A Solar-Home Rental Business Model: Capturing Synergies from Solar Energy and Single Family Rental Properties

Abstract. The credit market collapse and housing-led economic recession beginning in 2007-2008 have resulted in several million distressed homes in the U.S. that are in various stages of delinquency, default, and foreclosure. Over the past three to four years, a number of private equity investment pools have been buying large blocks of distressed residential properties at auction, in short sales, and otherwise, with the intention of renovating and renting them at attractive yields, and ultimately, profiting from their sale as prices rebound from recessionary levels. In the process, they are institutionalizing single family rental property management on an unprecedented state and regional scale. Market demographics and persistently tight credit conditions portend several years of sustained growth in both the demand for rentals and rental rates. Simultaneously, the installed cost of solar photovoltaic (PV) systems has declined over 50% in just the last three years. Among the major catalysts of the decline have been a glut of manufacturing capacity that was built in response to pre-recession demand; federal and state financial incentives including tax credits, rebates, and performance-based payments; and gradual gains from competition and efficiencies in balance-of-system costs. Together, these two trends offer the prospect of an integrated “solar-rental” investment strategy that will produce compelling returns while significantly boosting residential solar energy use. This paper encompasses three objectives: (1) to establish a framework for a solar-home rental business model in which rental incomes are enhanced via the sale of rooftop-generated solar electricity to the tenants of single-family properties; (2) to address several of the major operational elements of such a business, including installation and maintenance of the solar energy system, tenant billing, and management of the solar operation; and (3) to model the economics of the individual solar and rental operations, and the combined enterprise, in a ...