New HVAC Regulations Have Major Property Management Impact

Sustainability regulations for buildings are coming. To see what they might look like we need to search no further than places like NYC, where strict guidelines have already been set out and fines are already being levied. The entire European Union has also put into place stringent regulation that puts nearly 25 percent of its building stock out of compliance. As regulators across the country and world are looking at both carrots and sticks to coerce buildings to be more sustainable there is more reason than ever to stay ahead of the coming changes.

Since much of the energy that buildings consume is used to heat and cool them it is no surprise that heating, ventilation, air conditioning, and refrigeration (HVACR) are a focus of many upcoming regulations. One metric that is being used to understand a building’s performance is the Seasonal Energy Efficiency Ratio (SEER). It measures how much energy will be used over the course of a year. All new units must meet the minimum efficiency declared by The U.S. Department of Energy SEER ratings. “Across the board, SEER is going up one point. Ultimately, the impact is well more than a point of efficiency. For most manufacturers what that really requires is a redesign, start to finish, of all of your products,” explained Karl Pomeroy, President and General Manager at Motili, an HVAC technology, products, and solutions company.

What does this mean for buildings? According to Pomeroy, “Almost all multifamily buildings in the United States are operating an efficiency level that no longer qualifies as acceptable.”

The more pertinent question for most building owners is: what is this going to cost? “At first, we thought it would be roughly 30 percent more but now we think it’s going to be more than that,” Pomeroy continued. The additional costs can be related to commodity increases, shipping increases, and other key elements throughout the HVACR process. 

Another regulatory trend is the treatment of ‘materials of concern.’ Materials of concern are defined as “any waste, substance or material that is classified, regulated, defined or designated under Environmental Law as radioactive, explosive, highly flammable, hazardous or toxic or as a contaminant or a pollutant, or for which liability or standards of conduct may be imposed.” Many of us are familiar with these through California’s Prop 65 warning labels that frequent many items and places. “Prop 65 has a list of 5,000 chemicals that might cause cancer or reproductive harm,” said Rusty Tharp, senior director of regulatory and industry affairs at Goodman Manufacturing. He said that the warnings have become so ubiquitous that they often don’t mean much anymore, but they are still an important reason that buildings need to be conscious of what materials are considered concerning. 

How can operations, facilities, and procurement teams prepare for the changes? Even though it may seem like their hands are tied or that it’s just too much to think about on top of everything else, it can pay off to start planning today. “Proactive is the new reactive. Where a lot of property owners have waited to have a break and then fix or replace, we suggest getting in front of that,” said Pomeroy. “If you know you have units that need to be replaced in the next one to three years, why not replace today’s units at the lower cost?”

Buildings, and their bank accounts, will fare better if prescriptive measures are taken as soon as possible. “For property owners concerned about cost, I’d recommend doing your replacements today. Change everything now and, when you need to later on, buy replacement parts,” said Tharp. With supply chain issues and labor demands, many suppliers of equipment have had multiple increases in prices as well as delays in implementation. 

Even without the supply chain slowdown, costs are going up because, in order to be more efficient, equipment often becomes more expensive. “In a world where you’ve already been seeing runaway inflation, the average cost of HVAC is north of 20 percent higher already. Now you’re going to introduce new units that add another 15 to 20 percent,” said Pomeroy. “If you’re a multifamily owner that has 1000 units, you could be looking at substantial cost increases.” If items are pricey now, it’s likely they’ll become more expensive in the coming months and years. A good way to know what’s coming down the pipeline is to keep in touch with suppliers and distributors of air products, and to make sure they’re tracking future changes. By having a plan, property owners can schedule replacement work during the spring or fall when contractors have more availability and work for a lower rate. 

In order to stay ahead of the regulatory curve owners and property managers need to start by understanding how the building is operating now, the condition of each mechanical unit, and what will be needed to improve the building’s performance. Owners and operators may benefit from working with those who can provide consultative services for predictive analytics for better budgeting and projected equipment failures. When it comes to increased regulation around how buildings operate it seems like it is a matter of if, not when. The few places that already have regulations intact might be outliers now, but in a few years’ time the rest of the world might quickly follow them to a more regulated and, hopefully, more sustainable built world.