January 1st, 2021 will be the three-year anniversary of the City of Portland’s Home Energy Score policy. Twenty-thousand Home Energy Scores have been completed, resulting in some surprising new data from Portland’s Bureau of Planning and Sustainability. In addition, a new report by the American Council for an Energy Efficient Economy (ACEEE) looked at how home buyers nationwide respond to energy efficiency ratings in real estate listings. Both reports point to the year 2020 being a turning point for Home Energy Scores: People are using them, more cities are making them a requirement, and they are shaping the real estate market.
HES Program “Exceeds Expectations”
When Portland City Council passed the Home Energy Score Ordinance back in 2016, they included a requirement that the Bureau of Planning and Sustainability (BPS) evaluate the program 30 months after its implementation. The resulting report, released this fall, states that “The Home Energy Score program has met, and in some cases exceeded, staff and stakeholder expectations in its first 30 months.”
Here are some of the key findings:
- In just under three years, 20,000 homes have been scored using the Department of Energy’s Home Energy Score methodology.
- The number of homes with a Home Energy Score now represents over 12% of the total number of homes in Portland.
- In 2020, Milwaukie, Oregon created its own Home Energy Score requirement, and six other Oregon cities are also considering it
- In a survey of home buyers who purchased a home within the past three years, two-thirds of buyers stated that they paid attention to Home Energy Scores when home shopping.
- After purchasing a home, buyers found the list of recommended improvements to make the home more energy efficient, to be the most useful part of the HES Report.
- Among the five most common improvements recommended by Home Energy Score assessors, “seal gaps and cracks that allow air leakage into the home” was #1 (check out our DIY guide)
Obtaining a Home Energy Score is convenient, affordable for home sellers
With over 50 Home Energy Score assessors licensed in the Portland area, the only difficult part about scheduling an HES is choosing which one to work with! The BPS evaluation report found that the abundance of Home Energy Score providers in Portland means that homeowners can quickly and easily schedule the assessment, without needing to delay their home sale to satisfy this pre-listing requirement. Usually, a Home Energy Score assessment can be scheduled within two days of the decision to list. Online scheduling further increases the convenience of this service
Although housing advocates and real estate agents were initially concerned that the cost of Home Energy Scores would place a financial burden on home sellers, the report finds that this hasn’t been the case. The average cost of a Home Energy Score in Portland is $125 for homes under 3,000 square feet. Although the City of Portland does provide free home energy scores to low-income households, only 80 home sellers took advantage of the program over the evaluation period, indicating that simply ordering a Home Energy Score online was faster and easier than applying for assistance for the vast majority of home sellers.
Home Buyers Value Home Energy Scores
For a closer look at how home buyers value Home Energy Scores, we can turn to the recent American Council for an Energy Efficient Economy (ACEEE) study.
For this study, researchers interviewed over 1,500 individual home shoppers across the US. They were shown a simulated real estate listing website and observed as they responded to energy efficiency information presented alongside homes for sale.
When presented with the annual energy costs of a home, participants in this study were somewhat more likely to click on a listing, and willing to pay slightly more for homes with low energy costs. However, when given a Home Energy Score for a home, participants responded much more strongly, with more clicks on listings. The study also found that home buyers were willing to pay more for high-scoring homes.
Nearly all home buyers start their search online, and click on listings to learn more about the homes they see. The ACEEE study calls this “the point of decision making”. They report that “Presenting critical information at the point of decision making can change behavior. Therefore, getting efficiency information in front of home buyers at this moment may affect those critical decision-making clicks.”
In other words, Home Energy Scores are more valuable to home buyers when they can be seen during their initial phase of home shopping. That’s why the HES programs in Portland and Milwaukie require homes to be scored before they are listed, and not after. This research shows that the program could be even more effective if Home Energy Scores were shown right on the listing preview, along with other basic information like price, number of bedrooms, and square footage.
Buyers willing to pay 6% more for a 1-point Score increase
In the Home Energy Score system, homes are given a score from 1-10, with 10 being the most energy efficient and 1 being the least.
In the ACEEE study, participants showed that they were willing to pay more for similar homes if one home had a higher Home Energy Score. For every point increase in the HES, buyers were willing to pay an average of 6% more for the home. For a home priced at $420,000, this translates to $25,200 more that buyers may be willing to pay if it has, for example, an HES of 6 instead of 5.
However, this number is just an average. The study did not evaluate where on the scoring spectrum of 1 to 10 the movement needed to happen to translate into a higher home value. For example, if a home moves from a HES of 1 to a 2, this change may not provide significant value to buyers. But the take-away here is that the better your Home Energy Score, the more likely you are to sell your home for maximum value.
To learn about how to increase your home energy score, check out some of the DIY articles on our blog.
Ready to schedule your Home Energy Score report? Check out our transparent pricing structure and schedule online today!