Home-Buying: The Rise of Home Energy Scores

By Tim Miller

RISMEDIA, Thursday, May 24, 2018— Editor's Note: This was originally published on RISMedia's blog, Housecall. See what else is cookin' now at blog.rismedia.com:

We're all familiar with measures that assess the desirability of a home, from rankings that show the neighborhoods with the best schools to a Walk Score® that reveals how easy it is to get around without a car. Now there's a new rating gaining traction: the Home Energy Score.

While voluntary energy audits have been happening for years, cities across the nation are now adopting policies that require sellers to share a certified Home Energy Score with prospective buyers. In fact, Massachusetts Governor Charlie Baker is close to establishing a Home Energy Score policy across the entire state—a signal of growing support throughout the country for more transparency in home energy use.

Similar to miles-per-gallon ratings for cars, a Home Energy Score predicts how much energy it takes to run a home and rates it against the average score for homes across the nation. The score—given by a certified home assessor who evaluates a home's performance by looking at features like ductwork, heating and cooling systems, and insulation—provides prospective buyers clear, useful information on a home's energy profile and energy costs. This is one more data point for homebuyers to use in making informed purchases.

As the Home Energy Score continues to take hold, expect to see these shifts in behavior in the real estate market:

Buyers will be more attuned to home energy use. As more jurisdictions adopt mandatory Home Energy Scores, demand for more efficient homes will increase, and even in areas without scores, buyers will want to know more about energy performance and the monthly costs to run a home. People will compare the efficiency of similar homes before purchase, much like how we compare the efficiency of cars and appliances today.

Sellers will incorporate upgrades to boost a home's price. REALTORS® may more often recommend energy upgrades to better position a home for sale. From smart thermostats to insulation and highly efficient water heaters, look to see sellers increasingly prioritize energy upgrades to make a home more attractive to potential buyers.

Appraisers will factor in home energy upgrades when determining home value. With greater understanding of high performance features like duct sealing, solar panels and insulation, appraisers will value energy upgrades the same way they value a kitchen remodel. This means sellers will get more return on their investments with home energy improvements—even if those upgrades were made several years before.

Cities like Portland, Ore., have already adopted a Home Energy Score policy, and local nonprofits like Enhabit have performed hundreds of Home Energy Score assessments to date.

We're seeing the Home Energy Score drive change in markets across the country as healthy and sustainable living becomes an even greater part of the conversation in real estate transactions. As more states and local communities sign on, expect to see accelerated market transformation throughout the country.

Tim Miller is CEO of Enhabit, a nonprofit based in Portland, Ore., that creates social impact through better living spaces. Enhabit's programs are aimed at helping families at all income levels improve the efficiency, health and resilience of their homes.

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