CITY OF

CAMBRIDGE

Point-of-Sale & Point-of-Renovation

Energy Upgrade Policies

Initial Feasibility Analysis

March 18, 2019

Analysis and report prepared by:

Erin McDade, Architecture 2030

Vincent Martinez, Architecture 2030

Michael Gartman, Rocky Mountain Institute

Debbie Slobe, Resource Media

With a special thanks to Paul D. Sampson, University of Washington, for

his contributions to the Point-of-Sale analysis.

March 18, 2019

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CONTENTS

EXECUTIVE SUMMARY 2

INTRODUCTION TO BUILDING INTERVENTION POINTS 4

SOCIAL CONSIDERATIONS IN CITY POLICY 5

INITIAL POINT-OF-SALE FEASIBILITY ANALYSIS 8

OVERVIEW: POINT-OF-SALE POLICIES 8

PREDICTING FUTURE BUILDING SALES 8

KEY FINDINGS: POINT-OF-SALE TRENDS 10

SOCIAL CONSIDERATIONS IN POINT-OF-SALE POLICIES 13

INITIAL POINT-OF-SALE POLICY RECOMMENDATIONS 14

NEXT STEPS IN POINT-OF-SALE FEASINBILITY ANALYSIS 14

INITIAL POINT-OF-RENOVATION FEASIBILITY ANALYSIS 16

OVERVIEW: POINT-OF-RENOVATION POLICIES 16

PREDICTING FUTURE BUILDING RENOVATIONS 16

KEY FINDINGS: POINT-OF-RENOVATION TRENDS 17

SOCIAL CONSIDERATIONS IN POINT-OF-RENOVATION POLICIES 24

INITIAL POINT-OF-RENOVATION POLICY RECOMMENDATIONS 25

NEXT STEPS IN POINT-OF-RENOVATION FEASINBILITY ANALYSIS 27

INITIAL STRATEGIC COMMUNICATIONS RECOMMENDATIONS 29

CONCLUSIONS 32

APPENDIX A: POINT-OF-SALE ANALYSIS 33

METHODOLOGY 33

RESULTS 34

APPENDIX B: POINT-OF-RENOVATION ANALYSIS METHODOLOGY 41

APPENDIX C: ANALYSIS OF MEDIA COVERAGE AND SOCIAL MEDIA ACTIVITY 42

SEARCH STRINGS 42

ORGANIZATIONS RESEARCHED 42

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EXECUTIVE SUMMARY

Initial analysis of building sales trends and renovation permits in the City of Cambridge

indicate that a combination of targeted sub-sector policies that leverage point-of-sale

and point-of-renovation building sector intervention points could have substantial impact

by affecting the majority of residential and large commercial building area before 2050.

Residential building area sales trends indicate that all residential sub-sectors are projected

to see more than 65% of total sub-sector floor area sold by 2050. On average, it is

projected that 128% of total residential floor area will be sold between 2020 and 2050.

All building area will be touched by a renovation permit by 2050, with many undergoing

numerous renovations over that period. Over 40% of commercial floor area is touched by

renovation permits annually, indicating that there is high potential for impact from a sub-

sector targeted point-of-renovation policy for larger commercial buildings. Additionally,

renovation permits indicate that 49% of the floor area typically undergoing renovations

incorporate energy envelope work, suggesting that envelope improvements are a high-

value energy measure that could quickly permeate Cambridge’s building stock.

Unfortunately, small commercial buildings are not sold frequently, indicating that a point-

of-sale policy would not be impactful within this sub-sector. While a substantial number

of small commercial buildings undergo some form of renovation annually, about 40% of

these small commercial renovations have a total project cost of less than $25k. Thus any

small commercial point-of-renovation policies would need to seriously consider the

maximum incremental investment that could be required for energy upgrades without

stymying building renovation rates.

The analysis of media coverage and social media activity around residential building

energy efficiency and decarbonization efforts in Cambridge and Massachusetts provide

important insights that should inform point-of-sale and point-of-renovation policy

development. While energy efficiency is typically framed in a positive light, most of the

people engaged in the conversations are government and utility representatives and non-

profit organizations, rather than homeowners, renters, and property managers, or energy

efficiency professionals. It will be important for the City to elevate the voices of these

stakeholders in order to make the case for energy efficiency more credible and relatable

to audiences directly impacted by point-of-sale and point-of-renovation policies.

The conversations about residential energy upgrades also tend to focus on low hanging

fruit (e.g. LED lighting upgrades), rather than deep retrofits, building electrification, and

zero-energy or zero-carbon buildings. It is recommended that the City

conduct/commission and promote a study showing the potential energy, carbon, and

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cost-savings benefits of the widespread adoption of building energy upgrades

throughout Cambridge.

Finally, although housing affordability and high energy costs are significant concerns in

Cambridge, we did not detect any news coverage about increased energy efficiency as a

solution to address both issues. Therefore, it is also recommended that the City highlight

affordable, senior, and student housing projects in which energy efficiency helps reduce

costs. Most critically, addressing affordability concerns before proposing point-of-sale

and point-of-renovation policies will protect consumers and help inoculate against

opposition.

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INTRODUCTION TO BUILDING INTERVENTION POINTS

Building intervention points represent key points in the lifespan of a building where there

is potential to align and integrate building energy upgrades with existing capital

improvement and major renovation cycles, including:

o Building Lease/Rental

o Building Sale

o Building Renovation

o Building Maintenance & Major System Replacement

o Building Resilience Upgrade

Energy upgrades that can be implemented at these key intervention points include energy

efficiency improvements, building electrification, the addition of on-site renewable

energy, and the procurement of off-site renewable energy. Various energy upgrades can

be combined (e.g. electrification plus on-site renewable energy generation) to achieve

maximum greenhouse gas (GHG) reductions.

By integrating efforts to impact energy use, GHG emissions, equity, and resilience at key

intervention points, the cost, disruption, and other burdens incurred by building owners

and users can be significantly reduced while critical performance improvements are

achieved. Establishing policies at these points is a key strategy for accelerating building

energy upgrades, both in frequency and impact.

Selecting the most appropriate intervention points depends on the physical, economic,

and social characteristics of each city’s local building sector. This report provides initial

recommendations for the City of Cambridge on the impact potential of Building Sale and

Building Renovation policies based on quantitative analyses of historic trends, as well as

a qualitative assessment of social acceptability and key community stakeholders.

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SOCIAL CONSIDERATIONS IN CITY POLICY

For this feasibility assessment, Resource Media conducted an analysis of media coverage

and social media activity around residential building energy efficiency and

decarbonization efforts in Cambridge and Massachusetts over the past year. We reviewed

more than 150 news articles and dozens of tweets in our research. We also reviewed the

websites and social media channels of 25 local and state nonprofit, utility, university, and

building trade organizations to see how they are engaging in and talking about residential

building energy upgrades. A full list of organizations researched and search strings used

to find news coverage and social media activity can be found in the Appendix C of this

report.

Based on our research, we advise the City of Cambridge to proceed with point-of-sale

and point-of-renovation policy with a clear understanding of the broader social and

economic context in which these policies would fall. Unsurprisingly, housing affordability

is a major concern in the City of Cambridge, and it was a theme that we saw repeatedly

reflected in media coverage. According to Zillow, the median home value in Cambridge

is currently $799,800. Home values have gone up 4.4 percent over the past year, and are

expected to rise 7.7 percent within the next year. Cambridge also has a high number of

older and historic homes in need of upgrades, and the City has some of the highest energy

costs in the nation. This fact was repeated time and again in media coverage as a reason

for homeowners to act to conserve energy and make energy-efficiency improvements.

However, the cost of implementing energy upgrades is a major concern among

consumers, so any policy that requires homeowners to make improvements is likely to

be seen as a financial burden, in particular for low-income and fixed-income

homeowners, as well as small business and multifamily property owners and managers.

Such a proposal would also likely face strong opposition from real estate industry

interests such as the Massachusetts Association of Realtors and Greater Boston Real

Estate Board, who were quite vocal in media coverage against Governor Baker’s

proposed home energy rating and disclosure policy from last year, as well as NAIOP

Massachusetts, which is currently fighting back against a statewide proposal to require

solar on new commercial buildings and single-family homes. These groups are likely to

stoke consumers’ fears about costs associated with point-of-sale and point-of-

renovation policies, using the same arguments they used against home energy rating

and disclosure: that the cost to consumers would be high and the policies would

negatively impact Cambridge’s most vulnerable populations. These arguments have

merit, so the City should think about designing point-of-sale and point-of-renovation

programs that don’t unduly burden low-income and fixed-income homeowners and

small business owners. For example, it may make sense to allow exemptions or create

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pathways for extra funding and technical assistance for low-income and small property

owners to make the required upgrades, and/or to develop a one-stop-shop to access

resources to make the upgrade process easier. The City should also consider working

with community-based organizations to develop appropriate technical assistance and/or

funding programs for low-income families, so that when real estate interests feign

concern for low-income communities the City can say that they have already engaged

groups who work directly with those communities and have incorporated their feedback

into the design of the policies.

One group that was largely missing from media coverage, which stands to benefit from

point-of-sale and point-of-renovation policies, was the energy upgrade service industry

(e.g. home energy raters, solar installers, weatherization service providers, construction

workers and associated building trade groups). We recommend that the City begin

reaching out to representatives of local companies that provide such services to gather

their input on how to best design point-of-sale and point-of-renovation policies that

support local businesses. Policies that prioritize local job creation and support small

business would garner much more support than ones favoring larger, out-of-area

companies. Local companies and workers could also serve as important spokespeople for

such policies, touting their job-creation and local economic development benefits. Also

missing from media coverage were homeowners, renters and property managers, who’s

voices need to be elevated to help validate City, utility, and energy service provider claims

that energy upgrades save residents money and improve home comfort.

We found that most coverage around upgrades to residential buildings took place in the

weeks leading up to the dead of winter and height of summer, and during the

homebuying/selling seasons in late spring and summer. These windows of time present

possible opportunities for additional intervention points outside of point-of-sale and

point-of-renovation that could be explored by the City. We also found that the

conversation around energy efficiency improvements is stuck in the “low-hanging fruit”

paradigm (e.g. changing light bulbs, weatherization, and programmable thermostats), and

there were few examples in media coverage of deep retrofits, building electrification,

zero-energy or zero-carbon buildings, and high-performance homes. To encourage

property managers to think beyond low-hanging fruit, the City will need to find and

elevate examples of cost-effective deep retrofits that contributed to the local economy.

Finally, we saw little dialogue in media coverage about increased home energy efficiency

as a possible solution to housing affordability concerns. We strongly recommend that the

City make this connection in any point-of-sale and point-of-renovation program

messaging, in addition to working with community-based organizations to find and

elevate stories of a diverse array of homeowners and renters who are finding energy bill

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relief because of energy conservation and efficiency efforts, and who are using the many

programs available to help pay for energy-saving services and upgrades.

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INITIAL POINT-OF-SALE FEASIBILITY ANALYSIS

OVERVIEW: POINT-OF-SALE POLICIES

Point-of-sale energy upgrade policies have the potential to impact significant floor area

within use types with frequent turnover, such as single family housing. Because financing

mechanisms (e.g. mortgages) are already in place for the majority of sales, the added

energy upgrade costs can be wrapped into these existing financing mechanisms,

maximizing the cost benefit for buyers/sellers. Aligning energy upgrade requirements

with existing financing mechanisms and transaction processes also eliminates the need

for implementing jurisdictions and financial lenders to create brand new frameworks and

programs to support the energy upgrade policy.

When implementing Point-of-sale energy upgrade policies it is important to consider

whether the cost burden is placed on the buyer, the seller, or both. The appropriate

approach will depend on the characteristics of each city such as market conditions

(buyer’s vs. seller’s market) and social perceptions and acceptability (see Social

Considerations).

PREDICTING FUTURE BUILDING SALES

In order to predict the amount of floor area that will be sold in each of Cambridge’s

building sub-sectors by 2050 (the year by which the City aims to eliminate GHG

emissions), historic floor area sales trends were correlated with variables such as

population growth, property tax rates, and employment trends. The variables with high

correlations to each sub-sector’s sales trends were used to develop models for predicting

future floor area sales. A number of commercial building sub-sectors were eliminated

from the analysis due to a lack of meaningful historic sales data or correlations:

o Enclosed Mall (1.2% of total floor area)

o Food Service (0.05%)

o Medical Office (0.03%)

o Pre-School/Daycare (0.04%)

o Senior Care Community (0.5%)

o Worship Facility (1.03%)

Additionally, no meaningful correlations were found for Laboratories and the Multifamily

Housing sub-category. However, Laboratories and Multifamily Housing sub-sector

represents a substantial amount of Cambridge’s total floor area (Laboratories: 4.8%,

Multifamily Housing: 24%), so the annual average percent of total Laboratory and total

Multifamily floor area sold, based on historical sales data, was multiplied by growth

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projections to 2050 to estimate total Laboratory and Multifamily floor area sold between

2020 and 2050.

Predictive models were developed for the following residential and commercial sub-

sectors:

Residential

o Residence Hall/Dormitory (1.67% of total floor area)

o Single Family Unit (5.93%)

o Two Family Unit (4.38%)

o Three Family Unit (2.91%)

o Residential 4-8 Unit (2.19%)

o Residential 8+ Unit (7.02%)

o Multifamily Housing (forecasted without a model)

Commercial

o Automobile Dealership (0.07% of total floor area)

o Hotel (1.36%)

o Non-Refrigerated Warehouse (0.92%)

o Office (16.94%)

o Retail Store (2.29%)

o Laboratory (forecasted without a model)

These models were used to forecast floor area sales to 2050 in order to determine the

potential impact (area affected) of a Point-of-sale energy upgrade policy within each sub-

sector. For this initial feasibility analysis, it was assumed that each correlated variable (e.g.

population growth, property tax rates, employment trends) remained the same between

2018 and 2050 (e.g. employment rate remained at 98%). The modeled sales forecasts

depend heavily on assumed changes in each correlated variable, so in the next stage of

analysis it will be crucial to work with the City to determine reasonable projections (or

ranges of projections) to 2050 for each variable.

For a detailed explanation of assumptions, methodology, and results see Appendix A.

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KEY FINDINGS: POINT-OF-SALE TRENDS

Residential

Predictive models forecast substantial floor area sales by 2050 in all residential sub-sectors

other than Residence Hall/Dormitory.* The highest rates of sales are projected in small

residential buildings (Single Family, 2 Family, and 4-8 Unit Multifamily) as well as in the

general Multifamily sub-sector.

* There is uncertainty inherent in all forecasts, but due to the lack of a regression model for the Multifamily

sub-sector this forecast has a high level of uncertainty.

94%

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103%

94%

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While sales rates in other residential sub-sectors are lower, no residential sub-sectors are

projected to see less than 65% of total sub-sector floor area sold by 2050. On average, it

is projected that 128% of total residential floor area will be sold between 2020 and 2050.

When the total floor area sold by 2050 is greater than 100% it is assumed that some floor

area is sold multiple times. For a complete set of residential floor area sales projection charts

see Appendix A.

Commercial

Within the commercial sub-sectors for which predictive models could be created, no

commercial sub-sectors other than Hotel and Non-Refrigerated Warehouse are projected

to see more than 50% of their floor area sold by 2050. Hotels are projected to see more

than 213% of their floor area sold by 2050, where Non-Refrigerated Warehouse are

projected to see 55% of their floor area sold by 2050. It is projected that 50% of total

Office floor area will be sold by 2050.

Laboratories, like Multifamily Housing, represent a significant amount of total floor area

(4.8% in 2050) but had no significant correlations and thus no regression model was

created. Using historical average annual floor area sold, it is estimated that 116% of

laboratories will be sold between 2020 and 2050.

0

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2020

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Mill

ion f

t2Projected Floor Area Sales: Multifamily (General)

Total Floor Area Total Sales

353%

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When the total floor area sold by 2050 is greater than 100% it is assumed that some floor

area is sold multiple times. For additional floor area sales projection charts see Appendix

A.

SOCIAL CONSIDERATIONS IN POINT-OF-SALE POLICIES

The Massachusetts Association of Realtors and Greater Boston Real Estate Board are likely

to strongly oppose any point-of-sale policies. In the past, the arguments of these groups

have centered around fairness and costs to consumers (e.g. any mandatory home energy

requirement would unduly burden sellers, particularly low-income and fixed-income

sellers and small property owners/managers who are less able to afford upgrades). These

groups are also likely to fight any policy that is perceived as interfering with real estate

transactions. The City should ensure that any point-of-sale policies included robust

protections and/or additional resources for low-income homeowners and small property

owners. Not only is this a smart equity-based approach, but it also helps inoculate policy

implementation efforts against these opponents. This leaves them to fight for their own

business interests and the interests of wealthier and bigger property owners, which is less

a sympathetic position than fighting for low-income residents.

Funding energy upgrades will be a major concern for all property owners. They will likely

be an unplanned expense when preparing to sell properties, and since owners will not

benefit from the upgrades (other than potentially being able to use increased

50%

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efficiency/reduced utility costs to increase asking price) this will likely make energy

upgrade requirements unpopular. Offering free energy assessments to sellers is a good

first step in the path to requiring energy upgrades prior to listing, and there are several

existing utility programs to pay for or subsidize these assessments. Making the case that

energy-efficient homes sell faster and for more money will also help convince owners to

act. There are existing studies in some cities that support this claim. The City could work

with local “EcoBroker” Realtors to compile information and/or anecdotal evidence of

Cambridge residents who have bought or sold efficient homes at a premium. There will

also be owners who are not inclined to make improvements prior to listing and will try to

strike deals with prospective buyers about splitting upgrade costs, providing an upgrade

allowance, or folding the projected costs into a closing fee or sales price. Working with

mortgage brokers to allow buyers to finance the cost of upgrades through their home

loans may be a good approach in point-of-sale policies for certain sub-sectors. Another

approach the City should consider is working with local energy service providers to set up

energy service performance contracts with owners, so that owners can pay for upgrades

over time through energy bill savings. Extending the PACE program for local residents

could be a similarly beneficial approach.

Given all these social and economic considerations, we strongly recommend that the City

work closely with mortgage brokers, EcoBrokers, and energy service providers to design

point-of-sale policies that support consumers’ interests while driving energy and

emissions reductions.

INITIAL POINT-OF-SALE POLICY RECOMMENDATIONS

The substantial amount of projected floor area sales in Cambridge’s residential building

sectors (together representing 40% of the City’s total building area and 31% of the City’s

total building emissions) indicates that point-of-sale energy upgrade policies for

residential buildings have a high impact potential.

Floor area sales projections show much less turnover in the commercial sector, indicating

that commercial Point-of-sale energy upgrade policies are unlikely to impact City building

stock as much as other commercial energy upgrade policies (e.g. Point-of-Renovation).

However, given that Offices represent 17% of the City’s total building stock and with 50%

of total Office floor sold by 2050, it may be worth considering an Office point-of-sale

policy as well, perhaps even coupled with an Office point-of-renovation policy.

NEXT STEPS IN POINT-OF-SALE FEASINBILITY ANALYSIS

It is recommended that the City of Cambridge direct the focus of the next phase of the

feasibility study on residential point-of-sale energy upgrade policies, during which

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appropriate energy upgrade requirements (e.g. efficiency improvements, heating system

electrification, on-/off-site renewables) for each residential building sub-sector and size

category will be proposed. After the City determines which of the proposed energy

upgrade requirements they would like to consider for potential policy integration,

analyses will be completed to determine the energy and emissions reduction, job growth,

and tax revenue impact potential of each.

This analysis should be coupled with a similar analysis of policies most likely to reduce the

impact of commercial buildings (e.g. Point-of-Renovation).

Successful point-of-sale energy upgrade policies in Cambridge will also require the

inclusion of mechanisms to support and ensure implementation, such as grace periods or

alternative compliance pathways (e.g. the purchase of off-site renewable energy).

Additionally, policy development will require an understanding of the specific conditions

of targeted sub-sectors (e.g. varying types of multifamily building ownership, impact of

policies on low income housing) and developing sub-sector specific policy details to

address these conditions. The City should consider all of these policy nuances through

the lens of social acceptability and community support. If agreed to by the City of

Cambridge this will be conducted in the next phase of the feasibility study.

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INITIAL POINT-OF-RENOVATION FEASIBILITY ANALYSIS

OVERVIEW: POINT-OF-RENOVATION POLICIES

Point-of-renovation energy upgrade policies stand to complement point-of-sale policies

by addressing use types that are renovated or upgraded more frequently than they are

sold (e.g. office buildings). These polices can minimize the perceived and actual burdens

(e.g. tenant disruption) of energy upgrades by requiring them at a point when buildings

are already undergoing change. This aligned timing can also reduce the cost of energy

upgrades, especially when required upgrades are coordinated with complementary types

of already planned renovations (e.g. requiring LEDs for any planned lighting system

upgrade, or insulation improvements as part of any renovation touching the building

envelope).

PREDICTING FUTURE BUILDING RENOVATIONS

While point-of-sale policies upgrades are typically triggered by any building sale, point-

of-renovation policies can be honed to trigger upgrades with a wide variety of permit

characteristics (e.g. work type, minimum cost). Preliminary analyses for potential point-of-

renovation policies thus focused less on future forecasting and more on understanding

current permitting trends in order to determine which building types are most frequently

renovated and which renovation permit characteristics could potentially trigger energy

upgrades.

Approximately 13,500 permits issued by the City from February 2013 to August 2018 and

segmented across 31 residential and commercial building typologies were reviewed.

Information collected through the City’s permitting process and stored on Cambridge’s

open data platform was used to identify permit counts and impacted floor areas across

different building types and for a variety of different potential triggering characteristics

(e.g. building size, permit type). Seasonal and annual trends were also observed.

For a detailed explanation of assumptions, methodology, and results see Appendix B.

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KEY FINDINGS: POINT-OF-RENOVATION TRENDS

Permitted Building Typologies

Each year, Cambridge issues roughly 2,500 residential and commercial permits covering

61 million square feet of conditioned space. Most of this floor area is confined to a small

subset of building typologies: Office and College/University buildings alone make up 43%

of impacted floor area. Residential building types make up 72% of the permit count but

only 22% of the impacted floor area.

Floor Area of Building Typologies Undergoing Renovations

Buildings are typically renovated more frequently than they are sold. In Cambridge, all

building area will be touched by a renovation permit by 2050, with many undergoing

numerous renovations over that period. This is particularly true of commercial building

types: over 40% of commercial floor areas are touched by a renovation permit annually.†

Point-of-renovation policies targeting building types with lower sales rates could thus be

excellent complements to point-of-sale policies.

† This is not to say that 40% of floor areas are renovated annual. Replacing a single hot water heater in a

high-rise office building would incorporate that building’s entire floor area using this methodology.

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Triggering Characteristics

Three distinct triggering strategies (the threshold at which a point-of-renovation policy

would come into effect) were considered in this stage of analysis: minimum permit cost,

minimum floor area, and other permit characteristics.

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Floor Area Impacted by a Minimum Cost Trigger

Analysis reveals that many of Cambridge’s permits are for relatively low-cost work: 21%

of impacted floor area covers projects under $25,000. A point-of-renovation energy

upgrade requirement could substantially increase the cost of these smaller projects

(depending on the energy conservation measures required), which could either stymie

renovation rates in the City and/or generate substantial backlash from renovators.

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Floor Area Impacted by a Minimum Floor Area Trigger

Conversely, total impact potential is relatively independent of any minimum floor area

requirement. Ninety-one percent of permitted floor area was in buildings over 10,000

square feet, and 70% was in buildings over 100,000 square feet. This trend suggests that

point-of-renovation policies could be simplified with a relatively low change in overall

impact by focusing only on the largest buildings being renovated.

Segmenting permits by both cost and floor area reveals that many of Cambridge’s permits

are issued for small projects in large buildings, revealing an important question that the

City must answer in the creation of any point-of-renovation policies: what is the maximum

incremental investment that can be required for energy upgrades without stymying

building renovation rates? In the case of a 500,000 square foot office building with a

planned $10,000 renovation, a point-of-renovation energy upgrade requirement could

drastically increase the total first cost, albeit at a healthy financial return.

Average Annual Floor Area Impacted by Other Permit Characteristic Triggers

Cambridge’s permitting process yields a number of other useful permitting characteristics

that could be used to hone point-of-renovation energy upgrade triggers as well as

required upgrades. Key insights from this preliminary analysis include:

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o 49% of permits (by floor area) incorporated energy envelope work,

suggesting that envelope improvements are a high-value energy

measure that could quickly permeate Cambridge’s building stock.

o 11% of permits (by floor area) incorporate lighting improvements.

LED upgrades are a high-impact energy measure representing a

minimal incremental cost in situations where a lighting renovation is

already planned, but this measure will not have a timely impact on

Cambridge’s building stock without targeted engagement to increase

adoption rates.

o 6% of permits (by floor area) incorporate “substantial demolition”,

defined by Cambridge’s permit process as impacting structural

elements and/or 25% of total floor area. These permits could trigger

substantial energy upgrades, but this strategy alone would not have a

timely impact on Cambridge’s building stock.

Future analysis will consider these triggering opportunities in tandem with minimum cost

and/or square footage requirements for a defined set of energy measures.

Seasonal and Annual Trends

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A review of renovation permits by month substantiated some of the media analysis

insights about pre-summer, pre-winter, and sale-season peaks in building renovations.

The graphic above highlights a seasonal trend in overall permitting counts, with

significantly less work occurring in winter months than summer and shoulder seasons.

The month of May represented a high point for permit applications, with an average of

$227 million in permit applications per year (compared to a low of $71 million/year in

November). However, there was no significant trend identified in the type of work being

performed.

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These results suggest that while energy upgrade opportunities should generally be

marketed in the spring (as indicated by the media analysis) there is little evidence that

existing seasonal marketing by the private sector (e.g. a summer campaign for efficient

air conditioners) has affected renovation decisions to date.

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Perm

it C

ount

(#/m

onth

)Monthly Trends in Multifamily and Commercial Permit

Counts

Electrical Plumbing Gas HVAC Fire

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2013-2018 Permitting Rates:‡

A review of annual permitting counts shows a steady increase in the number of permits

issued (increasing by 50 per year), and a significant increase in the total permitted cost

per year (increasing by $195 million per year). The increase in permitted project costs

since 2016 indicated that Cambridge is in a real estate boom period, and that higher-cost

projects, which are typically better candidates for energy upgrades, are becoming more

common.

It is important to note that these trends have been identified from only 5.5 years of permit

data, and are highly dependent on local and national economic trends.

SOCIAL CONSIDERATIONS IN POINT-OF-RENOVATION POLICIES

Point-of-renovation policies have many of the same social and economic considerations

as point-of-sale policies, specifically how to address the additional cost of energy

upgrades and how to counter real estate industry opposition. In the Social

Considerations in City Policy Section above, suggestions are offered for supporting

property owners in completing energy upgrade renovations and countering opposition,

and key groups with which it will be important for the City to engage are identified.

‡ Counts and costs for 2013 and 2018 have been extrapolated to adjust for incomplete years.

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From an outreach perspective, our research shows that there are potential seasonal

opportunities to support point-of-renovation policies by promoting energy upgrade

rebates and technical assistance programs. In the weeks leading up to the dead of winter

and the height of summer building owners are thinking about ways to conserve energy

and remain comfortable in their homes and workplaces, and are therefore already

considering building renovations. Another key seasonal outreach opportunity is the

spring/summer home buying and selling season when owners are more likely to be

completing renovations in order to increase their home value. Additionally, major sales

events such as Black Friday or Cyber Monday, when people are shopping for deals on

major appliances, may be an outreach opportunity.

Finally, it is important to consider renters, who are largely left out of the equation in point-

of-renovation policies. There are many people in Cambridge living in inefficient homes

and apartments who paying for their own utilities and would thus greatly benefit from

having their homes upgraded. Since property managers aren’t paying these utility bills,

however, there is no incentive for them to complete energy upgrades. These buildings are

therefore likely slip through the cracks of a point-of-renovation policy that relies solely

on market-driven and natural renovation cycles. The City may want to consider a different

type of policy intervention to capture these properties, such as mandatory or voluntary

energy upgrade requirements for residential buildings below a certain threshold of energy

efficiency. Whether the upgrades are mandatory or voluntary could depend on building

ownership structure: for buildings with large capital budgets upgrades could be

mandatory, and for the remainder they could be voluntary, supported by economic and

technical incentives and assistance. Some of the programs that could support point-of-

sale policies, such as free energy assessments, energy service performance contracts,

PACE, and loans, could also support this type of policy.

INITIAL POINT-OF-RENOVATION POLICY RECOMMENDATIONS

Recommended Building Types

Based on our analysis, we recommend that point-of-renovation policies be focused on

larger building types. This strategy complements the findings of the point-of-sale analysis

which indicate low rates of turnover for commercial buildings. Point-of-renovation

policies focused on large commercial buildings will thus fill impact-gaps within point-of-

sale policies, and will minimize complexity by focusing on a single building sub-sector

while still maintaining impact.

A key question to answer in future discussions will be whether to include multifamily

buildings in the point-of-renovation policy scope. The “Multifamily Housing” and

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“Residential 8+ Unit” sub-types combined represent 6.8 million square feet of renovated

space annually (11% of the impacted area across all typologies), but at an average area of

15,500 square feet renovated per permit, the impact is significantly less than most

commercial building types. Point of renovation policies for multifamily buildings also

present the added complication of resolving tenant-owner split incentives, which are

typically less of an issue for commercial building types. While we recommend that

Multifamily building types are included in point-of-renovation policies to maximize

impact, removing them would simplify policy design by minimizing the overall number of

renovation interventions.

Similarly, policy design could be simplified by eliminating less-frequently-renovated

commercial building types. Of the 31 building typologies considered, the 15 least-

renovated represented only 3% of total renovated floor area. Removing these typologies

from the scope of a point-of-renovation policy could allow for more granular and higher-

fidelity energy measure requirements with a minimal reduction in overall impact potential.

However, creating these exemptions could enable loopholes for circumventing a point-

of-renovation requirement. The best approach may depend on the energy measures

selected for the point-of-renovation policies: those measures that are more easily applied

to a variety of building types (e.g. rooftop solar installations) could be required for all

commercial building types, while high-impact building types could be subjected to

additional targeted measures (e.g. LED upgrades for office buildings).

Applicable Energy Measures

The table below covers a preliminary set of suggested energy upgrade measures for

inclusion in point-of-renovation policies. This list considers how upgrade measures could

be logically matched to high-frequency triggering characteristics, and which measures are

applicable to the most frequently renovated building types.

Renovation Triggers and Key Energy Measures:

Trigger Key Measures

Electrical work o Electrical terminals for PV or EVs

o PV installation

o Heating system electrification

Plumbing work o Low-flow hot water fixtures

o Heat pump water heaters

Gas work o Efficient gas heating upgrade

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o Heating system electrification

HVAC work o Efficient HVAC upgrades

o Envelope air sealing

Energy envelope work o Insulation improvements

o Envelope air sealing

o Window upgrades

Lighting work o LEDs

o Occupancy sensors

Minimum cost and/or

square footage

o PV installation

o Retrocommissioning measures (used in

combination with other triggers)

Future analysis will refine the scope of required energy upgrade measures for point-of-

renovation policies by considering local energy savings and cost information for individual

and packaged measures provided by the City of Boston.

NEXT STEPS IN POINT-OF-RENOVATION FEASINBILITY ANALYSIS

Future analysis will focus on the specific building types and energy upgrade measures

that can maximize the impact and cost-effectiveness of point-of-renovation policies. Next

steps include:

Finalize Building Typology Scope

Determine whether to incorporate multifamily buildings, smaller commercial buildings

(sub-10,000 square feet), and/or less-common commercial building types (e.g. fitness

centers and automobile dealerships).

Finalize Energy Upgrade Measures

Information from the City of Boston, as well as a finalized building typology scope, will

inform a list of energy upgrade measures for point-of-renovation policies. This set of

energy upgrade measures will be curated to maximize energy and carbon savings while

minimizing policy complexity and maintaining an acceptable financial return for

Cambridge’s building owners.

Finalize Triggering Strategy

Triggering strategies will be refined by considering various triggering options (minimum

square footage, minimum permit cost, other permit characteristics) in combination.

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Recommendations for point-of-renovation policy triggers will work to balance impact

potential with policy complexity.

Estimate Impact

The preceding steps will yield the information necessary to project anticipated energy and

carbon savings for Cambridge’s point-of-renovation policies to 2050, which can be used

to ensure compliance with Cambridge’s climate goals and to compare against the impact

potential of other policies under consideration.

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INITIAL STRATEGIC COMMUNICATIONS RECOMMENDATIONS

From a strategic communications perspective, research has daylighted several

opportunities and recommended next steps for the City to get out ahead of consumer

and opposition concerns and start laying the groundwork for successful policy rollout.

The good news is that energy efficiency in homes and buildings is already being discussed

in a positive light. Increasing home energy efficiency is seen as a way to help lower utility

bills and improve home comfort, which are both of particular concern in Cambridge and

New England as a whole given their high energy rates and harsh winters.

Elevate voices of Cambridge residents, property managers and energy workers

While energy efficiency is being framed in a positive light, most of the people engaged in

these conversations are government and utility representatives and non-profit

organizations, rather than homeowners, renters, and property managers, or energy

efficiency professionals. It will be important for the City to elevate the voices of these

stakeholders in order to make the case for energy efficiency more credible and relatable

to audiences directly impacted by point-of-sale and point-of-renovation policies.

Show examples of what is achievable

The conversations about residential energy upgrades tend to focus on low hanging fruit

(e.g. LED lighting upgrades), rather than deep retrofits, building electrification, and zero-

energy or zero-carbon buildings. We recommend the City work to find and promote

stories of buildings that have undergone deep energy retrofits, and how these are

benefitting the residents, property managers, and local businesses that these projects

support. We also recommend that the City conduct/commission and promote a study

showing the potential energy, carbon, and cost-savings benefits of the widespread

adoption of building energy upgrades throughout Cambridge.

Capitalize on seasonal intervention points

We found that most coverage around upgrades to residential buildings took place in the

weeks leading up to the dead of winter and height of summer, and during the

homebuying/selling seasons. We recommend that the City consider actively promoting

its point-of-sale/point-of-renovation programs during these potential seasonal

intervention points and perhaps making program resources and technical assistance more

available during these times. The City could also consider launching its program just

before winter when home heating costs and comfort of significant concern to consumers.

This is also a good time to remind consumers that increasing energy efficiency helps

reduce dependency on gas, thus reducing exposure to gas leaks and the danger of

explosions. We saw several news stories emerge around the time of the Merrimack gas

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leak pointing to electric heating systems and stoves, and increased energy efficiency, as

safer and healthier alternatives to gas use in homes.

Make the connection between energy efficiency and housing affordability

Although housing affordability and high energy costs are significant concerns in

Cambridge, we did not detect any news coverage about increased energy efficiency as a

solution to address both issues. We recommend the City work with community-based

organizations and affordable housing advocates to highlight the high energy burdens and

housing affordability crises facing low-income and fixed-income residents, and emphasize

how increasing energy efficiency can help lower energy bills and total household costs for

local families and seniors. We also recommend that the City highlight affordable, senior,

and student housing projects in which energy efficiency helps reduce costs.

Start reaching out to potential allies

Several organizations emerged from our research as possible allies for point-of-sale and

point-of-renovation policies: Mothers Out Front Cambridge, Home Energy Efficiency

Team, Environmental League of Massachusetts, Homeowners Rehab, Greater Boston

Sierra Club, Green Energy Consumers Alliance, Green Harvard, Boston University:

Sustainable Neighborhood Lab, MIT Office of Sustainability, Northeast Clean Energy

Council, US Green Building Council Massachusetts Chapter, Harvard Center for Green

Buildings and Cities, and Green Cambridge. We recommend the City start reaching out to

these groups and learning more about their work and priorities, and if they are interested

in collaborating on point-of-sale and point-of-renovation program development and

promotion.

Address low-income concerns at the start to protect consumers and inoculate

against opposition

We found that opposition arguments against mandatory home energy rating and

disclosure centered around fairness and costs to consumers. Real estate industry

organizations pushed the idea in media coverage that this program would drive up home

prices, stigmatize inefficient homes and hurt low-income and fixed-income homeowners

who can’t afford to make improvements. We expect these same arguments to be front

and center should the City introduce point-of-sale and point-of-renovation energy

upgrade policies, and there is merit to them. We recommend that the City work with these

groups, listen to their concerns, and consider integrating protections for lower- and fixed-

income property owners into point-of-sale and point-of-renovation policies. While real

estate organizations are generally opposed to mandates, they are generally supportive of

increasing energy efficiency in buildings as long as this doesn’t interfere with their

business as usual practices. By designing a policy that safeguards consumers (e.g.

exempting low-income and small property owners, or providing them extra financial and

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technical support) the City can both protect consumers as well as preempt opposition.

Opponents will be left to defend their own business interests and the interests of wealthy

landowners, which won’t play well in the court of public opinion or with City

councilmembers.

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CONCLUSIONS

It is recommended that the City of Cambridge direct the focus of the next phase of this

feasibility study on residential point-of-sale energy upgrade policies and large

commercial point-of-renovation energy upgrade policies, during which appropriate

energy upgrade requirements (e.g. efficiency improvements, heating system

electrification, on-/off-site renewables) for each building sub-sector and size category

will be proposed. After the City determines which of the proposed energy upgrade

requirements they would like to consider for potential policy integration, analyses will

be completed to determine the energy and emissions reduction, job growth, and tax

revenue impact potential of each.

Successful point-of-sale and point-of-renovation energy upgrade policies in Cambridge

will also require the inclusion of mechanisms to support and ensure implementation,

such as grace periods or alternative compliance pathways (e.g. the purchase of off-site

renewable energy). Additionally, policy development will require an understanding of

the specific conditions of targeted sub-sectors (e.g. varying types of multifamily building

ownership, impact of policies on low income housing) and the creation of sub-sector

specific policy details to address these conditions. The City should consider all of these

policy nuances through the lens of social acceptability and community support. If

agreed to by the City of Cambridge, this will be conducted in the next phase of the

feasibility study.

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APPENDIX A: Point-of-Sale Analysis

METHODOLOGY

Point-of-Sale analyses utilized historic sales records from the City of Cambridge from

1995-2017, which were connected to the LCESS database to determine the BEUDO

building type and floor area of each sales record. For sales records that could not be

matched to a specific floor area, the average sales cost per square foot, by building type,

was used to estimate building floor area. Building types with fewer than 11 years of sales

records were eliminated from the analysis.

Building types with more than 11 years of sales records were correlated to data from

1995-2017 for the following variables, and when possible regression models were built

using variables with significant correlations (regression model development methodology

report available upon request).

Correlation Variables:

o Commercial Property Tax Rate

o Residential Property Tax Rate

o Employment Rate

o Total Employment

o Total Population

o London Inter-Bank Offered Rate (LIBOR)

o Federal Reserve Economic Data (FRED) Index

These regression models were used to estimate the total floor area sold between 2020

and 2050 for each building type. For the purposes of this initial analysis static (2018)

numbers were assumed for each variable.

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RESULTS

Historic Sales Trends

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Projected Sales: 2020-2050

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APPENDIX B: Point-of-Renovation Analysis Methodology

Point-of-renovation analysis relied on two datasets supplied by Cambridge’s open data

portal: 1 and 2 family homes and commercial and multi-family buildings. Jeff Amero and

Paul Creedon provided support in understanding and properly utilizing these datasets.

Permit entries in the commercial and multi-family buildings dataset were connected to

BUEDO building types using address entries. 10% of commercial and multifamily permit

entries were lost due to incomplete or mismatched information.

Key assumptions include:

o Annual variations in permitting rates were not considered; i.e. permitting rates were

assumed to remain constant over time. This was largely due to the limited dataset

available (covering ~5.5 years), and because renovation rates depend largely on

local and national economic trends.

o In extrapolating permit counts and costs for incomplete years (2013 and 2018),

monthly trends in permit counts were not considered (i.e. if six months of permit

entries were available, that number was doubled to reach the annual estimate).

Monthly trends were initially considered in extrapolating counts for the “1 and 2

family homes” dataset and shown to skew results by less than 1%.

o A number of BUEDO building types are nondescript- e.g. “N/A”, “?”, and “? (land?)”.

Renovation rates and affected square footage for these building types are

incorporated into summary results but not considered elsewhere.

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APPENDIX C: Analysis of Media Coverage and Social Media

Activity

SEARCH STRINGS

Search strings used for finding media coverage and social media activity in Cambridge

and MA over the past year):

o “energy efficiency” AND “home”

o “energy efficiency” AND “Cambridge”

o "energy efficiency" AND "home" OR "condo" OR "apartment" OR "duplex" OR

"multifamily" OR "residential" OR "townhome" OR "dorm”

o “energy” AND “scorecard”

o “multifamily” AND “energy efficiency”

o “Property Assessed Clean Energy”

o “energy efficiency” OR “save energy” AND “homeowner” OR “renter” OR “student”

OR “low income” OR “senior”

o “Massachusetts” OR “Cambridge” AND “zero net energy” OR “net zero energy” OR

“ZNE” OR “NZE”

o “Stretch code” OR “Green Communities” AND “Cambridge”

o “climate” AND “Cambridge” OR “Massachusetts”

o “Carbon free Boston”

o “Electrification” AND “buildings”

o “clean energy” or “solar energy” AND “buildings”

o “fuel switching” AND “buildings”

o “Energy” AND “disclosure”

o “real estate” AND “tax” AND “affordable”

ORGANIZATIONS RESEARCHED

Organizations Researched (25 total) for looking into how local organizations are working

on/talking about residential EE/EE improvements, who are active in this area, their social

media presence, etc:

NGO/Environmental and EE Advocacy Orgs:

1. Mothers Out Front

2. Home Energy Efficiency Team

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3. Environmental League of Massachusetts

4. Homeowners Rehab

5. Greater Boston Group Sierra Club

6. Green Energy Consumers Alliance

University-based sustainability programs/offices:

1. Boston University: Sustainable Neighborhood Lab

2. Green Harvard

3. MIT Office of Sustainability

4. Green Cambridge

Government-sponsored residential EE programs:

1. Cambridge Energy Alliance (City of Cambridge)

2. Massachusetts Clean Energy Center

NGO low-income advocacy sponsored residential EE programs:

1. MassCAP

2. Cambridge Economic Opportunity Committee

Utility-sponsored residential EE programs:

1. Mass Save

2. Eversource

Green building and EE trade associations:

1. New England Clean Energy Council

2. USGBC Massachusetts (Residential Green Building Committee)

3. Harvard Center for Green Buildings and Cities

Traditional real estate trade associations:

1. Massachusetts Assoc. of Realtors

2. Greater Boston Real Estate Board

3. Small Property Owners Assoc.

4. Mass Landlords

5. Homebuilders and Remodelers Assoc. of Massachusetts

6. NAIOP Massachusetts