Having a green certified home adds 9% to its appraised sales value in California, finds a new study.
The study is the first rigorous, large-scale economic analysis of the value of green home labels in California and was conducted by state university professors.
Researchers conducted a pricing analysis of all 1.6 million single-family home sales in California from 2007-2012, controlling for all other variables that typically influence selling price, such as location, size, age and amenities.
They documented that homes labeled with Energy Star, LEED or Greenpoint Rated (California’s label) sell for a premium of 9% compared to average similar homes.
The average sales price of a non-certified California home is $400,000. Green certification raises the price by more than $34,800.
Interesting that the sales premium is greater than the cost of the green features people are paying for and it’s greater than resulting utility savings. The most common green features are insulation and air sealing of attic and walls, weather stripping and efficient HVAC – none of which are particularly expensive.
The authors conclude that part of the premium is the certification itself – the premium is highest in areas of California that also have the highest sales of hybrid cars. People will pay more to buy a house that’s green-certified because it fits their values.
They also found premiums to be higher in parts of the state that tend to have hotter climates, indicating that people valued these certifications as reassurance that their homes would stay cooler without more energy costs.
A report released last year by Lawrence Berkeley National Lab showed that having solar PV boosted the sales price in California. The premium was about the same as the cost of the solar system.
In Los Angeles County, the sales price of three homes was compared before and after they got green certification, and found a rise of 5.5-9%.
“Green upgrades aren’t usually tracked as home features on real estate listing services, which makes it challenging for appraisers to determine the monetary value of the upgrades,” says Debra Little, the appraiser. “We used methodologies beyond the typical appraisal scope, taking into account the energy efficiency benefits as well as factors such as healthier indoor air quality and sealing air leaks – which improves the durability and effective life of a home. We ultimately determined that the many benefits of green homes do lead to higher home values in the local market.”
Home #1, Whittier, CA
- 6% rise in appraised value after green upgrades
- Home value before green upgrades: $720,000
- Home value after green upgrades: $765,000
- GreenPoint Rated score: 30 points (minimum is 25 points)
- Reduction in energy costs: $2,237 per year
- Upgrades include: insulation and air sealing of attic and walls, shower valves, pool pump upgrade, weather stripping
Home #2, Los Angeles, CA
- 5.5% rise in appraised value after green upgrades
- Home value before green upgrades: $475,000
- Home value after green upgrades: $500,000
- GreenPoint Rated score: 37 points (minimum is 25 points)
- Reduction in energy costs: $1,600 per year
- Upgrades include: Insulation and air sealing of attic, crawl space and walls; heating and air conditioning system with duct enhancements; solar panels; pool pump upgrade; water heater upgrade; shower valves
Home #3, San Fernando, CA
- 9% rise in appraised value after green upgrades
- Home value before green upgrades: $420,000
- Home value after green upgrades: $460,000
- GreenPoint Rated score: 45 points (minimum is 25 points)
- Reduction in energy costs: $1,963 per year
- Upgrades include: Insulation and air sealing of attic, crawl space and walls; heating and air conditioning system with duct enhancements; roof repair; pool pump upgrade; solar panels
Back in 1999, we reported on a study that showed Energy Star-labeled homes sold for much higher value, and there have been many studies since then that confirm it.
Last year, 400 of the nation’s biggest home builders pledged to meet newly upgraded Energy Star standards in all new construction.
Here’s the statewide study, The Value of Green Labels in the California Housing Market: