Enhancing Tenant Well-Being: Financial Feasibility of Implementing Healthy Building Concepts in New Multi-Family Housing

Abstract

The average person spends 90% of their entire life indoors and therefore, the quality of the indoor environment in dwellings is a key contributing factor to occupants' health and well-being (MacNaughton, 2016). Strategies aimed at improving indoor environments, such as ‘healthy building concepts’ are of critical importance (Frey et al., 2015; Galvin, 2010; Paradis, 2016). However, it is not clear which strategies are the most effective and cost-efficient (America, 2020). A clear and reliable model is needed for applying large amounts of data on healthy building concepts to new multi-family buildings to improve the health and well-being of tenants.

The primary objective of my thesis was to investigate the financial feasibility of applying WELL building standards to new multi-family buildings to enhance indoor environmental quality. My research involved investigating the Return on Investment (ROI) of various healthy building features for a hypothetical multi-family building of 50 units, over a 10-year period (2023-2033). My approach was to 1) calculate the costs of incorporating diffuse and dynamic lighting, providing views, improving indoor air quality, and increasing thermal comfort, and 2) gauge the potential premium, tenants would be willing to pay for improved well-being and comfort. I developed a cost-benefit model to measure the economic gains from these interventions at the building level. I also conducted a nationwide willingness-to-pay survey using Amazon MTurk to contribute to the overall economic assessment. The study aimed to determine if the benefits of adopting healthy building principles outweighed the implementation costs.

The research demonstrated that it makes financial sense to include health-focused features in multi-family properties, such as dynamic lighting, enhanced views, improved indoor air quality (IAQ), and increased thermal comfort. Lighting had a 412% return on investment (ROI) over a ten-year period equivalent to a 1.95-year payback period, while thermal comfort, the top preference among respondents with the highest-ranking average of 2.49, would take longer to pay back at 4.35 years. Tenants are willing to pay higher rents for apartments with health-centric amenities, averaging between $214 and $225 per month. These findings support the idea that the investment in such features is justified by the value they bring.

In conclusion, this research confirms the economic advantages of adopting healthy building standards, resulting in an overall ROI of 129% and a comprehensive payback period of 4.36 years for all features combined. These results challenge previous beliefs about the costs of such enhancements while highlighting their potential to generate higher rents and improve net operating income and indicate to residential developers that health centric building features generate a positive ROI.