The Intersection of Water & Carbon
Did you know conserving water not only can not only help mitigating future negative impacts of water stress to your financial returns but also contribute to reducing your Carbon Impact?
The August 12th headline in the Fort Worth Star-Telegram read, “Fort Worth wants to triple this fee on your water bill. Here’s the city’s plan for the money.” This is not a Texas thing; across the United States, outpacing inflation is the cost of water, which has risen an average of 30% over the past decade. Perhaps the only cost outpacing water is the costs of the associated sewer fees. Typically linked, both of these utilities are forcing cities to grapple with aging infrastructure, fewer resources, and extreme weather.
Water is one of those expenses that is sometimes baked into the rent. When combined with its use in common area amenities such as pools and irrigation, water costs can negatively impact your proforma. Clearly, for the owner, managing the efficiency of water use can have financial benefits. Even when the expenses are passed through, vacancies will hit the owner’s books, and if your water costs are higher than competing properties, you may lose an edge on leasing.
The benefits, however, do not stop with NOI improvement. Water scarcity and water quality can also impact the value of your real estate. The Florida Realtors Association, in one study, found that a single county in Florida experienced a property value increase of around $541 Million due to improved water quality in the region. Managing water quality and your communities impact on the surrounding water reserves can help mitigate value from literally going down the drain.
When it comes to thinking about water, sometimes our thoughts stop with costs. While saving money can be compelling on its own, water is a resource that also has a direct impact on the communities we build and operate in, and that impact goes well beyond merely saving actual gallons of water.
Water rarely makes its way to your property without energy. It takes energy to extract the water, treat it, pump it and transport it, and once it arrives on site, in some applications, heat it as well. Then when we are done with it, we have to again direct it to a clean-up facility which takes additional energy. Not only does it take energy to get the water to us, but water is used in the energy production itself, from hydropower to steam in thermodynamic energy generation; the nexus between energy and water is completely interwoven.
In a 2021 study, the UC Davis and LADWP collaborated on an energy-water conservation study to examine the relationship between water use and greenhouse gas emissions. That study found that in the State of California, 20% of the state’s total electrical consumption and 30% of the non-power plant natural gas consumption was used to “move, treat, and heat water.” The study also conclusively demonstrated that saving water saves energy and verified that the estimated energy savings secured through water conservation was cost-competitive with energy efficiency programs.
Like fossil fuels, fresh water is a limited resource, but unlike many other limited resources, this one is vital to our survival. Life itself requires fresh water. As our global population increases, the need for further industrialization and agricultural development also increases, consequently increasing the demand for freshwater. At the same time, however, the impact of climate change on the global water cycle is clear and can be demonstrated through more severe and extreme weather events.
You might be wondering - exactly how is the water cycle impacted, but as air temperatures increase, more water evaporates into the air. Warmer air can hold more water, leading to more intense rainstorms and extreme flooding. Within the past few weeks, we saw evidence of this from St. Louis to Las Vegas as flash flooding impacted both communities due to the amount of rainfall each received over a short period. This can also be observed in the behavior of hurricanes which tend to hold more water, as evidenced by Hurricane Harvey in 2008. That increased water evaporation also impacts us in the form of drought, as Lakes Mead and Powell are currently providing visual examples. Lake Mead, since 2000 has lost 60% of its volume and fallen 130 feet, which is directly related to the Colorado River Basin drought.
Across the Southwestern US, we see the impacts of what happens when water supplies drop below the need of the region. Farmland is lost, and the dry land left behind is vulnerable to fires, the emission from which lead to toxins being released into the air. It is a brutal cycle, but it can get worse. Did you realize that droughts can also destabilize governments and even contribute to wars? Look no further than Syria, which was hit by three intense droughts from 1980 to 2010, with the most recent lasting from 2006 to 2010. That drought alone was recorded as the worst multiyear drought recorded in 900 years. The result saw crop failures and 1.5 million rural workers immigrating from now barren land into cities looking for work. The destabilization left in its wake a political crisis that pulled the national government into a tailspin, and soon those impoverished farmers became prime candidates for terrorist recruiters from groups like the Islamic State or ISIS. The end result was the displacement of over 6.6 million people and a global humanitarian crisis.
Water is serious business, as is conserving it. For investors, water stress is often overlooked, but the problem is likely to intensify in the decades ahead and can have financial implications, as spelled out in the Blackrock report, “Troubled Waters.” This study used global real estate investment trusts (REITs) to illustrate how exposure to water stress can vary by location and time. The study leaned on the WRI’s “Aqueduct model” to assess the REITs exposure to various water stress risks both today and in the future. The results for the US looked like this:
The study found that 66% of the REIT properties in the US will experience high water stress by 2030, more than double the current number impacted. The study presented a thesis that while the risks may be mitigated, over time, the financial implications will become increasingly material and may negatively impact investment performance. Likewise, the study concluded that properties resilient to water stress may fetch a premium, providing opportunities. Better understanding and quantifying of the risks were highlighted as important in helping investors to mitigate exposure and potentially exploit any mispricing.
So what can we do?
The first step is to educate ourselves. What is the impact of water on multifamily real estate? Do we even know how much water the average unit uses?
The 2018 study, “Water Use in Multi-Family Housing Sector,” examined the consumption in 6 US cities. The interesting thing I took from this comparison was while there was more usage in single-family vs. multifamily, the habits of multifamily residents seem to be fairly similar regardless of location, while single-family resident uses swings depending on location. Some of this may be related to factors like exterior water use, seasonality, and household size, but the difference in user behavior was interesting.
Understanding what the use is, the next step is understanding where the use is. Research by both the National Association of Home Builders and Water Research Foundation outlines the following characteristics of water use:
Almost exactly half of the residential water use consists of water used outside the home (e.g., for watering lawns).
Indoors, the biggest user of water is toilets, followed by showers, faucets, clothes washers, and leaks.
Specifically for single-family homes, those homes built before 1960 tend to use less water, possibly because they are less likely to have swimming pools. After that, average water use varies only slightly among single-family homes of different vintages.
For the multifamily property owner, the split of indoor and outdoor water consumption requires developing water conservation strategies for both end-use streams.
Exterior-water consumption is primarily irrigation related. Strategies to reduce the amount of water used for irrigation include planting native species, installing “smart controllers,” and the use of xeriscaping in site development, in addition to reducing the amount of turf in general.
When we turn to internal, the toilet is responsible for roughly 65% of all internal unit consumption and should be the initial focus. The flap valve located inside the toilet tank is the culprit for a large number of those leaks. These devices typically do not adequately seal and allow for a small but continual leak that may not be noticed by the occupant.
Our maintenance teams contribute to this by using low-cost, “universal” flap valves, which tend to come close to but not entirely stop water from leaking down the back drain of the toilet. While well-intentioned, the dollar saved in buying the low-cost toilet valve is quickly lost to the water loss costs.
Of course, in new construction or renovation, we can specify more water-efficient toilet fixtures such as the Niagra Stealth, but that requires calling out performance in the development design and not leaving the model choice to the subcontractor to install based on first dollar cost alone.
If you are a regular reader, you know that data is the foundation of sustainability, and water conservation is no different. Tracking the water consumption of your portfolio is essential. Fortunately, it isn’t uncommon for properties to be master metered for water.
For the landlord, this means they typically have the overall consumption amount, but to encourage conservation by tenants, they need to have some accountability for their water use. The two most common ways to hold tenants accountable for water use are billing back through either submeters or ratio utility billing (RUBs).
While RUBs may seem like the easier route, if permitted in your jurisdiction, two major pitfalls must be considered. The first is the sacrifice of visibility. Submeters, especially connected or “smart” submeters, can provide operators with performance data. This includes often they can be leveraged to detect and alert operators of leaks - and often the technology is built into the water meter you already have installed. You just need to “turn on” the functionality. The second is the messaging RUBs sends - which is it discourages individuals from proactively reducing their personal water consumption. They are charged a percentage of the total building usage, regardless of their personal habits, instead of being rewarded for using less than their neighbors.
Another entrant into the monitoring field is the whole property water meter. Alert Labs Flowie is an example of one such product which installs onto an existing meter and can send alerts for issues such as leaks, temperature, and power. While it is not as specific as a submeter regarding where the leak is, it can provide the initial indication that a leak is active.
While submeters and connected whole building metering solutions provide tremendous insight, you already have one tool that can help with water conservation today - your water bill. The same bill that says how much you owe also contains the amount of water your property used. With that water consumption information in hand, multifamily owners can enter that data into their ENERGY STAR Portfolio Manager (ESPM) account and generate a Water Score.
Similar to the Energy rating in ESPM, the Water Score presents a 1-100 rating of how the property uses water compared to similar properties nationwide. Following the same logic as the ENERGY STAR Score, once the properties are benchmarked, the results can point towards the leaders and lagers of efficient water use within your portfolio. Leaders represent an opportunity to determine what that property team is doing and perhaps to spread those best practices to other properties. Lagers provide direction on where conservation opportunities may be present.
For those properties that indicate higher than expected consumption, here is a worksheet from the Water Sense program that can help the property complete a water assessment:
Multifamily Housing Water Assessment Worksheets (docx) (1.19 MB) (Fillable Word Form)
Supplemental Worksheets (xlsx) (Excel Workbook)
Additional Water Sense resources include resource guides that help multifamily owners to understand the water use of the properties, manage that use and improve it:
Bathroom Resource Guide (15 pp, 1,356 K)
Residential Kitchen and Laundry Guide (16 pp, 1,744 K)
Landscaping and Irrigation Guide (16 pp, 2,733 K)
Mechanical Systems Guide (20 pp, 2,788 K)
You can help reduce the impact of the built environment by sharing this blog with your peers. Together we can impact the 39% of greenhouse gasses attributed to the built environment. It starts with awareness, and we succeed with teamwork.
Stay well!
Chris Laughman is the ThirtyNine Blog author, a blog dedicated to reducing the impact of the built environment. When not blogging, Chris is helping the real estate industry minimize energy and water impact as the Vice President of Sustainability for Conservice, the Utility Experts. Whether Multifamily, Single Family, Student Housing, Commercial, or Military, we simplify utility billing and expense management by doing it for you. Our insight into your utility consumption provides an opportunity to identify risks. Leveraging innovation and experience, we ignite solutions with real impacts and track performance to ensure the trendline stays laser-focused on the goal. At Conservice, we have developed a true bill-to-boardroom solution to help truly make a difference. We have before us a tremendous opportunity. Standing shoulder to shoulder, we will get this done. Contact me at claughman@conservice.com for more information.
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