Energy efficiency mandates are moving fast. As of 2025, around 50 U.S. cities require multifamily owners to report energy use or meet benchmarking requirements, and a growing number of those cities have enacted formal Building Performance Standards that come with performance targets and financial penalties for noncompliance. For rental housing providers operating across multiple markets, keeping up with this patchwork of rules is no small task.
A new study published in the International Real Estate Review sheds important light on how apartment owners and operators are experiencing these policies on the ground. Produced by researchers at the Massachusetts Institute of Technology Center for Real Estate and Department of Urban Studies and Planning, and developed with the support of the National Apartment Association, the study draws on in-depth interviews with executives from 13 multifamily real estate firms to capture the compliance challenges, cost dynamics as well as tactical responses directing the rental housing industry's approach to building decarbonization.
The study found that rental housing providers are not against energy efficiency goals. They want policies that match how the real estate business really works.
About the Study
MIT researchers conducted interviews with senior professionals at 13 apartment companies between February and June 2025. Participants were recruited through NAA and represented a varied cross-section of the industry, including 1 international, 7 national and 5 regional firms. The sample spanned luxury, market-rate and affordable segments, and included owners and operators in both high-regulation and low-regulation markets. Interviewees held roles ranging from executive vice presidents of operations to sustainability directors and asset management leads, guaranteeing the findings reflect both strategic-level thinking and on-the-ground realities.
The Big Picture
Multifamily buildings account for approximately 32% of the U.S. housing stock and provide homes for more than one-third of all U.S. households. In dense urban markets where BPS policies have taken hold, including New York, Boston, Washington, D.C., Seattle, and Los Angeles, multifamily properties account for 30% to 40% or more of total building-sector emissions. That concentration explains why the compliance stakes are so high for rental housing providers.
Cities have taken very different paths. New York City's Local Law 97 sets carbon limits by building type and fines $268 for every extra metric ton of CO2. Boston's BERDO 2.0 requires yearly emissions reports, with fines up to $1,000 per day if you don't comply. Washington, D.C.'s BEPS uses ENERGY STAR scores and energy benchmarks, while Denver's Energize Denver sets its own targets and fines up to $0.30 per extra kBtu. This lack of consistency is a major frustration for rental housing providers.
Owners and Operators Are Not Against Energy Efficiency. They Are Against Policies That Do Not Work.
The study found that attitudes toward BPS varied significantly by firm type and market context, but a consistent theme surfaced across the board, which is that owners and operators are not pushing back on the goal of reducing emissions. They are pushing back on the design and implementation of policies that impose real costs without providing realistic pathways to compliance.
Out of seven firms that spoke about whether BPS fit today’s market, four strongly disagreed, including all three regional firms and one national firm. They felt the policies were more political than practical, did not consider real estate economics and changed too often from city to city.
The other three firms, which had experience with sustainability, had more balanced views. They did not reject BPS but wanted better data to set fair targets, more industry input in policy-making and incentives that multifamily operators can actually use.
- "BERDO is frightening. I mean, we have 12,000 apartments in Massachusetts across 75 locations. If we had 75 sets of rules, forget about it. We're not gonna invest here."
Many interviewees mentioned that these policies are making them hesitate to invest. Some firms have delayed buying or developing properties in places with strict rules, not because they oppose energy standards, but because the costs are unclear and the rules keep changing.
The Bottom Line Still Matters Most
When it comes to investment decision-making, the research confirmed that the bottom line drives the decision. Interviewees made it clear that upfront cost and return on investment are the primary filters for any capital expenditure, including energy-related upgrades.
The study also found that many firms are increasingly thinking about energy efficiency through the lens of asset value rather than solely in terms of operational savings. Improving net operating income by reducing utility costs directly affects property valuation, and that framing is gaining traction throughout the industry.
- "If I can reduce those expenses, my NOI improves, and therefore the asset value can improve. If I do a solar project on a building, it does more than just reduce the cost of electricity. It increases the NOI. When I consider the cap rate, it just increases the value of the property."
Firms said that the best time for energy upgrades is when they already plan to replace equipment, like old HVAC systems or during building renovations. When mandates force upgrades on a different schedule, it can lead to rushed choices and picking cheaper, short-term fixes instead of better long-term investments.
Incentives Help, But Gaps Remain
Rental housing providers were genuinely enthusiastic about financial support tools like rebates, green loans, and help with energy audits. They mentioned programs that worked well, such as Massachusetts' MassSave, which helped with LED lighting and thermostat upgrades, and New Jersey's Clean Energy Program, which supported high-efficiency boiler installations.
However, the study found big gaps in these programs. Rebates are usually state-specific, funding and rules change every year, and the incentives often do not match what a property actually needs. Owners and operators pointed out that upgrades like electrical system improvements and transformer replacements, which are often needed for electrification, are usually not covered by rebates, even though they are required for other improvements.
Programs backed by Fannie Mae and Freddie Mac were seen as attractive options, though not universally accessible. Interviewees overwhelmingly called for incentives that are consistent, predictable and available across all states, rather than the fragmented, program-by-program landscape that currently exists.
The Resident Equation
One big challenge the study found is the split-incentive problem. Rental housing providers pay for energy upgrades, but residents get most of the savings through lower utility bills. This mismatch discourages investment, especially in affordable housing, where profit margins are already low.
The study confirmed that resident awareness of building performance standards is very low. Most residents do not know what BPS are, and even those who express general support for sustainability goals have limited willingness to pay higher rents to cover compliance costs. One interviewee estimated that only 20 to 30% of residents have a meaningful personal devotion to energy efficiency and a demonstrated willingness to absorb the associated costs.
Owners and operators also noted that LEED certification and similar green designations have not historically translated into measurable rent premiums in most markets. Even luxury apartment rental housing providers estimated that energy upgrades could justify rent increases of less than $100 per unit, which is far short of recovering the principal investment. Affordable housing providers described an even more constrained reality, noting that their rent levels are set by what residents can afford, allowing little space to pass through compliance costs.
What Actually Appeals To Residents
The study found that the best way to get residents to support energy improvements is to focus on things they already care about, like comfort, reliability and indoor air quality. In a survey of about 2,500 residents, indoor air quality was the top priority, with energy efficiency close behind.
Companies that clearly explained the reasons for changes and showed how upgrades improved living conditions saw more stable occupancy and easier rent increases. One regional operator said they raised rents by 4% to 5% after installing high-efficiency boilers, and occupancy stayed steady because staff explained how the new systems improved comfort and service.
- "Being able to clearly communicate 'Why am I paying more? Why is this regulation being put into effect?' is foundational."
What Needs to Change
- Policy Design Must Reflect Industry Realities: The study's main policy recommendation is that rental housing providers need a seat at the table when building performance standards are developed. Interviewees expressed deep frustration with mandates that appear to have been written without significant participation from the people responsible for implementing them, particularly when the technical and monetary realities of multifamily operations are not reflected in the final rules. Owners and operators also called for more consistent standards across jurisdictions. Managing 75 different sets of compliance rules across 75 properties in a single state is not a workable framework for any organization, regardless of its commitment to sustainability goals.
- Workforce Development and Supply Chain Investment are Falling Behind. Several interviewees said the industry does not yet have enough trained workers or the supply chain needed to handle energy upgrades at the scale BPS policies demand. Long wait times for equipment, changing refrigerant standards, and electrification requirements all add to the training needs for facility teams. Interviewees called for ongoing investment in hands-on training for managers and engineers, and for supply chain improvements to make equipment easier to get and more affordable.
- Better Data Access Is Critical: A major barrier to compliance and investment is the lack of whole-building utility data available to owners. In most cases, residents contract directly with utility companies and pay their own bills, leaving owners with no visibility into actual consumption patterns throughout their properties. Without that data, it is difficult to measure the impact of energy investments, build a credible business case for upgrades or meet reporting requirements under benchmarking programs. Interviewees noted that individual firms negotiating data-sharing agreements with utilities are rarely successful, but that collective industry action could change the dynamic.