Boosting the Value of Multi-Family Units With Smart HVAC Upgrades

Dating back to its origins in economics and marketing theory in the 18^th and 19^th centuries, the value-based pricing principle states the price of a product or service is determined by its perceived value to the customer, rather than just its production cost.

When it comes to multifamily units, landlords can increase the value of their dwellings by outfitting them with high-quality, high-tech, high-efficiency HVAC equipment that will not only help to save both the tenant and building owner money, but also offer increased quality of life, and thereby increased rates and profit margins.

Adding amenities like smart thermostats and heat pumps are just a couple of the ways landlords can leverage HVAC to attract tenants, and capture some of the incentives currently being offered by the government and utility companies, while also making things easier on those tasked with managing the property.

Brass Tacks and ROI

All new technology and practices are good on paper, but when it comes to selling equipment and upgrades to the management personnel, they’re going to scrutinize whether the investment is worth it.

When pitching these upgrades, it helps to start smart.

New smart thermostat upgrades are an easy way to enhance energy savings, as they can learn occupants’ daily routines and make adjustments accordingly.

“The ability to monitor and control multiple units remotely can lead to a 10-15% reduction in heating and cooling costs,” said David Rames, senior product manager, Midea.

Making sure those smart thermostats are connected to systems like the Midea EVOX G³ Heat Pump and the Packaged Window Heat Pump (PWHP) can also increase the value of multifamily facilities, Rames added, by improving energy efficiency, lowering operational costs, and providing superior comfort. For landlords, these systems can become a key differentiator in the competitive rental market.

The decreased energy usage is also a selling point when attracting tenants.

“For landlords, installing high-efficiency heat pumps and smart thermostats allows them to promote energy savings that can then be passed on to tenants or used as a value proposition to increase rental income,” Rames said. “Additionally, connected smart thermostats offer tenants control over their energy usage, enhancing comfort while helping to reduce waste. This type of technology can differentiate a property in a competitive market, driving higher demand.”

In the case where a landlord is covering the cost of utilities for their tenants, Penny Lasater, senior product manager, residential ducted systems, Johnson Controls, said smart HVAC equipment can offer substantial annual savings with energy use and operational costs, as high-efficiency heat pumps and smart thermostats allow the systems to maximize efficiency, which can reduce energy use.

COMPACT: Some high-efficiency products, like the York HH8 Side-Discharge Heat Pump, come with the added benefit of compacted size, meaning they can be stacked, placed under raised decks, or installed in zero-lot-line neighborhoods. (Courtesy of Johnson Controls)

“The potential for significant energy savings can greatly benefit both tenants and landlords of multifamily buildings,” Lasater said. “A high-efficiency heat pump, for example, can offer up to a 50% energy savings compared to older, low-SEER models. When paired with a smart thermostat, higher-end HVAC systems can offer additional energy-saving features such as adaptive temperature control, zoning capabilities, and demand-response to lower energy costs during periods of peak demand.”

The trade-off with high-efficiency systems is a higher initial investment. However, landlords may currently stand to benefit and offset some of these costs by utilizing programs offered through the IRA, as well as local utility rebates and incentives.

“Two incentive programs available to multifamily buildings include the Home Owner Managing Energy Savings (HOMES) Rebate Program, which provides funding for retrofits, and 45L tax credits, which offer funding for new construction and major retrofits,” Lasater said. “Further, energy-efficient upgrades can boost the overall value of the property and command higher rental rates.”

Rony Cherian, product manager and application engineer at Friedrich Air Conditioning, noted that next-gen HVAC heat pump technology offers a promising solution for a sustainable and efficient future and, when paired with remote access technology, can be accessed from a web and/or mobile application, enabling effective management of multiple properties at once.

Integrating high-tech, energy-saving methodologies is often not difficult and will help to reduce dependence on fossil-fuel-based heating in the long run.

“While fossil-fuel and electric resistance heating are effective at regulating temperature faster, they are often inefficient and very expensive,” Cherian said. “In contrast, modern heat pump technologies, such as cold-climate heat pumps, offer efficient heating with coefficients of performance (COPs) over 2, even at -5°F. This indicates we receive twice the amount of heat for every unit of input power. Additionally, smart temperature controls enhance savings by learning occupants’ daily routines and adjusting home temperatures accordingly.”

To top it all off, Cherian also noted these upgrades can help increase the property’s value and enhance tenant satisfaction.

MODERN ERA: Modern heat pump technologies, such as cold climate heat pumps, offer efficient heating with coefficients of performance (COPs) over 2, even at -5°F. (Courtesy of Friedrich)

Retrofitting and Raising Value

“Simple upgrades, such as replacing existing thermostats with smart thermostats, updating packaged units with heat pumps, or changing from a single-speed system to two-stage or an inverter system, typically require minimal changes to existing infrastructure,” Cherian said. “In some cases, major renovations may be necessary, such as drilling 10-inch/12-inch holes for adding a dedicated fresh air module or an economizer. However, there are also packaged units available that include fresh air and economizer options within their chassis, simplifying that integration process.”

Heat pump and smart thermostat renovations are also often less disruptive than more invasive HVAC replacements and aren’t considered difficult.

“Multifamily property managers can also schedule staggered installations across different units to minimize downtime,” Rames said. “The benefits of reducing energy costs and increasing tenant comfort far outweigh the challenges of retrofitting.”

Most modern HVAC solutions are designed for easy integration with minimal disruption to existing structures, Lasater said, and the retrofit process is generally feasible through incremental upgrades, compatibility assessments, and professional consultation.

“Additionally, available rebates and incentives, such as those available through energy providers and the IRA, can help offset installation costs, making upgrades more accessible,” Lasater said. “The long-term energy savings and increased property value typically justify the investment in many instances, making the integration process worthwhile.”

Aside from smart thermostats, Lasater noted that zoned HVAC systems, energy management systems (EMS), and remote monitoring solutions are also viable additions that can streamline property management.

The biggest thing is remote access, which allows guardians of the system the ability to oversee all of their units from a web and/or mobile application, enabling effective management of multiple properties at once.

Looking Forward

Cherian said he sees high-efficiency products continuing to drive the market, especially as heat pumps rated for extreme cold climates become the norm and the public gravitates toward lower energy consumption and a decreased carbon footprint.

In order to meet the demands of the future, Cherian also stressed the need for technicians to continue to provide effective installation and service.

“Developing methodologies for preventive maintenance and predictive equipment failure can allow for proactive maintenance, reducing downtime and extending the lifespan of HVAC systems,” Cherian said.

IAQ is also something that shouldn’t be ignored, and a/c systems should manage both air temperature and quality.

“Fresh air integration is becoming increasingly important in new construction projects, and all HVAC products should include a module or method to introduce fresh outside air into the conditioned space,” Cherian said. “ERVs are also becoming popular in residential applications to recover energy from the exhaust air.”

Lasater noted that as improved heat pumps establish themselves as the go-to, they can slash construction costs in ways other than energy consumption.

“…[T]he development of ultra-cold climate heat pumps (UCCHP) will offer new construction the advantage of not incurring the expense of gas piping on job sites, creating an all-electric property that reduces build complexity and cost while reducing the carbon footprint,” Lasater said. “The temperature rating of UCCHP, which can extend -20C to -30C degrees, makes them suitable for a wide range of installation locations across North America.”

Increased integration of other cutting-edge technology will also extend the usefulness of new HVAC products for tenants and landlords.

“Advanced smart thermostats featuring enhanced AI algorithms will offer precise temperature control and improved integration with home automation systems,” Lasater said. “Meanwhile, as heat pump technology continues to advance, these systems will offer improved performance in diverse climates that will make them even more versatile.”

Rames sees HVAC for multifamily buildings heading toward more integrated and sustainable systems.

“One area of focus is cold-climate heat pumps, like the ones Midea is pioneering, which will continue to improve efficiency in extreme temperatures, making them more appealing in colder regions. Smart HVAC systems with AI-driven algorithms will also play a bigger role, allowing for predictive maintenance, which can alert property managers to potential issues before they become costly repairs,” Rames said. “Another promising development is the decarbonization of HVAC systems, as government incentives push for electrification and the reduction of fossil fuel-based heating. Public-private partnerships, such as Midea’s collaboration with NYCHA through the Clean Heat for All Challenge, are helping develop scalable solutions that could soon be applied to multi-family buildings across the U.S., driving the future of sustainable property management.”