How Energy as a Service Improves Long-Term Performance of Multifamily Housing

Key takeaways
●You can convert unpredictable capital projects to predictable operating costs and save on your budget.
●Better control of comfort, hot water, and air quality keep residents longer and cures out complaints.
●Data from your systems help you improve your net operating income and long term asset value.
●The right partner lets you modernize without big upfront checks, or having to constantly put out fires.

What Energy Models Mean to Multifamily Owners
If you’re the manager or owner of a multifamily building, you’re likely trapped between outdated systems and increasing expectations. You need reliability but capital is tight. You want energy efficiency, but you have your team already stretched out.

In a service style design, a third party designs, installs and owns major equipment, while another third party operates the equipment. You pay a predictable monthly fee based on performance and not just parts and labor.
Consider a 250 unit property that has an old boiler plant. Instead of paying for a complete replacement, the provider installs the new boilers, controls and monitoring and then takes responsibility for uptime and energy savings. You are preoccupied with residence and leasing, whereas they are preoccupied with technical performance.
Sounds more like the way you really want to run your portfolio?

The Energy Challenge of Today in Multifamily Housing
Multifamily energy costs have risen at a faster rate than general inflation in many markets. The U.S. EIA reported the price of commercial electricity rising about 15 percent from 2020 to 2023, and many owners felt more. When your utility bill increases in the middle of the year, your budget and NOI suffers.

On top of that, a lot of multifamily stock was built before the year 2000. I walked through a property that was 30 years old where in July a chiller broke down. Ownership had to raid reserves and still lose the population who were tired of portable units.
Residents expect quiet hvac, stable Wi Fi and maybe EV charging. Cities such as New York and Boston are now linking penalties to low energy performance. So you have the squeeze from residents, regulators and lenders simultaneously.

How Service Models Affect the Financial Picture
From the finance perspective, the big change is from sporadic capital cost to scheduled operating cost. Instead of waiting for a boiler to die and writing a six figure check you sign a long term service agreement including design, installation and regular optimization.
Lower energy consumption and less emergency repairs convey the high NOI. Studies from groups like Urban Land Institute have shown improved valuation and even cap rates for multifamily assets for energy efficiency and disclosure scores.

The Urban Land Institute’s Greenprint Performance Report outlines how portfolios with a systematic approach to green infrastructure and enhanced energy efficiency, along with indicator performance, have shown a higher net operating income and asset value over time. Referencing findings from the Greenprint Performance Report can help make the case for the connection between service-based energy upfits and long-term financial performance for multifamily owners.
Some contracts share risk. For example, a provider could guarantee 20 percent energy saving with a baseline. If they get it wrong they eat the difference. That structure can help property owners make cases for projects that can never pass the hurdle rate as a simple one time upgrade.

Operational Benefits (Reliability, Comfort, and Control)
From an operations seat, the first thing you notice is not as many 2 a.m. calls. Remote monitoring detects failing pumps, roving setpoints or short cycling hvac before residents feel it. I saw one site where a failing condenser fan was caught early and avoided what would have been a complete weekend outage.

Comfort improves when controls are appropriate to the manner in which people live. Zoning, smart thermostats and improved ventilation help eliminate hot and cold spots and noise. Your team spends less time chasing down room by room complaints and more time on preventive work.
You also get data. Dashboards illustrate trends across buildings, meaning a regional manager can identify which locations are falling off course. You can adjust schedules in common areas, stairwells and garages to conserve energy without compromising safety or comfort.

Resident Experience and Retention Increases
Most inhabitants will not be grateful to you for a new boiler, but they notice if showers are always hot and there is no freezing in the hallway. That stability matters. In one community I worked with, complaint tickets concerning temperature were reduced by approximately 40 percent following a central plant project. Renewal rates ticked up the cycle that followed.
Submetering and clear utility bills help too. When residents see their own usage, they see bills as fair. One property where the disputes and faster payment of the bills were reduced was the occupancy of added unit level meters. People like transparency.
Amenities that are associated with comfort and convenience continue to be a driving force in leasing. Smart thermostats, EV charging and quiet and well ventilated gyms appear in reviews. Ask yourself: what utilities do you have now, what amenities are asking you to move the needle on retention, and not just build marketing photos?

Sustainability, Compliance and ESG Results
Service based projects often aim at both saving energy and emissions. That could be things like condensing boilers and variable speed drives and better controls, and it could sometimes include solar or storage. The result is reduced energy use per square foot and reduced carbon footprints.
Many cities now include benchmarking, often using similar tools to Energy Star Portfolio Manager. Failing to keep pace can result in fines or mandatory retrofit schedules. A partner who deals with the measurement, reporting, and planning can keep you ahead of those rules rather than scramble later.
Investors and lenders are also asking more questions related to climate risk. When you can demonstrate an obvious course of action, with checked data and overseeing third parties, your narrative looks stronger in credit committees and investment memos.

Where Service Models Fit in Your Long Term Strategy
Not all multifamily properties require full service contracts. I think the best candidates are mid and large assets with central plants, older equipment, and limited capital. Markets with high utility costs or hard to meet performance requirements move up on the list.

Smaller walk ups with individual split systems and recent equipment might be good with targeted projects. In those instances, a simple controls upgrade or lighting retrofit may suffice for the time being.
The key is to look at the total cost of ownership, 10 to 20 years. Include maintenance, downtime, resident churn and regulatory risk, not just the sticker price of a chiller or boiler.

How to Assess a Service Provider
When you are talking to providers, ask about specific multifamily experience. Centrally heated domestic hot water, hydronic loops and mixed use podium projects are different to offices. Ask for references from similar climates and similar building types.
Look closely at the contract. What is in the monthly fee and what is additional? How are savings measured? Who owns the data? You want things like clear performance metrics, clear escalation clauses, clear exit options.
On the technical side, check to see how their platform is linked to your systems and networks. Is it able to integrate with your work order software? Who’s out there when alarms go off at night? If you can not imagine the support model on a bad day, keep asking questions.

Practical Steps for Getting Started with Service Models
If you are curious rather than ready to sign anything, take the first step of benchmarking. Pull a year of utility bills, e logs and complaints about comfort in each multifamily building. Tools similar to Energy Star can help you compare the performance to peers.
Energy Star Portfolio Manager is a widely used framework that provides you with a good source to refer to for this point. It allows your reader to verify the claim by using a document they will be able to check.
Then proceed to do a targeted assessment on your worst performers. Walk the site, inventory equipment, and go over control sequences. I went on one property where oversized boilers and bad reset schedules wasted energy every mild day. A service project corrected that without affecting the distribution piping.
From there develop a basic business case. Estimate avoided capital and energy savings and reduced utility costs Pick one or two pilot sites, monitor results and then determine if you want to scale across more multi family properties.

Real World Examples in Multifamily
I worked with a mid rise of 220 square footage where the building was having trouble with old air handling chillers and they constantly complained of hot water. A service partner replaced the central plant, added modern controls and took over monitoring. Within a year energy bills were reduced by about 18 percent and maintenance overtime was drastically reduced.

An affordable housing owner who is confronting a new local performance standard used a similar model to fund upgrades throughout multiple sites. They met the rule well in advance of the schedule and provided greater comfort for the residents who had been living with chronic temperature swings.
Another client, a new Class A community, used the approach to bundle together solar, EV charging and advanced ventilation. Lease up took off faster than pro forma did and the owner touted the project in ESG reporting.

Common Issues and Myths
Some managers are concerned that they will lose control of their buildings. In actuality, you still set comfort policies and hours. The provider takes control of meeting those targets with the equipment. You get dashboards and reports, not black boxes.
Others say service contracts always cost more in the long-run. Might well, but it depends upon what you compare. But if your current course is reactive repairs, surprise failures, and no real plan, then the hidden costs are bigger than they appear on paper.
Residents seldom move to their seats, when changes increase comfort and communication. If you are able to explain why new systems aid reliability and fairness in billing, most tenants accept it quickly.

Strategic Role of Energy in Multifamily Asset Management

Over the course of time, energy comes into contact with almost everything in multifamily. It determines operating margins, resident satisfaction and even how your assets deal with heat waves or grid events. I have seen properties pass through the summer peaks without worry because their systems were tuned and monitored.
Thinking about energy as a service, not just equipment, nudges you toward lifecycle planning. You organise plant work with unit refurbishment, amenity refreshes and refinancing. It is not something quite as sexy as a new lobby, but it quietly holds up every other improvement you make.
If you take a step back and observe your portfolio, which edifice would most benefit from a more structured, long term approach to energy at this point?