It’s Not Easy to EV

written by DAVID AARONSON

The multifamily industry is facing one of the most disruptive changes it has ever seen as our society transitions from gas-fueled to electric vehicles. Property management groups are starting to appreciate the importance of providing EV charging stations for residents who own electric vehicles. EV charging stations will soon be necessary infrastructure for resident satisfaction and revenue.

It began several years ago, with one or two Level 2 charging ports as an amenity on newer properties to secure prospective residents driving EVs.

However, with consensus estimates forecasting the number of EVs on U.S. roads to reach 26.4 million by 2030— up from 2.4 million by the end of 2021—more charging stations will be needed to meet demand. The interest in EVs is apparent: 71% of Americans express some level of interest in buying or leasing an electric-only vehicle. It’s critical for multifamily owners to provide enough EV charging stations to match the increasing demand to remain competitive in the market.

EV Charging = Revenue

Much has been acknowledged about the building requirements set forth by CalGreen and the additional costs developers incur by meeting the building codes. However, unlike most items required by building code, installing EV charging stations allows multifamily owners to develop a new revenue stream with a positive return—if done correctly.

As more and more residents use EV charging stations as the primary source to refuel their vehicles, charging stations will generate a recurring income stream. Profit is generated by charging the user a premium over the property’s cost of electricity. If the cost of the electricity is $.20 per kilowatt hour, multifamily residents will pay up to $.50-$60 per kilowatt hour. While pumps at gas stations can serve numerous gas vehicles a day and take minutes to refill, an EV charging station can only serve one vehicle per night and a few per day, depending on the car’s battery size and the charging station’s capability. Consequently, one charging station can serve up to ten residents driving EVs monthly. In conclusion, one charging port can generate an expected net profit of $3,000 to $4,000 per year.

New Construction

There is a considerable difference between installing EV charging stations in existing properties and installing them in properties under construction. In California, any newly proposed multifamily project must adhere to CalGreen building codes. Current regulations require 5% of multifamily parking spaces to have EV charging stations installed by the completion of the construction. If a property has three hundred units and four hundred parking spaces, the regulations require twenty operating charging stations after construction. Local municipalities have the option to require a higher percentage. Assuming that one charging port can serve the refueling needs of ten EV-owning residents, it’s unlikely there will be enough demand to provide an accretive return on most new developments by the time the property opens.

The CalGreen building codes also require newly developed properties with more than twenty units to have 10% of the parking spaces be “EV Capable,” meaning the infrastructure can support EV charging stations. In addition, 25% of the spaces need to be “EV Ready,” meaning they meet the EV capable requirements and have fully wired 40-amp electric circuits ready for EV charging station deployment (considering the building example in the previous paragraph). Under these circumstances, this would require forty parking spaces to be ready to deploy Level 2 EV charging stations. Providing this level of electrical infrastructure is costly, but depending on the speed of EV adoption, there will be at least some return coming in.

The 2023 updates to the CalGreen building codes can be expensive and overwhelming to development teams, but the good news is that the codes can be modified every three years. One suggested modification is to eliminate some of the requirements and let development teams decide on the number of EV charging stations themselves.

Developers are making significant investments, providing jobs, and increasing the tax base. They recognize that for their investment to maximize return, they will absolutely need to deploy EV charging stations. In addition, reducing the EV Ready from 25% to 15% while reducing the EV Capable to 5% should provide properties with ample capacity to host enough EV charging stations to serve their residents throughout the property’s useful life. Until adopted building codes are required in other states, developers will continue to gamble on their ability to develop, construct, lease, and sell their projects before the investor community shuts the door on acquiring projects that are not future-proofed against the impact of EV adoption.

Existing Properties

While CalGreen may be requiring too much infrastructure and too many charging stations in new construction, existing properties have a different problem. Most existing multifamily projects weren’t developed considering electricity would be needed for residents to refuel their cars. Consequently, only a few existing properties have enough extra electrical capacity and infrastructure to host the number of EV charging stations needed to meet future demand. In many cases, the property’s existing electrical infrastructure will allow two to four charging ports, which will only serve twenty to forty residents with drive electric vehicles.

The question is, What will happen when the property has dozens or hundreds of residents driving electric vehicles and want to charge at home?

In most properties, attracting or retaining just one resident will generate a positive return for property owners, as the annual rental revenue provided by just one resident is typically more than the cost of buying and installing a single EV charging station. For property owners reluctant to make the investment needed to host stations at their property due to lack of demand, the chances of a potential tenant choosing to live at a competitor’s property are high. Owners of existing multifamily properties will need to address the issue of updating their property’s electrical infrastructure if they expect their property to remain competitive during its useful life.

Utility companies across the country are researching whether existing properties are inable to host stations. Fortunately, many public and private entities in California are addressing these concerns by providing financial incentives to help reduce the cost of installing the infrastructure and charging equipment.

For example, Southern California Edison, the primary electricity provider for Southern California, has a program that brings new services to existing properties for a small cost. Multifamily property owners can also apply for various credits and grants through other utility providers, municipalities, and state and federal funding programs.

As the industry is still in its infancy, most architectural and consulting engineering firms that developers traditionally look to for support do not possess the knowledge and experience to provide direction. Multifamily property owners should seek out specialists in the real estate and EV charging industry to assist them in meeting their needs. Property owners should partner with an outside firm with an inhouse electrical personnel team that has developed expertise in all aspects of the EV charging industry and the multifamily industry.

Don’t rely solely on a manufacturer or a vendor. Manufacturers and vendors may be unable to offer clients the best solutions for their residents and properties because they are generally charged with pushing their brand and network, installing an infrastructure that meets their product, and installing more charging stations than needed or required. Because multifamily properties will provide a significant percentage of the EV charging infrastructure, it’s important to understand how to properly deploy EV charging stations to transition to cleaner energy efficiently.

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