Unlocking the Value of an Energy-Efficient Home

soldBy Melissa Ulbricht

More than 40% of total U.S. energy consumption comes from the buildings sector, which includes single and multifamily residences and commercial buildings. This is more than any other sector, such as industry and transportation. Here in Chicago, energy use in buildings is nearly 70% of total energy consumption. Older housing stock combined with extreme weather conditions—from long, cold winters to shorter, hot summers—makes homes in this region very energy intensive.

Because of this, a focus on improving the energy efficiency of existing homes and buildings in the region is critical. CNT Energy, in partnership with the Community Investment Corporation, runs Energy Savers, an energy efficiency program for owners of multifamily buildings, houses of worship and nonprofit organizations. Energy Savers helps owners improve their buildings and increase net operating income by reducing cost of improvements through access to technical assistance, financing options, construction oversight and annual performance monitoring.

Since 2008, CNT Energy has developed and launched energy efficiency initiatives that have reached more than 15,000 multifamily units through the Energy Savers program and an additional 20,000 families in Illinois through other programs, saving the release of over 28,000 metric tons of carbon emissions. This is equal to the annual greenhouse gas emissions from more than 5,900 passenger vehicles.

In addition to reducing energy use and saving building owners money, improving the energy efficiency of existing buildings helps preserve affordable housing, create local jobs and reduce greenhouse gas emissions. An often overlooked consideration is the value these energy efficiency improvements have in the real estate market for single family homes. That is, when homeowners make upgrades to their home, what return on investment do they see at the time of refinancing or selling an energy-efficient home?

Often, when homeowners make improvements to an existing single-family house, the most important aspects of home performance—including safety, comfort, energy efficiency, durability, and environmental impact—are invisible during key steps of any home sale or refinance transaction.

At the same time, consumer demand for energy-efficient homes that feature lower energy costs and greater comfort has been growing steadily during the past decade. The energy efficiency and real estate industries have an opportunity to develop methods that ensure that the energy efficiency improvements made to existing, single-family homes are fully visible, leading to more fair and consistent valuation that owners can recoup at time of home sale.

The first step is to document energy efficiency features and improvements using consistent, standardized methods. And, because energy efficiency programs capture this information as part of regular programmatic work, the responsibility for the first step lies with the energy efficiency industry.

“Most of the data required for a more transparent transaction is already being captured by energy efficiency programs,” said Anne Evens, CEO of CNT Energy. “Standardizing and communicating this information makes upgrades visible and accessible at the time of a home sale, and encourages homeowners to invest in energy efficiency improvements. This helps efficiency programs meet goals, and benefits the real estate industry, homebuyers and sellers and the environment.”

Now is the right time for energy efficiency programs to take the first step, and there are tools to help. The Building Performance Institute recently published standard requirements for a certificate of completion for residential energy efficiency upgrades.

The new standard identifies elements that should be captured after the completion of a whole-house energy upgrade or individual energy efficiency improvements in existing homes. Using these elements, energy efficiency programs can complete a standard certificate that can be passed along to the homeowner. Later, when the home is refinanced or listed for sale, the homeowner has in his or her hand a recognized, consistent certificate that can be included in the real estate transaction process. The outcome is that energy-efficient features become visible and can be accurately valued when a home is sold.

However, documenting energy efficiency improvements is just step one. A recently published paper from CNT Energy and National Home Performance Council (NHPC) provides a blueprint and outlines seven steps the energy efficiency industry must take to unlock the value of efficiency in the real estate market. The paper, Unlocking the Value of an Energy Efficient Home: A Blueprint to Make Energy Efficiency Improvements Visible in the Real Estate Market is available for download on the CNT Energy website.

After documenting improvements, the next steps outlined in the paper are to incorporate data in the real estate appraisal process, educate and train others, report on the growing inventory of energy efficient existing homes and work with partner financial institutions to ensure that qualified appraisers—those who understand energy-efficient homes—are assigned to the proper for-sale listings.

“Survey research clearly shows that homebuyers are interested in purchasing energy-efficient homes,” said Robin LeBaron, Managing Director of NHPC. “This paper shows how energy efficiency programs and real estate professionals can collaborate to ensure that efficiency features are fully visible and fairly valued during a real estate transaction.”

CNT Energy, NHPC and the Appraisal Institute will walk through the seven steps presented in the paper in a Webinar on Wednesday, October 2 at 11 a.m. CDT. All are welcome to register.

The implications of these seven steps are significant. As energy-efficient homes are more fairly and consistently valued in the real estate marketplace, it lays the groundwork for a virtuous cycle in which homeowners are eager to invest in energy efficiency improvements because they know that they can recover some or all of their investments at the time of the home sale.

CNT Energy is a creative think-and-do tank that combines rigorous research with effective solutions. The organization concentrates on helping consumers and communities obtain the information and services they need to control energy costs and become more energy efficient. We use our cutting-edge, localized programs and research in the areas of dynamic electricity pricing, building performance and regional energy planning.

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