Last month, I attended the Home Performance Conference, and it made a lasting impression. I was reflecting on a session called Going the Distance: Real Estate and Energy Efficiency Team Up in the Ring. It was moderated by the ever-funny Pamela Brookstein, the Market Transformation Specialist at Elevate Energy. She started off telling a story from that popular movie “The Heat”, starring Melissa McCarthy and Sandra Bullock. I know what you’re thinking: what does a Hollywood comedy have to do with real estate and energy efficiency? At first, I was wondering the same thing.
In the movie, there is an FBI agent – a “play things by the book” character in Sandra Bullock and a “loudmouth, hot headed street cop” type in Melissa McCarthy. As you might imagine, they have very different approaches and styles, but they ultimately want the same thing. Their end goal? To catch the bad guy!
Pamela used this story as an appropriate analogy for the relationship between energy efficiency and real estate transactions. Sometimes, energy efficiency advocates and real estate agents have different approaches to how EE should be rolled into the home buying/selling transaction. The two groups don’t always see eye to eye. Despite these differences, though, in the end both groups want the same thing. They’re just using different approaches and might even be communicating the same thing in different ways.
This got me thinking about the recent bill that Massachusetts Governor Charlie Baker filed and how most of the real estate community is against it. Not just this bill, but really any other commercial or residential legislation or ordinance that has been proposed in the region.
House Docket 4730: Why is the real estate community so against it?
On April 3, Governor Baker introduced An Act relative to consumer access to residential energy information. (House Docket 4730). It would require that a home energy scorecard and energy rating be provided to homeowners as part of free residential energy efficiency assessments. After January 1, 2021, it would also require that home energy performance ratings be made available to potential homebuyers when 1-4 unit family homes are publicly listed for sale.
Under this bill, the following would happen:
- Homes would be required to be inspected and labeled based on their energy efficiency;
- The rating and labeling system would include information about a dwelling’s energy costs and energy consumption, and would be required to be available at the time of listing a home;
- This information would be tracked and reported by the state government.
This isn’t a new type of bill. Similar bills have been filed before in Massachusetts, Maryland, and other states in the NEEP region. There are also model bills in other states cities around the country, like Portland, Oregon, Austin, Texas, Santa Fe, New Mexico, and Boulder, Colorado where energy efficiency ratings and disclosure are required for different types of construction. In addition, Burlington, Vermont has the Residential Rental Housing Time of Sale Energy Efficiency Ordinance that applies to apartments where the tenants are responsible for directly paying the heating costs.
There are examples of similar successful legislation from outside of the United States as well. Since 2009, Energy Performance Certificates (EPC) have been required in the 28 member countries of the European Union for all buildings and building units sold, rented, newly constructed and renovated, as well as public buildings over a certain size. EPCs must be provided to prospective buyers or tenants and included in commercial advertisements regarding buildings or building units for sale or rent. Literature evaluating the impact of these scorecards on the EU housing markets in England, Ireland, and the Netherlands illustrates that more energy efficient homes sell at higher prices – between 1-5 percent than more inefficient homes.
At the same conference I mentioned above, I sat in on a session that featured the 2018 Strategic Priorities of the National Association of Realtors. The group discussed the fact that the average consumer wants access to information, they are technology savvy, and want to know about energy usage of a home they are buying.
Immediately, I thought - this is great! Yes – we are finally on the same page.
NAR’s priorities include:
- to ensure that the role of the REALTOR® is essential to the consumer
- Consumers need a trusted advisor even as technology gives them access to more information
- REALTORS® must be relevant before, during and after the transaction
But then, when I got home, I read more opposition to the MA bill and have had more discussions. My excitement has waned.
Essential to the consumer! Isn’t having all the information essential?
As a home buyer, I’d want to know the total cost of ownership, good or bad. I want to know what the actual cost of living in that home is going to be. If you are a seller, you may want to showcase your homes features. Perhaps you have made improvements and want to be sure it’s reflected in the price you are asking. If you are a real estate professional, you’d want to accurately provide information so that your customers will be happy with their purchase. Then, when they sell their home in 8-9 years (the average time a homeowner stay in one place), they remember to call you back for their next transaction.
I know this to be true. I have bought and sold a few homes over the years. While I’ll admit that I have never been one to pick a home because of a granite countertop (who wants to maintain it?), I have quickly been caught up in the location, view, or adorable screened in porch. But then reality sets in and I start looking at the numbers. Can I actually afford this house? Is it energy efficient? Does it need a new roof or windows? Needing any of these thing never made me turn away from buying a house. I just wanted to know what I was getting myself into so I could make an informed decision.
Delay? No way!
I also keep hearing that requiring homes to have an energy scorecard or disclosing their energy usage will hinder the sale. This isn’t true. In fact, several studies across the country show that homes that disclose energy information sell 18-89 days faster, regardless of if the home is an energy hog or energy efficient. Buyers just want access to information.
What’s all the fuss anyways? Energy efficiency suggested improvements to homes are similar to most improvements home inspectors suggest and are relatively easily remedied. For example, if a property needs a new roof, it’s simply part of the sale/purchase process. Same with many efficiency upgrades. Having an energy scorecard or a Home Energy Score done on a property just bundles the information together in a more comprehensive manner.
We saw the same worries in 1975, when MPG stickers were first attached to automobiles at point of sale. Those worries were unfounded, yet a gradual increase in efficiency of our vehicles has happened since that time. Yet still with the MPG stickers, if you want to buy a Prius you will, if you want a Volvo V60 Polestar AWD (a car with one of the lowest rated miles per gallon) you will.
As I reflect back on Pamela’s analogy using the movie “The Heat”, I think that a sequel is in order. In fact, I’m looking forward to the sequel that features energy efficiency advocates and real estate community on the same page. That sequel is called HELIX.