Webinar series on the evolving role of local governments in supporting sustainable energy Encouraging the value of energy efficiency in residential transactions: Strategies for NC cities and counties Thursday, May 26 1:30-2:30 Examining energy efficiency opportunities in a small municipal utility: Benson electricity customer sales analysis Tuesday, May 31 1:30-2:30 Bringing a sustainable energy utility to a town near you: Innovative local government roles for financing distributed energy efficiency and renewable energy Wednesday, June 1 11-noon
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Encouraging the Value of Energy Efficiency in Residential Property Transactions: Strategies for Chatham County and other NC Local Governments Mary Tiger Senior Project Director Michael Chasnow and Megan Colonel Research Assistance May 26, 2011 Webinar www.efc.unc.edu
A recent study says that home buyers were willing to pay $10-$35 more for every dollar saved each year on their energy bill. Assume $25 Average SFDU in the Triangle spends $2,000 on energy If hose bills are reduced by 20%, a home owner would save $400/year Source: Institute for Market Transformation, 2010 = $6,000 in value from a 20% reduction in energy demand
A recent study says that home buyers were willing to pay $10-$35 more for every dollar saved each year on their energy bill. Assume $25 Average SFDU in the Triangle spends $2,000 on energy If hose bills are reduced by 20%, a home owner would save $400/year Source: Institute for Market Transformation, 2010 = $6,000 in value from a 20% reduction in energy demand
Focus groups with Chatham County realtors and appraisers Photo from Vernon Research Group
Why not? Financial benefits from energy efficiency investments are difficult to quantify and compare. The current housing market rewards low pricing, not quality of construction or lower future operating costs.
Realtor perspective Energy information exchange is ad hoc, at best Not having energy efficient appliances may decrease the value, but it s not going to increase the value Energy use is not visible If perception is reality, we re [the real estate industry] loaded in reality.
Appraiser perspective Pressure to offer low cost service use of comps (rather than cost approach) Without consistent information, comp method doesn t do much to value energy efficiency Pressure to appraise a low cost home undervalue of special features
Focus on energy information exchange Energy information is historic energy use, energy certifications, Energy efficiency improvements (e.g. insulation, high efficiency heating and cooling), and/or appliance descriptions.
Spectrum of energy efficiency information exchange programs Develop and use green market listing service to recognize energy efficient attributes (Green MLS) Require 12 months energy bill disclosure by home seller Require a home energy rating system (HERS) score for homes on the market Promote certification systems (e.g., LEED) to differentiate energy efficient homes on the market Require home energy audits (and disclosure of results) upon sale Weak Strong
Green MLS Green Building Features Advanced framing/concrete construction Energy Star light fixtures and appliances Engineered wood products EPA WaterSense plumbing fixtures Rainwater collection Tankless water heater Solar water heater Fresh air ventilation Geothermal heating system (closed loop) No/low VOC paints & sealants Solar power (PV) Sealed crawl space Green Building Certifications Energy Star Homes Leed-H Certified Green Home Builders of the Triangle Green Certified Home N.C. Healthy Built Home Certified
Third-party certification Certifications: EnergyStar, Built Green, Earth Advantage, LEED for homes, Green Home Builders of the Certified Home NAHBGreen NC Healthy Built Homes Triangle Green
Value of third-party certification Number of Sustainable Certified Homes Price Premium Time on Market Certification(s) Portland Metro Area 92 +3-5% 18 days shorter (30%) Earth Advantage & Energy Star Seattle Metro Area 68 +9.6% 5 days longer (40%) Built Green
Energy bill disclosure Montgomery County, Maryland example Before signing a contract for the sale of a home, the seller must provide the buyers with: Material approved by the Montgomery County Department of Environmental Protection (DEP) that gives information about home energy efficiency improvements, including the benefits of conducting a home energy audit. Sellers of single family homes and condominiums, which are individually metered for electricity and/or natural gas, are required to disclose certain usage and cost information when selling their homes.
Successes of Montgomery County program Negotiating uniform information be included in real estate disclosures Developing a package of information and training realtors Building awareness on the program
Weaknesses of the Montgomery County program No clear enforcement No tracking information Utility bill information is limited in its utility and is only a rough guide to a homes actual performance (initially proposed an audit at time of sale)
Home Energy Audits Austin, TX Energy Conservation, Audit and Disclosure Ordinance (ECAD) If a single-family home was ten years or older on June 1, 2009, the owner must hold an energy audit before selling. Owner must disclose the audit report to the buyer when title documents are filed with the County. Owner must send a copy of the report to Austin Energy 30 days after audit completion. Beginning in June 2011, multi-family units ten years or older (as of June 2009) must hold an energy audit before selling. Results of the audit report must be posted in prescribed building locations, and provided to individual tenants.
HERS indexing Established by Residential Energy Services Network (RESNET) Rolled into many third-party certifications Miles-per-gallon equivalent Well known by focus group participants 19
From the focus groups: Drawbacks to HERS rating and audits Audits can be expensive in an already strained market Would an old NC farmhouse pass? It s leaky but uses energy efficiently. 20
From the focus groups: Energy bill disclosure Benefits Easy-to-understand Low-cost Fact-based measurement Shortcomings Dependent on occupant Information can be difficult to obtain Opportunity for Electricities 21
From the focus groups: Three factors of any program Comprehensive An overarching policy could help sellers know what they could expect, anticipating the cost recovery for energy efficiency investments, and would allow buyers to shop and compare, integrating energy information into their home-buying decision. Mandatory Appraisers value certainty and consistency. Every home has a certain number of bedrooms, and if every home had a certain HERS Index score or provided energy bill data, then it could more likely be incorporated into the appraisal process. Quantifiable Appraisers need hard data for comps. 22
Next steps Evaluate the impact of GreenMLS and 3 rd party certifications Assess the local housing market Research methods of intervention Energy information as a material fact? Ordinance? Work closely with realtor associations to develop a policy on which both parties agree 23
Questions? Mary Tiger mwtiger@sog.unc.edu (919) 843-4958 www.efc.unc.edu