There are many ecological or “green” rating programs out there that offer home buyers reduced utility bills and maintenance costs, while also providing a cleaner, more comfortable and durable home. Studies show that these programs add value to your home when it comes time to sell. This article details three different green accreditation programs that are available and points to research that answers the question: Does having a “green” home add to its value?
Energy Star, LEED and the GreenPoint Rating Program are some of the most well-known rating programs in the US. They share a common goal of encouraging energy efficiency and conservation of natural resources in commercial and residential buildings, creating a win-win situation for people and the environment alike. They use certified third-party raters to conduct inspections of new and renovated homes so that quality building work and compliance to high standards is assured. Here is a quick review of the programs:
Energy Star – This is a government-backed label for energy efficiency. An Energy Star certified home will have met the strict energy efficiency guidelines set by the U.S. Environmental Protection Agency. The standards required are met across four categories: Complete Thermal Enclosure System, Complete Heating and Cooling System, Complete Water Management System and Energy-Efficient Lighting and Appliances. Once verified, homeowners receive their Home Energy Rating report and certificate.
LEED – Leadership in Energy and Environmental Design (LEED) is an internationally utilized green building certification program established by the U.S. Building Council. LEED certification requires a residential or commercial building to satisfy certain prerequisites as well as earn points in various categories for energy efficiency and ecological impact. A LEED accredited home provides assurance that it will achieve high performance results, reduce water and energy consumption, improve indoor air quality and save money for the homeowner.
GreenPoint Rating – This is a certification program developed by Build It Green, a membership-supported nonprofit based in California. The GreenPoint Rating program takes a holistic approach to home construction and includes community sustainability as one of its evaluations. It gives homeowners the assurance that their homes are healthier, and more energy and resource efficient.
No matter what “green label” you choose there are studies that show energy efficient homes command higher prices on the market. So it’s not only considered socially and environmentally responsible to have a “green” label for your commercial or residential real estate – it also makes financial sense. The Appraisal Journal as far back as 1998 showed this in a report they issued titled, “Evidence of Rational Market Valuations for Home Energy Efficiency”. The report concluded that homeowners who invested in energy efficient improvements to their home could bring in a profit during occupation of the home regardless of how long they live there as well as at the time of selling. They found that “the selling price of homes increased by $20.73 for every $1 decrease in annual fuel bills” (Nevin, Rick and Gregory Watson, 1998).
University of California published a paper in 2009 titled, “Doing Well by Doing Good? Green Office Buildings”. They studied the effects of Energy Star and LEED rated buildings on rental and selling prices across the country and found that “the difference in effective rent is estimated to be about six percent. The increment to the selling price may be as much as 16 percent.” (Eichholtz, Piet, Nils Kok, John M. Quigley, 2009). The benefits of a green label are even more significant in locations that experience more extreme climates. The study found that with greater heating and cooling expenses came an even greater value increase to the building. The study also came to the conclusion that beyond the premium commanded by the inherent energy savings of the building, added value was also attributable to the reputation and positive image associated with the green label itself.
A highly publicized study titled “The Value of Green Labels in the California Housing Market” found the research results indicated “the importance of a label attesting to the sustainability of a property in affecting the transaction price of recently constructed homes as observed in the marketplace.” (Kok, Nils and Matthew Kahn, 2012) The study states that the average price premium for the “green” rated homes is nine percent – roughly in line with studies conducted elsewhere.
In summary, homeowners have a lot to gain from making renovations in the home to meet the standards of an Energy Star, LEED or GreenPoint Rated label. Not only would greater energy efficiency reduce energy costs during occupancy of the home, but there are clearly financial gains to be had when the time comes to sell. Studies done over the past 15 years provide strong evidence that this a trend that is gaining pace and will continue into the future.
Kok, Nils and Matthew Kahn. (2012). “The Value of Green Labels in the California Housing Market: An Economic Analysis of the Impact of Green Labeling on the Sales Price of a Home.” n.p. Web. 28 May 2014.
Eichholtz, Piet; Kok, Nils; & Quigley, John M. (2009). “Doing Well by Doing Good? Green Office Buildings.” Berkeley Program on Housing and Urban Policy. UC Berkeley: Berkeley Program on Housing and Urban Policy. Retrieved from: https://escholarship.org/uc/item/507394s4
Nevin, Rick and Gregory Watson. (1998) “Evidence of Rational Market Valuations for Home Energy Efficiency.” The Appraisal Journal : n. pag. Web. 28 May 2014.
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