Sitting On the Three Legged Stool
With the current debate swirling around SmartRegs, I support them, professionally and personally. However, there are some details in the regulations that need correction and further work. As is often stated, the devil is in the details. No one would deny that improving the standard of housing in Boulder, or anywhere for that matter, is a good thing. SmartRegs is a step in that direction. The current outcries for and against this ordinance often depend upon whose ox is being gored. Tenants speak in support with hopes that it will reduce their energy bills, which, in most cases, it will. Negative outcries from landlords, some of which are barely hanging on, are about the mandated work that will cost them scarce money during a bad economic time. Both points are correct. What has been lost in this point-counterpoint debate that has mistakenly focused only on the energy savings to cost ratio promotion, is that it is not financial zero sum game. Debates will rage about how tenants will financially benefit but the reality is that there will be the canceling effect when their rents go up. What is overlooked is that it will reduce affordability in our town which is counter to one of the legs of our three legged stool of a sustainable community: economic. The three legs are economic, social and environmental. SmartRegs will lengthen the environmental leg while simultaneously shortening the economic leg. When each leg of this stool is worked on independent of the other two, the end result is much like chasing the carrot attached to the stick stuck on our back. We’re never going to get there.
To a greater sense this is really more about a comfort and quality of life for tenants. This is a good thing. The reduction in consumption and waste is beneficial to the community and the world as a whole. This is also a good thing. Setting aside landlords protests about costs, improvements to the asset increases their value and demand. This is also a good thing. The promotional focus for SmartRegs should remain on three points: reducing energy consumption, decreasing our carbon emissions, and increasing the quality of life environment.
Funding Dilemmas
What is missing for landlords is a way to fund the improvements. The cost of improvements are eventually recouped through rental increases and tax write offs but the catch for many is in how to pay for them. Some are able to finance out of pocket, some have reserved funds for improvements, and others will have to borrow the money. Currently, financial institutions are only lending to the absolute AAA class of clients. These landlords already maintain their properties in good condition, maintain reserves for unexpected expenses, and enjoy rents near the top of the price range. The properties in need of the most important upgrades and repairs are often the least able to do so. They may be owned by over-leveraged owners or by people that do not manage them properly. Their only option is to make the necessary improvements through the Climate Smart Loan Program. But, its long term ability to be funded is questionable given two recent events. First, voters last year turned down expanding the funding amount. This, despite the fact that this program is not a tax on everyone, but a debt obligation only to those who use it. The second problem that could potentially undermine Climate Smart directly and SmartRegs indirectly is the State Legislature’s attempts to stop or restrict all debt bonding abilities of Colorado public entities, (cities, counties, school districts) through Amendments 60 & 61, and Proposition 101. These bills attempt to eliminate the de-Bruceing fixes to the Tabor Amendment. If voters do not authorize new funding for Climate Smart and the amendments pass, you can say goodbye to the only real option at funding the SmartRegs for a vast majority of Boulder property owners.
The Real Culprits
Over the course of my career in this town, I have witnessed, firsthand, that where the greatest number of violations of non-permitted work, unlicensed rentals and greatest physical challenges to upgrade structures are in older historical homes. Unlicensed rentals units in basements, attics, and garages that were converted to such without permits are a serious life safety issue more than they are an energy problem. A blind eye toward unequal code enforcement and the granting of special exemptions from numerous parts of the city code further exacerbates the problem. Preservation of historical structures is very important, whether they are landmarked or not. For over thirty seven years I have saved and remodeled many of Boulder’s historical structures, some landmarked, some not. All have had physical challenges and expensive options. That means that not everyone can afford these homes. Should the public be subsidizing private ownership where the least able to afford them gain special privileges in the goal of preserving historical structures? These types of structures make up a large number of rental units in the city and are the ones that should be targeted to comply because they have the greatest deficiencies of in energy consumption, carbon emissions, and quality of life environment.
Hardship
Regulations should provide incentives to do the right thing, not punitive threats to force them into compliance. These regulations are the needed nudge when coupled with readily available and well funded Climate Smart loan options. The downside to these regulations is that they could bring owners to a tipping point. It will drive many owners to reassess whether owning the properties is worth it or whether they can hold on in this economic climate. Four years to comply, even with an additional four years is no guarantee that they will be able to come up with the funds either by borrowing or income reserving. Opportunistic investors will be waiting on the sidelines to quickly scoop up those on the edge. This begs the question of why we would not grant the same time and financial assistance that is being offered to the publicly owned affordable housing properties to everyone. The very same challenges outlined in the Affordable Housing sector’s reasons also apply to private individuals. Unfortunately, the horse trading allowing hardship exemptions by purchasing carbon offsets whose funds will be used to upgrade public housing means that only public housing will get fixed. Neat trick, similar to “borrowing from Peter to pay Paul” but does not reduce our carbon emissions. This false zero sum game is really an averaging of emissions at a much higher level and a financing trick for public housing. There are better options to support affordable housing. Carbon offsets are a bad thing and should be eliminated because, while they lessen guilty feelings, they do not solve the problem.
In my career, I have also remodeled and maintained many rental properties for clients and myself. I am also a licensed Building Contractor and rental inspector. A majority of the properties I have inspected are in good to excellent condition with responsible tenants that are eager to live in them. The rental rates are a predictable result of this cause and effect. Those with serious neglect and in need of major work fill the range of “affordable’” rental housing. They fall below a quality of life standard for housing than should be allowed in this city by any human measure. Many of the improvements necessary fall outside the rental license baseline check list and the SmartRegs would not even begin to address the deficiencies of these types of properties. Improvements to these would be a major quality of life improvement for the tenants and go a long way towards reducing our energy waste and consumption. But, the remaining deficiencies would still fall between the cracks.
The Prescriptive Path
SmartRegs’ proposed Prescriptive Path guidelines point system has missing and nonsensical points for some of the categories. At its root goal, SmartRegs is about carbon emission reductions. There are no points given for electrical power that is Windsource originated. Xcel clients that choose Windsource, pay a premium and in the current regulation would not get credit for the easiest way an owner and tenant can reduce their carbon footprint. The Prescriptive Path points for Windsource should be up in the same range as solar generated power sources. These alternate energy sources do more than carbon offsets ever will. Give people more time if needed but avoid creating more bureaucracy via government run money pools.
Points are not given for natural cooling methods such as opening windows or doing so in conjunction with ceiling fans. Giving two points for ceiling fans or whole house fans versus eight points for air conditioning encourages going the carbon emitting air conditioning route. Also, there is potentially too much ambiguity with the city discretionary review for Passive Solar Design option. I have constructed many passive solar homes that have extremely low to net zero energy costs. Will discretionary review necessitate extensive documention, costing time and money, to prove your case?
Unintended Consequences
The last point I want to make addresses the constant pitch that these regulations “will be cheap to comply with so just do it”. Some options will, but many won’t. What is forgotten when we create new ordinances without dovetailing them carefully into existing ones, is the resulting adage: sometimes the best of intentions can produce the worst results. Case in point: any electrical work performed to meet the SmartRegs that requires obtaining a permit will trigger making the structure totally comply with the smoke detector requirements under current city ordinances and the National Electric Code. That requirement means that a smoke detector must be inside each and every bedroom and outside of each of them in a common room and that they must be hard wired and interconnected. This is a life safety issue that is a good thing because battery operated smoke detectors, while better than none, often fail to perform at the critical moment due to bad batteries or complete removal. I have inspected many student occupied units only to find they have removed the batteries because “they kept going off”. The code was changed to counteract this problem and it means electrical work in the range of $1,500- $3,000 per unit would have to be performed, far from a simple $600 upgrade.
My fear, with every new regulation we pass, is the entrenchment of a culture of avoiding the painful route. Many tell me that it is easier (and cheaper) to ask for forgiveness than it is to ask for permission. The end result, though, is that this drives rentals back underground and increases remodels using unlicensed trades performing very questionable work without permits. That is not the comfort and quality of life results that any of us desire.
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