Momentus 2013 for Residential Green Building Movement

The momentum created in 2013 towards a healthy residential green home market can be best summarized by four documents, 2 studies and a piece of  proposed bipartisan legislation. 

It is impossible to value green homes without data that accurately details home features designed to increase energy efficiency, sustainability, or healthy living. For property owners in the US, most home sales data is recorded through the Multiple Listing Service (MLS). There are over 900 independently owned MLSs collecting data fields on properties across the country. These independently owned MLSs are, quite literally, the brains of the residential and commercial real estate transaction. In the largest metro areas of the US, multiple listing services include data fields that reach for higher standards of home energy efficiency and sustainability. Version 1.2 of the Real Estate Transaction Standard Data Dictionary was published in November, 2013, and includes clear definitions of green fields for MLSs to implement.  The MLS Green Implementation Guide offers additional guidance to MLSs that have not taken the opportunity to upgrade green property data fields. It will also assist MLSs that wish to migrate to green data fields which have been documented in the Real Estate Transaction Standard Data Dictionary as part of an overall data dictionary compliance strategy. These documents will serve as guidance for specific and consistent green data sets for MLSs nationwide.

The Valuation of Green Buildings: Background and Core Competency was produced by the Appraisal Practices Board (APB) as a first exposure draft to stakeholders in July of 2013. It is the first document that clearly establishes best practices for appraisers to value green buildings in an ethical and competent manner. Although the document will not be finished until 2014, the first exposure draft was open for public comment in July of this year. One of the most intriguing notes referred to appraisers having to pay attention to the potential for a “brown discount” to establish the correct valuation of properties. Homes subject to a “brown discount” are homes in active green markets without green upgrades and subject to obsolescence.

Another document that further reinforces the need to accurately account for the green premium of high performance homes was Unlocking the Value of an Energy Efficient Home; A Blueprint to Make Energy Efficient Improvements Visible in the Real Estate Market by CNT Energy and the National Home Performance Council. This document created a blueprint for addressing the disconnect that exists between the energy efficiency program administrators, the real estate community, and the homebuyer and seller. A common issue among real estate agents is that selling a home with a granite countertop and new kitchen cabinets is easier than selling energy efficiency improvements. Energy efficiency improvements may be invisible to potential homebuyers; the essential question is how does an agent sell the invisible? Unlocking the Value of an Energy Efficient Home; A Blueprint to Make Energy Efficient Improvements Visible in the Real Estate Market seeks to find ways that energy efficiency programs can create stronger linkages in order for the real estate industry to be able to feature consistent, standardized data about energy efficiency features in existing homes that can be taken into account by buyers, appraisers, lenders, and others during the home sales transaction.

In Mid-March of 2013 a ground breaking study of energy efficient homes and 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 a year of great import for establishing the value of green homes, Exploring California PV Home Premiums was released on December 12^th. A new study from Lawrence Berkeley National Laboratory found that houses with rooftop solar panels sell for higher prices than comparable non-solar homes. California home buyers are willing to pay a premium for solar PV installed on resale residential properties.

Among the houses studied, that value of homes with solar PV systems had a premium of $5,900 for each kilowatt that an array can generate. Most home solar systems included in the study produced between 2 and 5 kilowatts of electricity. Older PV systems sold at less of a premium than new systems. 

In addition to the industry momentum towards accurate valuation of green homes, the SAVE ACT, a bill aimed at encouraging home energy efficiency improvements by establishing underwriting guidelines for mortgage lenders that factor in cost savings for homeowners, was reintroduced to Congress in 2013.
The Sensible Accounting to Value Energy Act of 2013 is sponsored by Sens. Michael Bennet, D-Colo., and Johnny Isakson, R-Ga. The bill has been referred to the Senate Banking Committee and has the support of many real estate industry trade organizations.  

These documents, studies and legislation are excellent markers of the national momentum towards ensuring that the high performance home market is accurately measured both in terms of the data fields that are available to buyers, real estate agents, and appraisers, as well as correct valuation of the green premium. That all of the documents were created or produced in the same year is clear evidence that 2013 was significant to the high performance home industry.