower hanging fruit, but that's part of it at this point. There's a clamor for this anyway, and it now comes in conjunction. A lot of the older buildings, there's a disparity in the heating system itself, where traditionally the higher apartments are always hotter than the lower apartments, which always want more heat. So balancing systems with thermostats and gauges in the different apartments to balance it out does help that.

And there is efficiency in the way things are heated as well. The other thing that we've done, which if we have the room and the capability, is installing a separate, smaller hot water system. Many buildings that were built between the twenties and. I'd even say into the eighties, used one boiler for both heat and hot water.

Now what we're able to do is install a separate hot water system and be able to shut down the main boilers and run a much more efficient, smaller, hot water heating system in the warmer months. That's proven to be a very big savings. We try to promote that as much as possible given the financial constraints and in the priorities of what buildings are facing.

Emily Myers: So that's eliminating summer boiler use. Yeah. That's very practical. Correct. How do you then help co-ops and condos manage the financial constraints while improving their energy efficiency? 

Stuart Halper: It's always the balance between what they're paying now, what's expected to increase that we have no control over, and those are the biggest economic drivers, real estate taxes and insurance. And fuel as well too, whatever you are burning. Ultimately those three items are your biggest costs that you just don't have control over. And it's a balancing act. And the last couple years, insurance has gone up dramatically.

Taxes are back again very high. The regular cost of inflation. We all know where we've been and very quietly. Interestingly enough, we've just this last couple weeks breaking the news to our boards that the water rates are going up by 8.5%, very quietly. So compounding that into everything else of what's on the wishlist, that's how we proceed: very slowly and take care of the priorities.

Emily Myers: You were talking about water rates and I just wanted to point out,, you mentioned insurance and taxes, but of course now Local Law 97 penalties are in the mix. 

Stuart Halper: Yes. Right now it's very psychological because of the gradings that the buildings are getting.

Nobody really wants to advertise a failure or a D rating. And yes, it's around the corner, but in the end, will that fly? And now there's been a crack in the model, the way congestion pricing went away. It's great to wanna have another financial resource center, but if the buildings can't afford it, and the boards and the people can't and won't raise their maintenance, and they'll start to go into the hole.

Something's gonna give. Look, we have some financially distressed buildings that haven't paid their water bill in years and owe four, $500,000 in water. You have properties, once again, condominiums and co-ops not paying their real estate taxes. I've been around long enough to understand what happens when you do that.

We go back to the 1970s where the landlords were turning, taking the keys . They're not paying the taxes and they handed the buildings over to the, to the city. That's where your HDFC program came from, all those abandoned buildings. And today's politicos need to understand that you cannot destroy the housing by implementing these mandates that are not funded.

The money's gotta come from somewhere. 

Emily Myers: Okay. And touching on this financial aspect, can you then explain the role of incentive programs? 'Cause they are out there. 

Stuart Halper: The biggest one actually is NYSERDA and through Con Ed and through if you can, I forget the gas company's name.

Emily Myers: National Grid 

Stuart Halper: Nat Grid. There are incentive programs out there and they run in cycles, and we work with the different companies that are out there doing the conversions, and we apply for everything that is possible. It helps, but it's a very small amount. It's minimal. It's still not addressing problem. 

Emily Myers: So what steps do you then take to engage and educate the board and residents about the importance and benefits of these projects? Because that's a big part of it. 

Stuart Halper: It's all about education. The buildings that we've managed for years, on a yearly basis, will have this discussion. The real place where we have the discussions much more are when we're interviewing with buildings , they're looking for new management and they come to us and say, how can we turn around our finances? And we find especially a lot of the HDFCs that are still burning oil.

And that's the biggest opportunity, there, is that conversion to gas. And even today, if a building came to me and they were burning oil and we could get the gas, we'd work out the gas delivery company, the supply companies. There are a lot of incentives where they'll finance the project for you over X amount of time, and hopefully within the amount of the payback period, and we're able to achieve this. That's probably the biggest thing out there that could really turn around the building's finances. Getting off of oil is still a very big, big thing out there that really can turn around the finances of a building. 

Emily Myers: So is that one of your biggest takeaways for boards then, to encourage them to switch from oil to gas, which is obviously cleaner and less expensive?

Stuart Halper: Absolutely. We're a major proponent of that. It has become the lowest hanging fruit of them all.

Emily Myers: Is there anything else you want to share? 

Stuart Halper: It's just a constant process. I'm hopeful that the city and the state will take its foot off the gas as they realize the economic realities of the real world. The congestion pricing issue is the first step in facing reality.

Emily Myers: And so you are actually quite, in a sense, skeptical that the Local Law 97 requirements can be met and that they will be enforced. Is that what I'm hearing? 

Stuart Halper: I believe that there will be amendments to it and it will change. I'm a major believer in that and that's why I'd rather move slowly, rather than more expeditiously at this point in time. 

Emily Myers: And so just spell out for me then, the benefits of moving slowly. 

Stuart Halper: Moving slowly means only doing the things that make economic sense and that we could afford to do, and that's the balance that we need to achieve, to, in our opinion, be a healthy property. 

Emily Myers: And in terms of financing, the takeaway there is of course using assessments when you can, refinancing, using government incentives, with an emphasis on these payback periods. 

Stuart Halper: Correct. Listen, it's become harder now in the last three, four years with the rise of interest rates and as much as especially the politicians speak about rates coming down, we haven't seen one sense or notice that things are gonna drop and this seems to be the new reality and we're here to deal with the realities. 

Emily Myers: Great. Stuart, thank you so much. Stuart Halper, vice president and co-owner of Impact Real Estate Management. Great to chat. 

Stuart Halper: Same. Pleasure as always.