Valuing Home Performance Improvements in Real Estate Markets

Many regions and communities nationwide have adopted residential energy efficiency goals as part of their sustainability plans. Consumer demand for high-performing homes has been increasing during the past decade, and successful energy efficiency programs have contributed to the growing inventory of efficient homes. Yet, energy efficiency is still largely invisible on residential real estate markets, due to a disconnect between program implementers, the real estate community, appraisers and homebuyers and sellers. These gaps prevent high-performing homes from being fairly valued at time of sale and limit the investment potential for residential energy efficiency.

This paper describes existing barriers to integrating energy efficiency data into real estate markets, and illustrates recent efforts to address them. National cross-industry collaborations have resulted in standard data collection and transfer tools that allow home performance data to be shared across industries. Real estate markets in some regions have begun including these data into multiple listing services (MLS), making them visible during real estate transactions.

The authors highlight two initiatives in Chicago and Colorado, two markets that incorporated energy efficiency into the real estate value chain. Both regions leveraged local assets and achieved success through cross-industry collaboration. Lessons from these early adopters can assist other regions in developing a tailored approach to making high-performing homes recognized on real estate markets. Closing this gap could propel a virtuous cycle in which homebuilders, lenders and homeowners are more likely to invest in energy improvements, and can therefore be a key component of regional sustainability strategies.