Recently, while doing research for a series of articles I am writing for Multifamily Executive Magazine, I ran across some interesting information on the multifamily construction industry and the increasing demand for green certified buildings. Affordable housing, much of which is multifamily, has been leading the way in green building for many years, much of this due to incentives tied to low income housing tax credits (LIHTC) that promote certified projects.

In recent years, due to the downturn in real estate which forced many former homeowners to become renters, there is increased demand for rental apartments throughout the country. This demand makes multifamily rental property a significantly better investment than it has been for many years, piquing the interest of many investors and REITs who previously avoided residential buildings. It has been reported that one large REIT, Mack-Cali Realty, is “moving aggressively into the multifamily property sector” and “has been a seller of office properties.”

Green REITs do better

According to an article in FSInsight, REITs with green buildings in their portfolios perform better, have lower risk, and a higher net cash flow.

Although most REITs have historically focused on commercial buildings, as noted above in the case of Mack-Cali, they are shifting significant portions of their investments toward residential buildings. It can be reasonably assumed that REITs that require or otherwise incentivize their development partners to have their commercial buildings green certified will do the same with residential properties.

According to Kelly Vickers, National Director Sustainability for Alliance Residential Company, a national apartment developer, their institutional investor clients ask for green certification in their properties. Depending on the property location and investor preference, the majority of their new properties will be certified under LEED, National Green Building Standard (NGBS), or a local program.

The numbers don’t lie

To date there are over 38,000 LEED Homes certifications, including over 27,000 multifamily units. The NGBS has certified over 18,000 total units, of which over 12,000 are in multifamily buildings.

Many regional programs such as EarthCraft House have also seen their multifamily certifications outpace single-family certifications. Multifamily green certifications seem to be leading the industry.

I expect that renters who live in high-performance apartments will come to appreciate the efficiency, health, and comfort they experience in them. When they look to move or buy a home, they will be seeking the same benefits, helping create more demand for green buildings down the road.

The many shades of green

I realize that having a building certified as green isn’t the be-all and end-all of high-performance buildings. But it is definitely a start.

I have run across people who think that the Passivhaus standard or the Living Building Challenge should be the baseline standard for all buildings. While I appreciate the dedication and rigor of programs like these, we do live in the real world, and I have come to the conclusion that I am OK with incremental improvements.

Yes, I know that a building that just barely meets a green certification standard will be wasting more energy and resources than a much better one, but I don’t think as a society we are capable of huge overnight transformation. So I’m pleased that the mainstream green certification programs are moving steadily into the multifamily market. I believe that it will continue to stimulate demand for green buildings over the long term.