Sightline’s research has found that increasing standards for buildings is an important step toward realizing the full benefits of energy efficiency. Including an energy audit along with the home inspection when a home is being sold is a great example of raising standards, which in turn should increase demand for energy audits and retrofits in the residential sector. British Columbia is taking a step toward implementing point-of-sale energy audits with a new voluntary program. It’s one that problem solvers in the region should pay attention to as they consider how to implement this kind of requirement.
The impacts of such a requirement are minimal, and, in the end, they pale when compared to the expense and complexity of the overall transaction of selling or buying a house. Three cities outside our region already have such a requirement: Austin, Texas; San Francisco and Berkeley. California, Washington, D.C., Austin, Texas, and Washington State already require energy use disclosure for commercial buildings.
Find this article interesting? Support more research like this with a year-end gift during our Fall Fund Drive!
Austin’s program is the most recent and it has received mixed reviews. The complaints mainly come from real estate agents and single family developers who argue that such requirements will kill real estate deals at a time when the housing market is already suffering huge setbacks. The requirements just kicked in over the summer, so it is a bit early to judge Austin’s program. But in a Wall Street Journal article titled “Energy Audits Vex Austin’s Home Sellers” a home seller is quoted as wondering “Could they do anything else to make it harder to sell a house?” She expresses a reasonable concern that additional requirements might paralyze an already weak housing market. Let’s take a quick look at the pilot in BC to see how it works.
First of all, the one of the main supporters of the pilot is The Victoria Real Estate Board, the local affinity group for real estate agents in Victoria. Compare that with real estate agents in Washington State who opposed similar legislation earlier this year.
Second, the BC pilot eliminates the barriers and complexity by having local utilities and government cover the cost of the $300 audit, each chipping in $150. In order to qualify for the the money to cover the audit, all the seller must do is disclose the rating of their home’s efficiency on their listing when they sell. There is no requirement to make upgrades, as there is in the two California cities with the rating requirement. Removal of this upgrade requirement won the support of the realtors in Austin.
What makes the program in BC a good start is obvious. It’s free, the realtors are behind it, and the program is entirely voluntary. The downside is that a homeowner with an old energy hog of a home has little reason to jump into the fray. And that is precisely the homeowner who needs the most encouragement to have an energy rating. It is also unclear what standard is being used for the rating (other programs use Energy Star or the Energy Performance Score) and whether the rating is easy to comprehend for the potential buyer.
The bottom line is that energy efficiency is a huge selling point for a home. Homeowners think nothing of putting in new counter tops, appliances, and other capital-intensive improvements with the rationale that it will increase resale value. Today’s housing market in the US is beginning to shift however, with many more homeowners opting to make efficiency a priority over cosmetic improvements. That means the stage is set for these kinds of voluntary programs to demonstrate that including a rating at the point of sale is a good idea—and that making energy efficiency investments will decrease money spent on energy bills and increase resale value.
The ideal program would start with a pilot like BC’s program, but eventually phase in a requirement for audits and ratings. Such a program would, like the BC program, use incentives to offset the costs of the audit and even the improvements. Stimulus dollars are already being used in the US for energy audits, retrofits and affordable financing. Portland’s Clean Energy Works program, for example, would benefit from a pilot like the one in British Columbia. Clean Energy Works is already using stimulus dollars to support audits and on bill financing. Piloting a requirement for an audit at sale would certainly create more interest and support for the program.
If local governments start now with this approach, it won’t be long before rating a home for sale will be just part of the routine of selling and buying a home. Such a standard is completely consistent with the intent of the disclosure laws already on the books and it will stoke demand for the energy efficiencies that contribute to a green collar jobs economy.