How Energy Inspections Are Changing the Way We Buy Homes
In February 2019, Minneapolis passed domestic energy disclosure laws intended to encourage efficiency investments and offer homebuyers and renters more data on homes and apartments. Could this be a trend across the nation?
The idea is simple. People searching for an apartment or a home in Minneapolis, and most cities, do not have access to any information regarding energy costs and properties' efficiency. Now they will have additional energy scores or ratings with which to compare homes. And they will have a checklist of prioritized improvements they can make to their houses to reduce their utility bills.
What is the Residential Disclosure Ordinance?
The American Council for an Energy-Efficient Economy fights for energy disclosure policies. Residential energy ratings and disclosures help increase transparency about ongoing variable housing costs. They also help to promote decision-backed purchasing decisions. Detailing energy use also assists in efforts regarding the enhancement of policy and programs in the future. The end goal is to reduce energy consumption and outline the journey toward achieving climate and energy targets.
The residential disclosure ordinance has mainly caught on in progressive cities: Portland, Oregon; Austin, Texas; Berkeley, California; and Boulder, Colorado. These laws differ a bit from city to city. Generally, they require homeowners to hire a trained energy auditor to produce a report on insulation, structural elements, and energy consumption.
A good example is Austin. The city requires every home sold to have an inspection done by a certified energy auditor. The resulting report offers attic insulation assessments, duct systems, weather stripping around doors, plumbing penetrations under sinks and windows. For most other cities, the list isn't quite as extensive.
The overarching strategy of the energy disclosures is to encourage sellers, buyers, and landlords to advance residential properties' efficiency and, therefore, reduce carbon emissions. It can benefit cities with older housing stock, such as Minneapolis, where 90 percent of homes were built before 1960, and 70 percent lack good insulation.
The ordinances add robustness to housing reports that disclose plenty of helpful information about the condition of homes. These reports do not always focus on factors associated with energy efficiency, such as insulation. The likely cost of utilities also is not revealed in housing reports.
Truth in Sale of Housing
The Minneapolis ordinance requires additional information from homeowners and landlords. Before homes sell in Minneapolis, you have to do an inspection called Truth in Sale of Housing (TISH).
Inspectors will now have to drill a small hole in a wall to determine the insulation of homes. That is unless home sellers have evidence – such as invoices - showing they have recently had work done. While invoices offer proof of purchase, they are not good at determining where insulation might be missing.
TISH reports will likely offer an energy score and outline suggested improvements while directing buyers and sellers to finance and rebate programs. It may also include other energy consumption data, as details emerge over the next two years as they introduce the ordinance. In 1980, Minneapolis passed a residential energy code, so homes built after that do not need energy inspection. Councilmember Cam Gordon, who developed the ordinance with fellow council member Jeremy Schroeder, said cities have few opportunities to evaluate properties for energy efficiency.
Many residents live in their homes for years, which makes it hard for the city to intervene. If they could, they would encourage people to change their windows, furnaces, or boilers. They would suggest utility savings programs involving air conditioning that could lower bills.
He believes the energy ordinance could spur more efficiency projects than other city programs. The city's Home Energy Squad, which offers energy audits, reaches between 800 and 1,000 homeowners annually.
How Much Impact Could Energy Inspections At Time of Sale Make?
In Minneapolis, more than 5,000 homes are sold every year. So, if just 10 to 20 percent of households get energy makeovers, the city could achieve double or triple its current impact.
Timing is everything. Kim Havey, the city's Director of Sustainability, said people tend to make improvements either before they sell a home or after they buy one. The ordinance does not mandate that sellers or buyers make improvements, he said.
Chris Duffrin, executive director of the Center for Energy and Environment (CEE), a nonprofit which helped write the ordinance, believes buyers will wind up making improvements, not sellers. He said it's the nature of home sales that more expensive, non-cosmetic work is generally completed after purchases.
Why? New homeowners are still excited about their purchases and more willing to make energy investments that, when completed, will begin saving them money. An early start to a list of projects means the benefits start taking effect immediately.
Also, energy improvements are generally completed over time. The earlier this starts, the more likely they will occur, he said.
Energy-Efficiency Investments
Home efficiency is still a bit of a mystery to many buyers. But, these reports will offer a detailed list of priorities outlining how to get the best bang for their buck. On average, an efficiency project could yield $2,500 annually. Ideally, energy investments pay for themselves, and that's at least what other cities have discovered.
In Texas, homes with sustainable features sold for almost six percent more than typical models. Oregon saw homes certified as efficient sell for 4.2 percent more and 18 days faster. Chicago has seen efficient homes sell much quicker.
Cities should not be the only repositories of energy information, and some Realtor groups agree. The Minneapolis Area Association of Realtors believes it could add energy-efficiency investments to the "competitive market analysis" reports used by Realtors for home valuations.
The association offered to entertain the notion of placing financial credit for efficiency investments into appraisals and adding green and efficiency fields to multiple listing services.
We're interested to see how the ordinance impacts the city after it goes live in 2021. Multi-family housing energy data will be the first to begin, being collected this year.
The city has not quite determined how the energy score of homes will be determined. Thankfully, CEE has produced a potential scorecard that compares a home for sale with similar ones around the city. Along with the score is a list of "recommended upgrades" with a range of typical costs and possible rebates available.
Come 2021, homebuyers and homeowners will have a better idea of how their homes perform and the price of improvements. City officials optimistically believe more than a few buyers or owners will invest in making their homes more efficient and comfortable.
Bottom Line
The City of Minneapolis is one of many cities to set an aspirational—yet attainable—goal. They aim to reduce greenhouse gas emissions to combat climate change: to move to 100% renewable electricity for their operations by 2022 and citywide by 2030. "Citywide" means that homes and businesses will need to get busy as well. As energy efficiency reduces the amount of energy required to be renewable in the first place, it is a significant piece of the equation.
City-level leadership is happening—as the innovative C40 network says, "cities will shape our future." What's your city doing?
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Frank Jossi
Based in St. Paul, Frank Jossi is a journalist, editor and content strategist. He covers clean energy in Minnesota for Midwest Energy News and writes frequently for Finance & Commerce. His work has appeared in more than 70 local, national and international publications.