A wish for 2011: an MPG-like rating for all homes on the market in Oregon

The Energy Performance Score for homes should be included in MLS real estate listings.

As we work as a society to grapple with the environmental problems that confront us, one of the primary challenges (and opportunities) is to eliminate “externalities” in markets, “costs or benefits not transmitted through prices,” (Wikipedia) that negatively impact environmental health.

Gasoline is a classic example of one such externality.  When we pay at the pump, the price of gas reflects the cost of extracting, refining, transporting, distributing, plus some taxes.  But the environmental costs of oil extraction and of gasoline consumption (read oil spills and global warming) are left out, allowing the price to be artificially low (even at $4/gallon).  If these externalities were included (“internalized”), the price of gasoline would shoot up, demand for gas would decrease, and demand for fuel-efficient vehicles would skyrocket.

What does this have to do with houses?  Currently, information about the relative energy performance and consumption of our buildings is not available to prospective buyers in the marketplace.  In fact, it’s not even measured in any systematic way.  So it’s impossible to effectively compare energy performance between homes, or assign a value to that performance.  No info means no value means building energy performance is, largely, an externality in the marketplace.

Why should we care?
  Because investing in energy efficiency and building performances does have real value that should be included in market decisions.  And, if internalized, that market value would provide powerful incentives for retrofits and green building, which would be good for the planet.

Let’s say I do a deep energy retrofit of my home, making it more comfortable, quieter, safer, cheaper to operate, and better for the earth.  Shouldn’t the value of my home rise compared to a comparable-but-not-retrofitted home?  Sure, I can tout the work I did on the home to prospective buyers, but without a trusted measure of actual building performance, I can’t effectively “transmit” the value of the retrofit into the resale price of my house.  Being the green-minded, enlightened fellow I am, I’d probably do the retrofit anyway, right?  But it sure would help to know that my investment in the home would be accurately valued by the marketplace.

Now say I’m a prospective home buyer looking for a nice, low-impact home.  How can I evaluate the energy performance of the houses I’m viewing and considering for purchase?  In my quest, I can look for a LEED home, maybe find a house that recently had an Energy Trust-supported home performance retrofit, or look for a smaller home because less area to heat mans less energy consumption.  All of these are reasonable approaches… but wouldn’t it be great as a buyer to know the actual level of energy performance for each of these homes and be able to compare them during my buying decision?

We do this all the time when buying a car – we compare MPG as a key factor in determining value and in determining the price we’re willing to pay.  The MPG rating ensures that fuel efficiency is transmitted to price.

We need an MPG for houses!

Enter the Energy Performance Score, or EPS.  Developed by Earth Advantage Institute with Energy Trust of Oregon backing, the EPS “provides an estimate of actual home energy consumption as well as related carbon emissions, and shows homeowners where they rank in energy use on a regional and national scale.”  It’s a great measure that allows buyers to compare energy consumption between homes and gives homeowners market incentive to do energy upgrades.  It’s also good for builders and developers because it promises to provide market incentive for energy efficient building and increases demand for green building and home performance work.

Where’s the rub? 
Well, EPS is entirely voluntary.  To really have power in the marketplace, the EPS should be included in every MLS real estate listing.  Universality is the only way to truly “internalize” building energy performance in the marketplace and incentivize performance upgrades throughout the market.

That’s why we’ve signed on to Oregon Environmental Council’s Jobs & Prosperity initiative, which will work at the state level in 2011 to mandate the inclusion of EPS in listings.  It’s a market-based solution that will help us move our built environment closer to where it needs to be in terms of greenhouse gas emissions and performance.

Because the Energy Performance Score measures the relative energy consumption of homes, it recognizes that both size and performance matters.  So it dovetails well with our work with Accessory Dwelling Units, small infill housing, Passive House buildings, and home performance improvements.  With small footprints and/or high performance, all of these green building strategies will be reward with good EPS scores.

If you’re interested in supporting the Jobs & Prosperity campaign with its Energy Performance Score provisions, please sign on here.  Meanwhile, have a Happy New Year!


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