The effects of uncertainty

I have been invited to be a panelist for ISO New England’s Consumer Liaison Group meeting on December 5^th.  The panelists have been asked to give their thoughts on Impacts of ISO and Government Decision Making on Retail Rates.

As you may know, ISO – NE is the non-profit market monitor of New England’s power grid. Their job is to make sure that the lights stay turned on, as well as make sure that the wholesale power market is operating in a fair and transparent way. 

The impacts of how the power market is legislated, planned, and monitored certainly have a powerful impact on retail power rates. The real impact however, is not so much on the retail rate, but on the end user. The impacts are on family owned businesses here in New England, on business decision makers that are asking themselves questions like: Should we hire more people? Should we expand our product? Should we drop our prices to compete more effectively? Should we cut a shift? How low can our margin drop before our business is still viable?

Granted, we are existing in an environment in which there is a true energy paradigm shift. The decisions being made today about how we how create energy, and how we consume power are ones that will have long lasting impact. Questions about the value of renewables and distributed generation, of the true cost of carbon and fossil fuels, of the investment in our power grids infrastructure and security are deep and inevitably will create uncertainty for business decision makers.

The uncertainty before us, unfortunately, is not just limited to the production and consumption of energy. Coupled with deep political and economic uncertainty we have created an environment for business decision makers that is very difficult to function in. Our leaders owe them more than deep uncertainty.December 5th Meeting ISO New England

Green building litigation coming to a state near you

A lawsuit in Colorado illustrates some of the challenges that Massachusetts real estate agents, builders, appraisers, and lenders should all begin to pay attention to as the high performance home market in this state matures.

As I understand it, the suit alleges that the builder and listing broker marketed the property as LEED certified. The builder had completed a HERS rating test prior to the sale; the home’s HERS rating* was exceptional (at least from an energy efficiency perspective).  However, the builder registered the home with the US Green Building Council (USGBC), the administrator of LEED performance, but never completed the formal certification process.

The new homeowner alleges that the property was misrepresented in its marketing materials. Misrepresenting, whether knowingly or unknowingly, “green” products by marketing them as being more environmentally friendly than they actually are is known as greenwashing.  The outcome of the suit will be of interest to all of us involved in the green building industry. Certainly, with a HERS Rating of 13, the home clearly fits into the high performance category. However, the marketing of the property as LEED certified is a clear misrepresentation.

I am of the belief that any building that has been, or is in the process of receiving; a green certification should be listed by a real estate broker who is a National Association of Realtors (NAR) GREEN Designee. The NAR GREEN certification is rigorous; the course load covers nationally recognized green building certifications as well as appropriate marketing of high performance/energy efficient/green homes.

*A HERS rating of 100 is an average new construction building, most old housing stock in the US averages around 130, and a home that provides as much energy as it uses (usually with the aid of a  PV solar system) achieves a 0 HERS rating, often referred to as a net-zero home. The Colorado home was HERS rated at 13.

The Benefits of a High Performance Home

As the market is picking back up, we're seeing more and more new home construction and a flood of new buyers. In fact, recent studies from McGraw-Hill Construction show that one in five homes built in 2012 were considered 'green'.

The benefits of more sustainable homes come in many forms. Living in a high performance home provides a healthier indoor environment for families. Home owners can also expect cost savings due to durability and increased efficiency, and overall a more comfortable place to live. People say you can actually feel the difference when inside a home that's been built with sustainability in mind. 

It certainly doesn't hurt that studies also show home owners looking to sell a high performance home can expect to see a boost in the sales price. Single family homes with a green certification actually sell for about 9% higher than their non-green alternatives. So if you're looking to buy or sell your home soon, take a look at these numbers and studies to gain a clearer perspective on how sustainable features could benefit you and your family. If your home is newer, you may have a good number of efficient features already present!

Upgrading to a green home may be an option for you, but remember most of the housing stock here in the Northeast was built before 1940 when building codes didn't factor energy efficiency and sustainability. It is possible, through thoughtful retrofits, to make a brown home more energy efficient. This may be an excellent way to increase the value of your brown home. In a recent draft of new national guidelines for bank appraisers to establish proper valuation of green buildings the Appraisal Practices Board states that appraisers should be aware of "a brown discount for existing buildings that don't green up."

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National momentum on green building valuation grows...

Team work. This graphic of the players needed in the green build and sales process (courtesy of NAR and the MLS Green Toolkit) expresses the team of professionals needed to establish the proper value for high performance buildings.

The great news for us in the green home building and sales market is that there is significant national momentum towards building the professional teams in the graphic above.

On July 15th the Appraisal Practices Board released a first exposure draft of Valuation of Green Buildings: Background and Core Competency. In the draft the APB says that this will be the first of three advisories on national best practices for appraisers hired to establish value for a green building. One quote from the draft, "The transistion towards green buildings, green building codes and technologies, and the growing awareness of the relevance of sustainability to the marketplace...can be viewed as part of the natural evolution of the real estate industry as it adapts to environmental, societal, and economic changes."

The NAR Green REsource Council is close to releasing the Green MLS Implementation Guide v1.0 in tended to help the 860 or so privately owned Multiple Listing Service organizations in the US have guidance on adding green data fields for listings. Important to note is that in 2009 only a handful of MLS vendors offered fields for green or high performance homes.

To the team of people and organizations within the real estate industry that are working to make our home or businesses energy consumption part of a solution to reduce stress not only on our own utility bills, but also the environment and the energy grid: Keep up the great work!

A partial review of 2013 momentum towards energy efficiency and high performance buildings

We haven't quite reached the end of June 2013 but there has been enormous momentum this year towards big picture solutions for tackling carbon emissions by increasing the efficiency of homes and buildings in the US. I thought it might be helpful to review some of the local and federal momentum partway through 2013.

This post will begin and end with President Obama's leadership on the issues of US energy production,  consumption, and climate change. Many on the left feel he has not done enough to reduce US carbon emissions; many on the right side of the political aisle fear anything the President says about carbon emission solutions will lead towards bigger government verging on Marxism. There is no question that both sides deserve the right to express facts and opinions concerning worries that the US is not moving quickly enough to tackle the threat of climate change, or that the President's solutions could cause the price of power to rise substantially for large end-users of power; namely our manufacturing and industrial sectors. I would like to personally applaud the President for leadership in energy issues with a thoughtful eye on both arguments.

At the beginning of the year in the President's inauguration address on January 21st he stated, "We, the people, still believe that our obligations as Americans are not just to ourselves, but to all posterity. We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations...The path towards sustainable energy solutions will be long and sometimes difficult. But America cannot resist this transition, we must lead it."

A long and difficult path could have been a reference to decisions that our country faces on the benefits/costs of fracking for oil and natural gas, the Keystone pipeline, investment in renewable energy, or permanent storage of spent nuclear fuel, or perhaps all of the above.

On February 21st the the President's State of the Union address he said, "I'm also issuing a new goal for America: let's cut in half the energy wasted by our homes and businesses over the next twenty years. The states with the best ideas to create jobs and lower energy bills by constructing  more energy efficient buildings will receive federal support to help make it happen." As a Massachusetts resident this sentence made me very happy.

In February Massachusetts Governor Deval Patrick was awarded the "Green Governor of the Year" award by the US Green Building Council (USGBC) and the Sierra Club.

At the beginning of March the National Association of Home Builders (NAHB) published a new study titled, "What Do Home Buyers Really Want?"  Answer number one was energy efficiency.

In mid March an extensive study of energy efficient homes and their home buyers relationship to the marketplace was released by the University of North Carolina at Chapel Hill Center for Community Capital. In the study author Dr. Nikhil Kaza states that owners of energy efficient homes are 32% less likely to default on their mortgages and that "the mortgage-lending process does not include the financial benefits of energy efficient savings in its underwriting decisions."

In April, a bipartisan bill co-sponsored by Senators Jeanne Shaheen (D-N.H.) and Rob Portman (R-Ohio) was trotted out before the Senate Energy and Natural Resources Committee. The bill would authorize a state-based private financing program to encourage energy efficiency upgrades, direct the federal government to undertake energy-saving practices and roll out voluntary efficiency standards for new building codes.

On May 8th, the Boston City Council passed the Building Energy reporting and Disclosure Ordinance by a 9-4 vote.

On May 9th, CO2 reached an average daily level of 400 ppM at the Manua Loa observatory in Hawaii for the first time.

June has been an unusually active month for federal initiatives; the HOMES Act and the SAVE Act were introduced to Congress. The Home Owner Managing Energy Savings Act (HOMES Act), introduced by Congressmen David B. McKinley (R-WV) and Peter Welch (D-VT), would provide rebates based on projected savings. The Sensible Accounting to Value Energy Act (SAVE Act), introduced by Senators Michael Bennett (D-Colo) and Johnny Isakson (R-GA), would instruct federal loan agencies to assess a borrower's expected energy costs when financing a house.

 

On June 19th, President Obama gave a speech while he was in Berlin and said, "This is the global threat of our time. And for the sake of future generations, our generation must move toward a global compact to confront climate change before it is too late. That is our job. That is our task. We have to get to work."

 

And on Tuesday, June 25th in a speech that is scheduled to start at 1:35 PM at Georgetown University, the President of the United States will give a speech on his long awaited climate change plan. I will be listening.

S. 1106, the Sensible Accounting to Value Energy Act of 2013, is sponsored by Sens. Michael Bennet, D-Colo., and Johnny Isakson, R-Ga. - See more at: http://www.inman.com/2013/06/12/energy-efficiency-improvements-could-be-factored-into-mortgage-underwriting/#sthash.Mluqy4yl.dpuf

S. 1106, the Sensible Accounting to Value Energy Act of 2013, is sponsored by Sens. Michael Bennet, D-Colo., and Johnny Isakson, R-Ga. - See more at: http://www.inman.com/2013/06/12/energy-efficiency-improvements-could-be-factored-into-mortgage-underwriting/#sthash.Mluqy4yl.dpuf

S. 1106, the Sensible Accounting to Value Energy Act of 2013, is sponsored by Sens. Michael Bennet, D-Colo., and Johnny Isakson, R-Ga. - See more at: http://www.inman.com/2013/06/12/energy-efficiency-improvements-could-be-factored-into-mortgage-underwriting/#sthash.Mluqy4yl.dpuf

Interview with RE/MAX New England re Energy Efficeint Houses and Sustainability

           How long have you been with RE/MAX?  How long have you been a REALTOR?  How long have you been the Chief of Energy Solutions at RE/MAX Leading Edge?

I joined RE/MAX Heritage in January of 2012 after spending 12 years with another firm. I jumped on board with REMAX Heritage and the broker-owners Linda O’Koniewski, Eileen Hamblin, and Steve Chuha primarily because it was clear that they are a forward thinking partnership and extremely supportive of their agents and their communities. Their willingness to think creatively stands out in the real estate industry. When I joined Heritage at the beginning of 2012 we agreed that I would take the title of Chief of Energy Solutions at that time. It was immediately apparent that they are committed to being industry vanguards for energy sustainability and were willing to put resources towards innovative and solution oriented ideas. I can’t express how grateful I am that they gave me this opportunity.

At the end of 2012, we merged with RE/MAX Leading Edge and Paul Mydelski. Paul has joined the ownership team with an equal commitment to ensuring that RE/MAX Leading Edge continues to be a responsible partner with the communities we serve. Now I have the opportunity to bring my mix of energy management expertise and my 13 years of real estate experience to over 180 agents and twelve communities in the Greater Boston area. I could not have chosen to partner with a better group of broker-owners at a better time.

          Why is home energy and efficiency important to you?

I want to be part of the solution, and increasing the energy performance of residential homes and commercial buildings in our region is the best place for me to participate. We use more energy per household in New England than any other part of the country and we pay some of the highest utility rates. From my energy management experience I often refer to the energy stress triangle in our region, stress on the rate-payer (homeowners and business owners that pay those high utility bills), the environment, and the regional energy grids is significant here in New England; energy efficiency is one of the few solutions that relieves stress on all three points of the triangle.

          Why should home buyers and sellers be aware of the “green” movement?

That’s a great question. The answer, to me, is really about gaining control of the operating costs of your home or business as well as lowering your energy consumption which lowers your carbon footprint and relieves stress on the regional energy grids. As we lower demand for power in our region, the price we pay for energy drops. That’s the kind of recurring cycle that can help everyone in our region. Also green/sustainable building practices bring other pluses to the equation besides just energy efficiency. These include building healthy homes, sustainable construction materials, recycling and disposal of debris, and proper site management in new construction that can take advantage of the best practices in water and energy management.

I’d like to make a few comments about the “green” movement, however. What is referred to as the green movement goes back to the 70’s.  Personally, I can support many of the initiatives of that movement, but sustainability, the issue I am truly interested in, was only one bullet point in that movement. I understand that not everyone in the real estate community in our region is supportive of the total package of the “green” movement as it was originally conceived. It is unfortunate that there is a segment of our population that is turned off by the concept of “green.” This is why I prefer talking to my clients first about gaining control of the energy operating costs of their home or business.

          What are you most proud of with your business?

            I am very proud to be a member of the RE/MAX Leading Edge team. Moving from my former 

            firm was one of the best professional decisions that I have ever made.

            I am proud that I have the opportunity to make a difference with one of the most difficult      

            questions  that we face today; how we use energy.

            I know that my family is able to experience a sense of pride in what I have done with my work and 

            the commitment I have made to being part of the energy solution.

          Where do you see the “green” movement in MA and your business in 5 years?

Massachusetts is at the leading edge of energy efficiency in this country. The legislation, initiatives, and incentives recently passed (and in the works) in the Commonwealth will change the skills real estate agents need to serve buyers and sellers of property in our region.

In 5 years, my plan is to be the guy that everyone consults about buying or selling a high performance home.

          What advice do you have for other agents?

            Get your NAR Green Certification. Despite the fact that it is rigorous, and that it does not count 

            for CE credits in Massachusetts (this needs to be changed), it is well worth doing. Because of 

            my energy management background, I see that this emerging market in Massachusetts is about 

            to explode forward. I truly believe getting the NAR Green Certification will make a big difference 

            to your business in the near future.

Feel free to reach out to me if you are a REALTOR suffering from “green fear”-- I can probably help get you through it!

What to expect from a home energy assessment...

For a short video on what to expect at a home energy assessment watch our short video with guest Travis Estes of Next Step Living at: http://www.youtube.com/watch?v=8wmJCDAgEgE

To sign up on line for a home energy assessment with NSL go to: http://nextstepliving.com/rle

Impact Study of Energy Efficient Homes on 2012 MA RE Market

Energy Efficiency, Utility Costs, and High Performance Homes Study

2012 Massachusetts Residential Real Estate Marketplace impact Study Released

Winchester, MA, February 28, 2013 – The Study of Energy Efficiency, Utility Costs, and High Performance Homes on the Massachusetts Residential Real Estate Marketplace 2012 by Craig Foley, Chief of Energy Solutions at RE/MAX Leading Edge and a Managing Partner of inCharge Energy, has been released. The study is the first of its kind in Massachusetts and analyzes home sales data of high performance homes and their effect on the Massachusetts real estate marketplace.  This study of the emerging high performance home market will have industry-wide ramifications and will serve as a base line marker for future studies.

Study findings indicate that:

·         Buyers paid a premium of $11 per sq. ft. for houses heated with natural gas versus homes heated with oil within the RE/MAX Leading Edge market territories.

·         Natural gas heated homes sold after less market time than those heated with oil.

·         Homes heated with natural gas sold at a higher percentage of the list price than homes heated with oil.

·         Converting from oil to natural gas to heat Massachusetts homes both reduces the carbon emissions of an average home by 1-2 tons, and reduces utility bills by an estimated $1500 for the 2012-13 heating season. Additionally, this conversion raised the market value of a 2000 sq. ft. home by $22,000 in 2012 in the RE/MAX Leading Edge market areas.

The study found that buying tendencies in the Greater Boston area reflected concern about homes whose operating costs and utility expenses were higher than the norm. It also looked at “green” fields data recently added to the regional MLS.

Findings revealed that:

·         Green certified homes and condos sales became an emerging market in the state in 2012; 50 condos and 61 single-family green certified homes sold in Massachusetts, according to MLS PIN data, in 2012. In 2011, there were no sales of green condos and single-family listings statewide according to MLS PIN data.

·         Regional breakdowns within Massachusetts revealed “hotspots” of green certified building.

The study also indicated that the real estate industry has an opportunity to prepare itself for this emerging market, and that challenges within the real estate industry need to be addressed to better serve both buyers and sellers of high performance homes.

·         There is a lack of adequately educated industry professionals to serve high performance properties. Currently there are 0 green certified appraisers in Massachusetts (according to the Appraisal Institute) and only 0.5% of realtors nationally carry the National Association of Realtors (NAR) GREEN Certification, and that underwriters are not aware of the lower annual operating costs of these type of properties and the effect on their market value.

·         The regional Multiple Listing Service has opportunities to improve the “green fields” data they added in 2009-2010 and better educate real estate brokers and salespeople on their usage.

The real estate industry has a unique opportunity to help bring the benefits of high performance homes to consumers. For realtors and brokerages that invest in educating themselves on these initiatives, there is an opportunity for those brokerages to separate themselves from the competition as well as increase customer loyalty to their brand.

 “We feel that, as the market share of energy efficient homes increases in Massachusetts, the value of green buildings will rise, while the value of low performance homes will drop,” says study author Craig Foley. “The real estate industry has a great opportunity to serve its clients and communities better, and is uniquely positioned to bring the benefits of energy efficiency improvements to homeowners. I am pleased to be part of a RE/MAX Leading Edge team that is deeply committed to this emerging market.”

Eileen Hamblin, one of the four partners that make up the ownership group of RE/MAX Leading Edge says, “We pride ourselves on being at the cutting edge of our industry and we are excited to be leaders in this movement as well.”

“We are pleased to have professionals like Craig Foley in our in our company who can be valuable resources to homeowners, other agents and their buyers and sellers,” says partner Paul Mydelski.