In June 2022, the Biden Administration announced new executive actions to spur clean energy manufacturing, including invoking The Defense Production Act (DPA) to accelerate domestic production of technologies such as solar panels and building insulation. Historically, the U.S. has struggled to compete with foreign manufacturing of clean energy components, which require a robust supply chain. U.S. energy manufacturing involves investors, scattered suppliers, labor competition, and transportation costs; it’s no wonder that nations who have better optimized their supply chains have won the price competition battle.
The impact of these recent executive actions may not be felt immediately. However, forward-thinking real estate leaders have an immediate opportunity to ride this momentum, and to leverage future investments made in domestic clean energy production. These groups have an opportunity to act now to adopt solutions like solar, home energy efficiency, and monitoring - at scale - to accelerate this U.S. transition to clean energy, one rental property at a time.
More Power to Homeowners, Managers, and Investors
In the next decade, it's predicted that 12 percent of all new homes built in the U.S. will be single family rentals (SFR). Many of these homes are owned by larger investment groups and management companies. The DPA will reduce the costs of adopting clean energy for individual residential customers, as well as property managers owning and operating portfolios of single-family homes.
Lower costs and higher availability of materials will make energy efficiency retrofit projects in the SFR market more viable. Homes that have been upgraded with renewable generation, efficient appliances, and energy monitoring are transformed from sources of strain on the grid, to potential assets for decarbonization and utility support. What’s more, reducing emissions produced by millions of single-family homes will propel the real estate industry toward a more sustainable future.
Amid all the momentum driven by legislation and heightened private sector innovation, many American renters are still left out of the equation when it comes to residential clean energy technologies. Supply chain and cost barriers aside, we have an abundance of options for retrofitting homes to increase energy efficiency and boost clean energy production. Since renters do not own their homes, most don’t know how or if they can approach these upgrades. By leveraging local and national incentives and price structures to bring these technologies to entire portfolios at scale, SFR owners and management companies are not only lowering their carbon footprint, they are introducing more Americans to the benefits of a sustainable and efficient home. Owners that pursue clean energy projects in their rental communities are investing in the planet, and laying the foundation for their renters to one day become homeowners with mindful energy-efficient habits.
The DPA makes the integration of clean technology more accessible, both through new home construction and existing home upgrades. Many of the materials needed to complete these projects will be manufactured in the U.S., eliminating international fees or tariffs, and shortening wait times for production and delivery. And, with a two-year bridge on select solar imports from countries like Cambodia, Malaysia, Thailand, and Vietnam (currently in effect), any essential technologies or components that cannot be sourced from U.S. manufacturers will also be lucrative options for maintaining momentum of clean energy projects.
More reliable access to quality materials, from a broad variety of U.S. and international PV and battery technology manufacturers, will help SFRs reduce the carbon footprints of their portfolios - and better utilize the clean energy they generate and store. Opportunities for improving energy efficiency in SFRs are widespread; they extend beyond just energy generation and addressing inefficiencies such as improper insulation or outdated appliances. The emissions reductions that come with clean energy sourcing and enhanced energy efficiency can also serve as strong ESG proof points in real estate portfolios for investors and developers.
Taking Efficiency from Rental Communities to the Grid
U.S. reliance on foreign countries (i.e., China) has disrupted the energy supply chain, and significantly impacted the clean energy industry by extending the timelines for residential and commercial clean energy projects designed to lower emissions and support utilities in their efforts to modernize grids. The DPA will strengthen our domestic solar and grid manufacturing industries, and help lower utility costs. Coupled with low- or no-tariff imports of components from international suppliers, we’ll see increased availability and a greater variety of technologies; even small-scale retrofit projects, like those owned by SFRs, will be able to contribute to meaningful change in clean energy generation and smarter energy use.
As the industry, and society at-large, waits to see how the DPA will go into effect, SFR operators must act on this opportunity to lead meaningful change. These executive actions have been introduced at a time of increased consumer demand for clean energy and home efficiency technologies. Heightened awareness of the lasting impact inefficient homes can have on the environment presents the perfect opportunity for property managers to invest time and resources into upgrading the efficiency of their portfolios.