Solar Power and the Power of Numbers
Homelessness and Renewable Energy
169, 164, 5, 10, 2, 25, 19, 30, 0.
The above series of numbers has real significance in a lot of lives, and I think they are the keys to the answers to broad questions about homelessness, the economy, and the environment.
In my home state of CT, there are 169 cities, towns, and municipalities combined. 5, New Haven, New London, Waterbury, Bridgeport, and Hartford have the state mandated amount of affordable housing of 10% of all current housing stock. The other 164 have, on average, 2% affordable. There is opportunity right there.
After doing a bunch of research on the internet, I found out an amazing fact: 25% of all evictions come from people who paid their rent, but couldn't pay their utility bills. The cost of energy put them on the street. What is the community cost for this problem? Other than having people living in alley ways and cardboard boxes, city streets are less safe with large amounts of homeless about. Because those cities are less safe, people with money are less likely to spend it in commercial areas of that city. Because there is less commerce, the local, and by assumption, the national economy suffers. Less jobs result. More unemployment. More unemployment results in greater homelessness, and on and on we go.
So, for argument's sake, let's just address that 25% of the homeless who can't pay their energy bills, because if you had a way of curing 25% of all homelessness, you would lauded a national hero. Now, if all affordable housing were constructed in such a way that the units all had an R-value (meaning, the rate at which heating and cooling escapes from a dwelling) of at least 19, the cost of fueling these homes would decrease dramatically. If you were to build these dwellings with exterior wall integrity, and an interior wall within which you could put all your plumbing and electric, you could achieve an R-value of 30, nearly twice the energy savings. On top of that, if you were to put into place solar panels on the rooves of these housing complexes, with a fuel cell back-up and a geo-thermal HVAC system, you could well nigh get energy costs down to zero (0). Theoretically, 25% of all homelessness would disappear as a result of this renewable energy source design of affordable housing.
OK, so now you, as a landlord of affordable housing and local hero for decreasing homelessness by 25%, let us say, you now have an additional 5 percent of revenues because folks don't get evicted for not paying their electric bill or because they don't have to choose between paying rent or paying for heat. Also, because tenants don't have to pay any utilities you can charge an extra 50, 100, 200 dollars per unit, and because tenants and housing authorities take these additional savings into account, thus you are making substantially more in general income. Fewer surprises, fewer disaster scenarios. More settled tenancy. Less stressed landlord. We are talking better conditions for everybody all the way around. The question before us then is what is that worth?
If you look at it mathematically, it is worth a whole hell of a lot. Take a housing complex with 100 units. Say you would normally charge 600 dollars per month per unit, and utility costs per unit are 100 dollars per month per unit. Under that set of circumstances, you figure the value of a unit is approximately 100 times more than the monthly rent. So these above described units are worth 60,000 dollars a piece, and thus the entire complex is worth 6 million dollars. Not too far off from reality. So your pro forma gross income would be 720,000 per year. Take off 40% for traditional costs, insurance, heat and hot water, water and sewer, hallway electric, etc... and your net is 432,000. You have a cap rate of 7.2%. Fairly nice deal.
However, let's say you invested in building this thing with solar, fuel cell, geo-thermal. Let's try to figure out what the value of those energy sources mean to you. OK, now, by conservative logic applied above, you prevent 5% on your vacancy rates. That's worth 36,000/year. Similarly, you can now charge an additional 50 dollars per unit. That's 60,000/year. You have no heat and hot water costs to speak of. You have no common area electric bill. Let us say you would save 50 dollars/ unit/month, which again is a very conservative estimate, but we will use it. That equals another 60,000. So total extra money in the landlord's pocket is 156,000 per year. If we were to extrapolate, using the above 7.2 cap rate, the additional income would embue your project with another $2,166,666.67 worth of resale value. The issue becomes, would that utilization of renewable energy sources in building 100 units cost you over two million dollars above and beyond what you would spend on HVAC and electric systems in conventional construction. The answer is most definitely not! No way. You have units that cost you 60,000 apiece. Now they wouldn't cost you 81,666 per unit. What exactly it would cost would depend on a myriad of circumstances, but the point being made is building affordable housing with renewable energy systems seems to be the only way that makes sense. Love to hear a strong arguement against the above. I can't find one myself.
The Numbers Joke
A young comedian finally, after a series of successful stand-ups at the local nightclub, gets the invitation to join a bunch of comedians who get together every night at the local Friars Club to eat dinner and tell jokes. When he arrives at the Friars, he watches as comedians stand up in front of their compadres and start yelling out numbers, 11, 55, 1102, and such and the entire audience cracks up laughing after every single shouted number. The youngster leans over toward the comedian next to him and asks what's going on, and the elder answers, "We have been doing these dinners for so long, the jokes are such old hat, they now just call out the numbers of the jokes that we have at this point simply catalogued in our heads, and folks know what the joke is and they laugh."
The youngster thinks this is great, so with a little gumption and a few strong drinks under his belt, he makes his way up to the dais, and leans into the microphone, takes a deep breath, and says, "112!"
No response.
He tries again. "400!"
Nothing.
He looks around the room and sees dozens of comedians staring at him with straight, somber faces.
He takes another deep breath, and blurts, "2!"
Silence.
Defeated and stunned, he returns to his seat and sits down completely done in by his failure. He sits and stares dumbly for quite sometime, unable to gather his thoughts let alone say anything. Finally, the elder comedian next to him pats him on the back for consolation. With that the youngster asks, "Why didn't they laugh? I gave out numbers just like everybody else, and when they said numbers, people laughed like crazy. Why?"
The elder says with a sad grimace, "It's all in the delivery, kid."
169, 164, 5, 10, 2, 25, 19, 30, 0.
The above series of numbers has real significance in a lot of lives, and I think they are the keys to the answers to broad questions about homelessness, the economy, and the environment.
In my home state of CT, there are 169 cities, towns, and municipalities combined. 5, New Haven, New London, Waterbury, Bridgeport, and Hartford have the state mandated amount of affordable housing of 10% of all current housing stock. The other 164 have, on average, 2% affordable. There is opportunity right there.
After doing a bunch of research on the internet, I found out an amazing fact: 25% of all evictions come from people who paid their rent, but couldn't pay their utility bills. The cost of energy put them on the street. What is the community cost for this problem? Other than having people living in alley ways and cardboard boxes, city streets are less safe with large amounts of homeless about. Because those cities are less safe, people with money are less likely to spend it in commercial areas of that city. Because there is less commerce, the local, and by assumption, the national economy suffers. Less jobs result. More unemployment. More unemployment results in greater homelessness, and on and on we go.
So, for argument's sake, let's just address that 25% of the homeless who can't pay their energy bills, because if you had a way of curing 25% of all homelessness, you would lauded a national hero. Now, if all affordable housing were constructed in such a way that the units all had an R-value (meaning, the rate at which heating and cooling escapes from a dwelling) of at least 19, the cost of fueling these homes would decrease dramatically. If you were to build these dwellings with exterior wall integrity, and an interior wall within which you could put all your plumbing and electric, you could achieve an R-value of 30, nearly twice the energy savings. On top of that, if you were to put into place solar panels on the rooves of these housing complexes, with a fuel cell back-up and a geo-thermal HVAC system, you could well nigh get energy costs down to zero (0). Theoretically, 25% of all homelessness would disappear as a result of this renewable energy source design of affordable housing.
OK, so now you, as a landlord of affordable housing and local hero for decreasing homelessness by 25%, let us say, you now have an additional 5 percent of revenues because folks don't get evicted for not paying their electric bill or because they don't have to choose between paying rent or paying for heat. Also, because tenants don't have to pay any utilities you can charge an extra 50, 100, 200 dollars per unit, and because tenants and housing authorities take these additional savings into account, thus you are making substantially more in general income. Fewer surprises, fewer disaster scenarios. More settled tenancy. Less stressed landlord. We are talking better conditions for everybody all the way around. The question before us then is what is that worth?
If you look at it mathematically, it is worth a whole hell of a lot. Take a housing complex with 100 units. Say you would normally charge 600 dollars per month per unit, and utility costs per unit are 100 dollars per month per unit. Under that set of circumstances, you figure the value of a unit is approximately 100 times more than the monthly rent. So these above described units are worth 60,000 dollars a piece, and thus the entire complex is worth 6 million dollars. Not too far off from reality. So your pro forma gross income would be 720,000 per year. Take off 40% for traditional costs, insurance, heat and hot water, water and sewer, hallway electric, etc... and your net is 432,000. You have a cap rate of 7.2%. Fairly nice deal.
However, let's say you invested in building this thing with solar, fuel cell, geo-thermal. Let's try to figure out what the value of those energy sources mean to you. OK, now, by conservative logic applied above, you prevent 5% on your vacancy rates. That's worth 36,000/year. Similarly, you can now charge an additional 50 dollars per unit. That's 60,000/year. You have no heat and hot water costs to speak of. You have no common area electric bill. Let us say you would save 50 dollars/ unit/month, which again is a very conservative estimate, but we will use it. That equals another 60,000. So total extra money in the landlord's pocket is 156,000 per year. If we were to extrapolate, using the above 7.2 cap rate, the additional income would embue your project with another $2,166,666.67 worth of resale value. The issue becomes, would that utilization of renewable energy sources in building 100 units cost you over two million dollars above and beyond what you would spend on HVAC and electric systems in conventional construction. The answer is most definitely not! No way. You have units that cost you 60,000 apiece. Now they wouldn't cost you 81,666 per unit. What exactly it would cost would depend on a myriad of circumstances, but the point being made is building affordable housing with renewable energy systems seems to be the only way that makes sense. Love to hear a strong arguement against the above. I can't find one myself.
The Numbers Joke
A young comedian finally, after a series of successful stand-ups at the local nightclub, gets the invitation to join a bunch of comedians who get together every night at the local Friars Club to eat dinner and tell jokes. When he arrives at the Friars, he watches as comedians stand up in front of their compadres and start yelling out numbers, 11, 55, 1102, and such and the entire audience cracks up laughing after every single shouted number. The youngster leans over toward the comedian next to him and asks what's going on, and the elder answers, "We have been doing these dinners for so long, the jokes are such old hat, they now just call out the numbers of the jokes that we have at this point simply catalogued in our heads, and folks know what the joke is and they laugh."
The youngster thinks this is great, so with a little gumption and a few strong drinks under his belt, he makes his way up to the dais, and leans into the microphone, takes a deep breath, and says, "112!"
No response.
He tries again. "400!"
Nothing.
He looks around the room and sees dozens of comedians staring at him with straight, somber faces.
He takes another deep breath, and blurts, "2!"
Silence.
Defeated and stunned, he returns to his seat and sits down completely done in by his failure. He sits and stares dumbly for quite sometime, unable to gather his thoughts let alone say anything. Finally, the elder comedian next to him pats him on the back for consolation. With that the youngster asks, "Why didn't they laugh? I gave out numbers just like everybody else, and when they said numbers, people laughed like crazy. Why?"
The elder says with a sad grimace, "It's all in the delivery, kid."
Labels: affordable housing, cap rates, connecticut, fuel cells, jokes, numbers, renewable energy, socially responsible investment, solar energy
posted by milesjason03 at 9:31 AM
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