Thank goodness shelter-in-place orders are no longer happening. If they were, we'd be in big trouble this summer as temperatures are hot enough to endanger many lives. Why would staying at home be so bad?
It's getting tougher and more expensive to have air conditioning in the home.
Let's explore why this is happening and how real estate investors should handle this expensive air conditioning condition.
Air conditioning is currently 15% more expensive to buy (and will possibly rise higher). Even if you're willing to spend more money to get it, good luck hiring someone to install a unit for you, as there are currently not enough workers doing this job. Even if there were, there's a shortage of parts. And that just about covers all the bases.
Big demand, not enough supply
In a sort of Catch-22 conundrum, some people blame the rising heatwave we're experiencing this summer on climate change (what used to be called "global warming"). To combat the heat, people use an air conditioner. But doing so is said to lead to climate change (or global warming). This is quite a gloomy predicament, as people can and have died from heat-related illnesses.
There's one bright spot: Hotels are serving locals who can't get an air conditioner for their home, a needed development since many hotels are experiencing vacancies due to air travel being down from fewer flights (because of COVID-19) and car travel being down due to more expensive gasoline (partly because of COVID-19 and partly because of the current administration). Dystopian thoughts aside, what should real estate investors who have tenants consider doing?
What investors should do
Real estate investors in hot states have had it made for decades. Air conditioning is one factor that made places like Atlanta boom. In fact, people in Atlanta and other hot cities like Miami, Houston, and New Orleans report that 98% of homes have air conditioning. That's all well and good for landlords who own buildings and houses that have a working HVAC system or who have their own supply of portable AC units at the ready
But what if the AC unit in your home or building is on its last legs? Is it time to bite the bullet or to simply let your tenants fend for themselves regarding cool air?
Landlord-tenant AC laws
Whether you own commercial buildings or single-family homes, you need to follow the law for your state or jurisdiction regarding air conditioning requirements. Of course, the desirability of your rental unit is also a consideration. Even if the law doesn't require AC, you probably want to provide it for the comfort of your tenants and to compete.
But during tough times, many landlords might need to forego this amenity if it becomes unavailable or unaffordable. So what does the law generally say on this? Typically, air conditioning doesn't fall into the federal implied warranty of habitability laws, laws that require a landlord to provide a livable rental unit. Heat falls under this law, but not cool air.
With that said, you must check your local laws because your state, county, or city might require landlords to provide air conditioning.
The Millionacres bottom line
If air conditioning becomes unaffordable or unavailable and you're under no legal obligation to provide it, you might consider not offering air conditioning moving forward with new tenants. Another option is to raise the rent as soon as you're able, to offset your increasing costs.
Let's hope the myriad air conditioning problems we're seeing now will abate soon. Extreme heat can do more harm than just make folks cranky; it can be a life-threatening event for many people. There are greener ways available to heat and cool homes and buildings. Landlords and real estate investors might want to explore the option of modernizing their systems.