Valuing a Home for Its Energy Profile

Introduced by Senators Michael Bennet (D-CO) and Johnny Isakson (R-GA), the Sensible Accounting to Value Energy Act, or SAVE, is expected to be introduced today and aims to include a home’s energy saving profile as a measure of its true value in granting loans and conducting appraisals.

In short, SAVE will improve mortgage underwriting by evaluating all of a home’s assets, including its energy efficiency, and will also encourage investment in energy efficiency at an individual, or homeowner, level, as well as greater expenditure (aimed at significant return) in the residential construction market. Finally, it will reduce residential energy consumption, moving the U.S. one step closer to that clean and secure energy future envisioned by the Obama Administration in its 2011 blueprint whitepaper. It will also help further what Chris Hoch, President and owner of National Fiber, calls “the business of energy conservation.”

Bennet and Isakson will be joined by Ross Eisenberg, the U.S. Chamber of Commerce’s Counsel on Environment and Energy, and the Natural Resources Defense Council’s (NRDC’s) Philip Henderson, Senior Financial Policy Specialist. Also present will be a representative from the Appraisal Institute, a nonprofit global association of professional appraisal agents dedicated to creating a knowledgeable foundation for property economics.

The move will help “regreen” the U.S. Chamber’s increasingly tarnished environmental image – an image made even browner by its backing of the $13 billion Keystone XL oil pipeline project, which rumor suggests will not even deliver oil to the U.S., but to Illinois, Texas, and other American shipping ports for transshipment to China to help pay down U.S. debt.  

The NRDC’s image doesn’t need much polishing, but it is fitting that this essentially overarching environmental organization should use its power – that of 1.3 million members, 350 professionals, and uncounted online activists – to promote something so eminently beneficial to America’s environment as a system for encouraging residential energy efficiency in both older and new homes.

How it works is this: where once licensed appraisers took into account a home’s age, location, square footage, general appearance, amenities, and tax burden, when calculating value, they will now add the value – presumably represented as savings in energy dollars – of (adequate or superb) wall, attic and foundation insulation, thermal windows and doors, energy-efficient lighting options, and a non-leaky building envelope, for example. No one has said whether the program will cover energy-efficient appliances assumed as part and parcel of a home, like furnaces, hot water heaters, and built-in dishwashers, for example.

Currently, the costs of insurance and taxes are calculated when estimating the loan value of a home and the potential buyer’s ability to pay. Utilities are not included, even though most homeowners pay upward of $2,000 per year for electricity and/or heating fuel – a burden that is, in 90 percent of cases, as great as, or greater than, real estate taxes and homeowner’s insurance combined.

So it only makes sense to include it. Moreover, including it will create a regulatory and financing framework that would allow home buyers to finance home energy upgrades as part of their mortgage; sort of like PACE (Property Assessed Clean Energy) financing, but against the mortgage instead of the property tax burden.

And, as if that weren’t enough, SAVE is also expected to create 83,000 new jobs in construction, home renovation, and manufacturing (of insulation, windows, and doors, for example). And a report out of Minnesota shows that home energy efficiency measures, through local and municipal utilities, has saved more than $6 million in energy costs and more than 107 gigawatts of electricity since 2009.

The bill reportedly has support on both sides of the aisle, as witness the two backers. It also has huge support from a diverse group of real estate, building trade, and conservation organizations (and professionals), many of which are expected to attend the October 19 announcement. These include the National Association of Manufacturers, and the Leading Builders of America, which has been pushing the initiative for a year and a half in both the political lobbying arena and through a website called ProtectHousing.com, whose aim is simply to “defend policies that encourage responsible homeownership.”

According to Robert Sahadi, Director of Energy Efficiency Finance Policy at IMT:

“The SAVE Act is a sensible and industry friendly approach to the longstanding problem of considering household energy costs and efficiency improvements in the single family underwriting process. This has garnered the support of a diverse coalition including the Chamber of Commerce, NAM, the Leading Builders of America, and the Appraisal Institute, as well as prominent energy efficiency organizations. It corrects the underwriting and appraisal process for energy efficient homes, saves money for the consumer as well as conserves natural resources and has a potentially positive construction trades employment impact of 83,000 jobs by 2020 without requiring any federal outlays.”

For a more comprehensive overview of SAVE, please also review NRDC’s Switchboard forum. For a better understanding of energy efficiency and how it ties in to America’s homes and buildings, please visit Energy Boom’s efficiency news site and learning pages.  

Image Credit: mjmonty via Flickr.