This is an Editorial in part: This article does feature my personal beliefs about Home Energy Scores. I see the benefits of them and of course want energy efficiency in all homes. But this is something I know about and have lived. Feel free to disagree with me and please make up your own minds. The City needs to hear your voices so the most important thing is that you all participate.
Taking a page from the Portland, Oregon book the City of Hillsboro today announced that the City intends to begin the process of requiring a Home Energy Score on all homes sold in the City. Portland has done this for 36 months now and the results have been mixed. The goal is a great thing to aspire to In short these programs and policies seek to encourage energy enhancement in homes to reduce the energy use and the Carbon footprint that residential homes put off. It is also the goal of these programs to get homebuyers informed of the efficiency of the home they are buying. All of us want a more efficient home, on that, we can all agree.
As a real estate broker with 38 years of experience, I have sold many homes. In the past 3 years, we have closed escrow on 20 plus homes that had to display the Home Energy Score in Portland, Oregon. The process of getting a test is costly and time-consuming and needs to be planned for. Most policies require the score to be done before the home is listed and advertised on the MLS or any form of media, It is just one more thing that has to be done among many when selling a home.
If the seller does not follow the rules then fines will be issued for non-compliance. In Portland fines of $500 are issued to owners Portland who fail to advertise the home for sale without Energy Score information clearly displayed. See more here
Courtesy City Of Hillsboro website – https://www.hillsboro-oregon.gov/
Is this what we want our City doing? Fining people for not advertising how efficient their home is? We have to think that is not the majority opinion. God knows many people already find themselves at odds with their government. Being essentially forced to comply will be divisive. In Portland, the feeling is that the benefits are worth the pain and angst that the fines cause. Compliance is mandatory and the results have been contentuous.
Many believe that those sellers with efficient homes can distinguish themselves and the value of their home with home buyers by voluntarily getting a Home Energy Score. Those who have homes of lower energy efficiency can choose not to get a score and buyers doing an inspection can pay for one. Do we all want the most efficient home if we can afford it? Yes. But should we mandate this or let the free market work it out?
My experience leads me to one conclusion. Homes with higher scores sell faster and for much more money. In fact, they sell for a lot more than the energy benefits that they offer. The reasons are that the perception of value far outweighs the real economic value. Imagine that there are 2 homes. Home A has an energy score of 8.5 and Home B scores a 4.5. Homebuyer X looks at both and decides he/she will pay $20,000 more for Home A with the 8.5. Great- and that is the reality we see. Higher scoring homes do gain values of tens of thousands more in many cases.
But here is the reality. Home A has an energy bill of perhaps $100 less a month than Home B. It will take 15 plus years for Home A to offer the type of savings it needs to when considering the additional costs had our homebuyer just bought Home B.
The second issue is a more onerous outcome. The homes with lower scores, often older homes, are being artificially forced down the pricing scale. Homeowners of the less efficient home may often be economically not as well off as the owners with the modern efficient home. The outcome is an obvious one. The homeowner of Home B is losing value because of the Home Energy Score. They are in essence being punished.
Those of us in the field who watch the data know this to be true. If you do not find that believable, read this study by two PHDs at the University of Wisconsin and the Analysis Group. In this 50 plus page report using data from around the world and in particular Portland, Oregon, the lead analysts found that higher scores lead to higher prices and that lower scores lead to lower prices. Not only that the difference is disproportionate to the energy savings.
Here is an excerpt from their Executive Summary:
Energy ratings are costly to undertake, and at present there is no clear evidence that mandating their disclosure at the time of property listing reduces energy use or leads to investment in energy-efficient technologies. By contrast, many other policies targeting household energy use and investment have demonstrated efficacy from both an environmental and cost perspective. These other policies often try to influence consumer energy use or investment behavior directly. Given that the behavioral pathway by which energy ratings would affect energy use or investment decisions is indirect at best, established alternatives offer better policy approaches.
In addition to the substantial uncertainty about their efficacy, an energy rating requirement may have unintended consequences. In particular, their impact on property prices may exceed an adjustment consistent with the underlying differences in energy costs. Economic research confirms that energy ratings affect property values in the expected direction ‒ that is, higher ratings lead to higher valuations (“premiums”) and lower ratings lead to lower valuations (“discounts”). However, research has found that the magnitude of these premiums and discounts does not appear to accurately reflect the capitalized value of expected future energy expenditures. Instead, these premiums and discounts appear to inflate differences in expected future energy expenditures across properties with different ratings. The reason for this inflation of premiums and discounts is unclear. It could reflect over attention to future energy expenditures (perhaps due to the salience of the information provided) or personal preferences (e.g., the cachet of owning a highly rated home, or the stigma of owning a lower-rated home). In any case, evidence to date indicates that mandatory energy ratings can lead to home-value effects that are incommensurate with the changes in energy costs that the policy was designed to incentivize. And economic research finds that these home-value effects could be large, with changes in property values potentially on the order of tens of thousands of dollars. (Source https://www.analysisgroup.com/globalassets/insights/publishing/re_impact_of_energy_rating.pdf)
The study finds that offering incentives to homeowners to make their homes more efficient has a more positive effect and makes homes truly more valuable. State and Federal incentives for solar systems, Mini-Split high-efficiency heat pumps, insulation packages, and new highly efficient windows are proven ways to get our housing to a better place. It is less divisive and does not pit governments against the people. We wonder as a society as to why so many citizens distrust the government. Maybe we need to realize this proposal has that potential.
Let me ask you all this. Is this the time to be doing this? In the past few months, the Hillsboro community has been handed a water rate increase, and a sewer/stormwater rate increase. Businesses are closing all around town and the winter is just starting. Most of us won’t see friends and family over the holidays that we need to see and are becoming increasingly isolated. Wouldn’t it be nice to just have a big long pause and take a deep breath instead of being loaded up with more changes and more new proposals? Or have we as a collective forgotten how to do that and what that feels like?
Mandating more rules right now amidst rising homelessness, growing poverty, and with evictions looming large for so many …well it just seems like way too much to ask. Bad timing for more changes I feel. I know many of you do too.
In closing, I am reminded of the great Doctor Suess and his brilliant book and cartoon The Sneetches. If you have the Star on your chest your the best. If you don’t, well your not. These energy scores have made some of my clients in the past feel a bit like one of those Sneetches. Some had the Star and some did not. It is the “did nots” that I worry about in this new proposal by the City of Hillsboro.
Here is the information from the City of Hillsboro’s website- Citizens have until Feb of 2021 to weigh in. I suggest you all do that and support a position you believe in. Citizen involvement is key now more than ever in our City, it is growing so fast! Your voice can make the difference.
Community Member Benefits
A Home Energy Score Report provides homeowners and potential home buyers with information about the home’s energy use and cost. It also provides a list of suggested improvements to improve the home’s energy efficiency and decrease cost. Providing this information up front empowers homebuyers to make informed decisions about their home purchase.
Home Energy Score Polices have the potential to help:
- Increase energy efficiency retrofits
- Benefit the environment
- Improve energy efficiency and lower utility bills
- Increase home comfort
- Increase property values (if energy efficiency measures are implemented)
Advancing City Goals and Priorities
Establishing a Home Energy Score Policy will help advance the following City of Hillsboro goals and priorities:
Reduce community-wide residential energy use by 25% by 2035 over a 2010 baseline —Community Environmental Sustainability Plan
Establish a Home Energy Score Policy and Program — Hillsboro 2035 Community Plan
Institutionalize diversity, equity, and inclusion into the delivery of City services and policy-making — 2020 Hillsboro City Council Priority
A Home Energy Score Policy would require sellers of residential, single-family homes to obtain and disclose a Home Energy Score Report before publicly listing their home for sale.
If adopted, homeowners will be required to:
- Include the full Home Energy Score in the Multiple Listings Service (MLS) and other places where the home sale is listed.
- Provide the full Home Energy Score Report or a link to the full report in any listing or advertisement for the home. For example: Craigslist, social media, realtor websites, newspapers or other printed publications.
- Display printed copies of the Home Energy Score Report in the house where prospective buyers will see it.
Providing this information helps home buyers to understand how efficiently the home uses energy, the energy cost to operate the home, and what measures can be taken to improve energy efficiency and lower costs.
A policy that includes single-family rental homes may be considered at a later date.
Assessment: Unlike a traditional home inspection, a home energy assessment focuses on mechanical systems, insulation, and air duct sealing. A home energy assessment takes about an hour to complete. A trained and certified assessor will evaluate the home’s:
Mechanical systems: heating, cooling, and hot water
Insulation: walls, attic, and crawl space
Existing efficiency measures such as solar panels
The scoring system is a 10 point system with 0 being the lowest or worst score and 10 being the highest or best score. You can see what a report and the associated score looks like right here.
The scores require an investment typically ranging from $150 to $300 dollars and the City is looking to provide grants for those who can not afford the cost of the test.
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As a realtor it’s clear the Home Energy score is not effective, and targets those least able to address any deficit. This requirement is just another expense for a home owner, especially a homeowner selling at the lower price point. So not only does this seller have to pay for the Home Energy Report, it gives leverage to an investor if the home is in a depressed area, or not in perfect shape.
The home energy evaluation should be an option and not required. This is just more bureaucracy. If you want to effect change, offer this as a free service to those who need it, if the City wants to fund education and/or repairs to address energy for the economically challenged, do so. But, requiring something which is just a “tick the box” and makes no difference is wasting our time and resources, and those least likely to afford said resources.
Help me understand why Washington County would follow anything Multnomah County is doing? Multnomah County is in the dumps, with poor management, and is truly an embarrassment and disaster. Really, you want to follow in their footsteps?
Your lived experience as a professional mirrors my own. This is a make work program that have no real positive impact if any. If the program is so great and so needed make it voluntary. But that is not an option that folks being told what to do can do. There is no dissent nor any real analysis being done. Rather decide for all of us. Brokers know it is ineffective and punishes the poor. Very sad indeed.
Home scores are worthless, just another cost to a seller at zero value to a buyer. It’s 2022 now, I’ve never had a buyer put any weight or even look at the energy score, they’d rather call & get an average cost of utilities for the past year so they know what to expect.
The requirement for energy scores needs to change, families are struggling enough without being mandated to pay more! DO BETTER CITY OF HILLSBORO!
Well said, Heather!