How Solar Energy Can Reduce Operating Costs in Multifamily Buildings

In an era where energy efficiency and sustainability are paramount, the role of solar energy in revolutionizing the way we power our buildings cannot be overstated. Multifamily buildings, in particular, stand to benefit immensely from harnessing the power of the sun. As the demand for affordable and environmentally friendly housing continues to rise, finding innovative ways to reduce operating costs while minimizing our carbon footprint has become a top priority. While many multifamily property owners view investing in solar as an added expense, when done well, solar can actually reduce operating costs for your property. In this blog post, we will explore how solar energy can be a game-changer for multifamily buildings, not only in terms of financial savings but also in promoting a cleaner and greener future for generations to come.

How Solar Power Reduces Operating Costs

The long-term financial benefits of solar power are undeniable, with many multifamily building owners experiencing a remarkable return on investment as savings accumulate over time. By embracing solar power, property owners can unlock a cost-effective and sustainable approach to powering their buildings, making a positive impact on their bottom line while contributing to a greener future. Below are the key ways switching to solar power helps property owners cut down on operating costs.

Reduces Electricity Costs

Utilities often make up the largest portion of a property’s operating costs. Although residents usually pay for their utilities, multifamily building management must pay for utilities used in public or shared facilities. Solar energy can offset common area electricity for parking lot and landscape lighting, office and other shared space lighting, as well as common area electric heat, AC, and water heating. 

By harnessing the abundant energy from the sun, property owners can significantly cut down their reliance on the grid, resulting in substantial savings and mitigating the impact of rising energy prices. Solar power eliminates or greatly reduces monthly electricity bills, offering a stable and predictable energy source.

Increases Resident Retention and Marketing Value

Multifamily buildings rely on residents for income, and thus, must promote and advertise the property to fill in vacancies and reduce turnover rate. A solar-powered property with lower utility bills is attractive to potential residents and is also more likely to retain current residents. Thus, having solar power serves as a form of marketing and cuts down on vacancy costs due to increased retention, more word-of-mouth marketing, and a sustainable amenity that helps your property’s ads stand out in a crowded market.

Lowers Tax Liability

Multifamily solar provides an effective means of reducing tax liability for multifamily building owners. Governments at various levels have recognized the importance of promoting renewable energy adoption and have implemented tax incentives and credits to encourage the installation of solar panels. One of the most notable incentives is the federal Investment Tax Credit (ITC), which allows building owners to claim a percentage of the total solar system cost as a credit against their federal tax liability. The current ITC rate is 30% until 2033, and multifamily buildings can qualify for an even higher percentage through special bonus programs. The domestic content bonus can increase your ITC by 10% if you meet the requirements of using materials made in the USA. Furthermore, multifamily buildings in low-income communities can add another 10% to their ITC, and those who equitably share the solar benefits with residents can add another 20% to their ITC.

Additionally, some states offer their own incentives, such as grants, rebates, depreciation, or property tax exemptions, further reducing the financial burden. These tax benefits not only offset the initial investment but also help accelerate the payback period, making solar power an even more attractive option for multifamily building owners.

Generates a New Net Operating Income (NOI)

The electricity industry has been a monopoly for many years, but onsite solar has changed that. Multifamily building owners can now own their own “virtual power plant”. With the support of Virtual Grid software, the solar on your multifamily building can not only reduce operating costs but also increase revenue with a new NOI. By installing solar panels, building owners can generate their own renewable energy on-site at a low levelized cost. Then, thanks to Virtual Net Metering, the solar power and its benefits can be shared with residents at a price up to the current utility rates. This results in an average of $500 to $1200 of new NOI per unit annually (depending on location).

Implement Solar Energy for Your Multifamily Building with Ivy

The goal of any multifamily building is to have high rental income and low operating expenses. By switching to solar energy, significant operations costs are reduced while providing savings to residents and value to your property. Moreover, solar power installations are often seen as value-added features by prospective tenants, allowing building owners to potentially command higher rental rates and attract environmentally conscious residents. In fact, a survey found that 75% of US adults are willing to pay more for sustainable products.

This combination of increased income and reduced expenses leads to a positive impact on the property's overall financial performance and enhances its long-term investment value. Embracing solar power not only reduces operating costs but also generates a new stream of income, positioning multifamily buildings for greater financial success in an increasingly sustainable and energy-efficient world.

Reduce your building’s operating costs with solar energy. Get a free demo of Virtual Grid today!

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