Introduction: The Shift Toward Decarbonization in Multifamily Real Estate
Multifamily real estate owners and operators are under increasing pressure to start demonstrating progress against their net-zero targets. With mounting investor demands, new building performance standards, and resident expectations for sustainable living, the need for a comprehensive and scalable decarbonization strategy has never been clearer. Yet, the complexities inherent in multifamily real estate—and the limitations of traditional planning approaches—are creating significant roadblocks.
The question is no longer whether to decarbonize…but how? How do we move from isolated projects to an actionable, cost-effective strategy that tackles hundreds, or even thousands, of buildings at once?
In our recent webinar, Decarbonizing Multifamily real estate: Navigating challenges & opportunities, we sat down with Katie Rothenberg, Vice President of ESG at AvalonBay Communities, and Chris Laughman, Senior Director of Energy and Sustainability at Greystar, to dig into the how and discuss some of the more advanced challenges in decarbonizing multifamily real estate portfolios. These unique hurdles, including unitized systems, split incentives, and the sheer scale of operations, require innovative solutions.
We explored how multifamily owners can overcome these hurdles and drive actionable, portfolio-wide net zero plans - plans that not only meet regulatory demands but position them as leaders in a zero-carbon future.
Unique Challenges in Decarbonizing Multifamily
Multifamily buildings present unique challenges when it comes to decarbonization, largely due to their unitized systems. Unlike commercial real estate, where energy use is often centralized, multifamily buildings have separate controls, energy meters, and systems for each unit. This decentralization makes it difficult to implement portfolio-wide energy and carbon management strategies.
Chris Laughman from Greystar touched on this during the webinar, highlighting the complexity of managing energy consumption across such large, varied portfolios. “I mean, this isn't going to happen overnight. You've got decentralized building systems. This is someone's home, and managing that is certainly a challenge,” he explained. “We have thousands of individual units, each with its own HVAC system, hot water heater, and electricity meter. That’s millions of data points across hundreds of assets, and tracking that efficiently is a huge challenge.”
Another key challenge is the split incentive dilemma. Property owners bear the upfront costs of decarbonization efforts—whether through energy-efficient retrofits or new technologies—while residents benefit from reduced utility bills. This makes it difficult for owners to justify the financial investment when the return doesn’t accrue back to them. Katie Rothenberg from AvalonBay shed light on this issue during the webinar: “It used to be that [the purpose of] reporting was to report, right? And now I feel like reporting should be the way you can shine a light on successes and challenges and show that you have a plan of action. You know, people want to see the action that's being taken because everyone has goals, but we need to show progress, we need to show impact.”
Data Collection & Management: Overcoming the Scale Problem
Decarbonizing multifamily real estate is a multifaceted challenge. The decentralized nature of energy consumption in these buildings, combined with the complexity of data management and the financial implications of large-scale projects, creates a perfect storm.
This decentralization makes it difficult to gather reliable, accurate data at scale. Property managers are tasked with managing thousands of data points every month. Without the right tools, it’s easy to lose sight of the big picture.
Working with the right tools can be critical to getting a handle on your data. Chris Laughman highlighted the importance of tools like Power BI in simplifying this overwhelming task. “We’re leveraging Power BI to pull together data from thousands of individual units—everything from electricity consumption to HVAC performance,” he explained. Older tools like Excel crash under the amounts of data these plans generate. Increasingly advanced data analysis tools allow companies to make sense of millions of data points and identify actionable insights more efficiently. Connected living programs are also being used to integrate various building systems - enabling property managers to collect, analyze, and act on real-time data.
Moving Beyond Reporting: From Data to Decarbonization
Data collection is necessary but not sufficient to drive action. It’s essential to use that data to derive insights that can then drive action. The challenge for most multifamily operators isn’t only in gathering the information—it’s making sense of it, prioritizing what to act on, and balancing risk with investments.
This is what we’re focused on at Audette. By helping clients prioritize decarbonization actions based on risk management, capital constraints, and evolving regulations, the focus shifts from merely ticking boxes to moving the needle.
Data tells a story. Those millions of numbers in millions of boxes point to repeatable and scaleable ways to drive profitable zero-carbon projects and to engage with stakeholders, investors, and tenants alike, showing them the impact of efforts. Well-documented projects prove compliance and generate buy-in for future initiatives. A strong case is built while future-proofing properties by demonstrating energy savings, lower emissions, and the long-term viability of sustainability projects.
Leveraging data this way aligns regulatory requirements with financial realities, clearing a path for decarbonization. Audette’s approach turns data into action.
Addressing the Split Incentive Dilemma
The most prominent hurdle in multifamily decarbonization is the split incentive. While simple fixes like LED retrofits deliver fast results, they barely scratch the surface of the greater challenge - electrification. It’s not just about replacing gas systems with electric ones; it’s also about building the business and financial justification for that spending.
In this webinar, Katie highlighted that electrifying units and switching heating systems come with a hefty price tag. “As we electrify, especially in existing buildings, it’s not just the cost of the upgrade—it’s the cost to the resident too. Electric heat, in the short term, can be more expensive than gas, and that’s something we have to think about as owners. How do we balance that with the long-term benefits and regulatory pressures?”
However, scalable solutions do exist. Solar, for instance, offers a way to bridge this gap. Solar installations can deliver real value to property managers and tenants in regions with building performance standards. For example, AvalonBay’s solar projects in California demonstrate how solar can help manage Scope 3 emissions, benefitting both the property owner and residents, in a fiscally responsible manner.
Engaging Stakeholders: From Investors to Tenants
Stakeholder buy-in is crucial for driving decarbonization. Investors are raising the stakes, with institutional backers increasingly focused on climate risk and regulatory compliance. As Chris Laughman pointed out, these investors aren’t just looking for green credentials - they expect properties to meet specific environmental targets or risk losing out on capital.
At the same time, tenants are demanding more sustainable living options. 5, 10, 20 years ago, renters may not have factored in energy efficiency when looking for a home. That’s all changed. Greystar’s data shows that 74% of residents now factor sustainability into their housing choices. 53% are willing to pay extra for greener living. Younger renters like those in Gen Z are driving this demand shift.
For property owners, this presents a clear opportunity. Owners can tap into a growing market of environmentally-conscious renters by aligning with this growing demand.
Conclusion: Bridging the Gap to Net Zero
Decarbonization planning is no longer optional. As regulations tighten and tenant demand grows, owners need to move beyond low-hanging fruit projects and develop comprehensive, long-term strategies that can scale across portfolios. It’s time to stop relying on static energy audits and start embracing new tools that allow for data-driven decision-making at scale.
The key to decarbonization is understanding the unique challenges of multifamily real estate and planning for both the long and short term. As we bridge the gap between regulatory requirements and financial realities, the most successful portfolios will be those that take a proactive, holistic approach to decarbonization.
