Originally published, May 15, 2001

• Update: Does Building Green Add Value?

By Broderick Perkins
DeadlineNews.Com

FOR EVERY $1 you save on your annual fuel bill, your home value will jump by $20 or more.

That doesn't mean you can simply set back the thermostat or stop heating your home to boost its value.

You must actually reduce your home's fuel requirements, say, by completing energy-efficient home improvements. Once you do, increased home value could be yours.

That's the findings of two little-known, government financed, private research efforts completed in the late 1990s, which are just now attracting interest, thanks to the nation's growing energy problems.

"Nobody was interested in the 1990s, but I'm certainly getting calls now. It should reassure people about making investments in energy efficiency and particularly the Energy Star program which is the nationwide GoodHousekeeping stamp-of-approval for energy efficiency that people will recognize," said Rick Nevin, vice president of ICF International, the Fairfax, VA-based international consulting firm that conducted the research with funding from the U.S. Environmental Protection Agency and the U.S. Department of Housing and Urban Development. News of the research efforts couldn't have come at a better time.

• President Bush's had just established an energy crisis task force that, in part, urged a nationwide expansion of the EPA's Energy Star Program.

• In California's Public Utilities Commission had just set the largest electricity rate increase in the state's history.

• The same day, the North American Electric Reliability Council (NERC), in it's Summer Reliability Assessment said California should expect more rolling blackouts and New England, New York City, Texas and some Midwestern states could suffer outages if long-term heat waves occur.

IFC's research could help take some of the edge off beleaguered energy consumers and compel home owners to consider energy efficient home improvements.

Not only does the research quantify what previously had been largely anecdotal evidence, it also reassures home owners not to forego energy efficient home improvements because they believe a reduced energy bill won't translate into added value when it's time to sell.

"The implication for home buyers is that they can profit by investing in energy efficient homes even if they do not know how long they might stay in their homes. If their reduction in monthly fuel bills exceeds the after-tax mortgage interest paid to finance energy efficiency investments, then they will enjoy positive cash flow for as long as they live in their homes and can also expect to recover their investment in energy efficiency when they sell their homes," according to the 1998 "Evidence of Rational Market Evaluations For Home Energy Efficiency", the first of two research efforts conducted by ICF, a consulting firm for energy efficiency, environmental, housing and community development, transportation and other issues.

Appraisers missing added value

The report does, however, voice concern that appraisers may not always fully consider the increased value derived from energy-efficient home improvements.

"The implication for appraisers is that cost-effective energy efficiency investments do appear to be reflected in residential housing market values. Therefore, the appraised value of energy-efficient homes could understate their actual resale value if the comparables used in the appraisal do not reflect the value of a cost-effective energy efficiency investment," the report also says.

A year later, more ICF research, "More Evidence of Rational Market Evaluations For Home Energy Efficiency" found that cost vs. value home improvement studies likely underestimate the added value of new energy efficient windows.

"In fact, this analysis shows that the value associated with high-performance low-e windows could fully recover the cost of replacing wood-frame, single-pane windows and may well exceed the cost of replacing metal-frame windows," the second study says.

Home owners also shun energy-efficient home improvements because they often aren't as visually appealing as non-energy efficient home improvements.

"Energy efficient home improvements are the things that also make your home more comfortable, but except for your windows you don't see them," said Ken Willis, president of the Ontario, CA-based League of California Homeowners.

Both ICF research efforts are based on detailed household characteristics data from 55,000 homes throughout the nation's major metropolitan areas collected by the U.S. Census in it's periodic American Housing Survey.

"The research we've done, I would hope, should reassure people that they aren't the only ones who value energy efficiency. This was conducted in the 1990s when fuel prices were low and this was not front page news, but people were willing to pay more to spend less on energy," said Nevin, who co-authored the research reports.

More home energy news.

By Broderick Perkins
DeadlineNews.Com

An early-warning system, free and available to the public, can help you plan ahead for a host of emergencies from blackouts and other weather warnings to fires and floods.

First, when hot weather spawns "Stage One" and "Stage Two" energy alerts, a "Stage Three" might not be far behind.

Should the state's energy traffic controller, California Independent System Operator (CAISO)
issue a "Stage Three" alert, calling for rolling blackouts -- officially known as "rotating outages" -- listen for your "Rotating Outage Block" number. You can find your "Rotating Outage Block" number on the "Account Detail" portion of your utility bill or elsewhere on your utility statement.

In California, during Stage Three alerts, local power companies flip the switch off and on in several or more outage blocks at a time for short periods to avoid a major blackout that could suddenly leave many more homes and businesses in the dark for a much longer period. The blackouts are announced by block numbers.

( A quick word here about power conservation during heat waves to help avoid Stage Three alerts. CONSERVE!)

California's Office of Emergency Serviceshas a unique early warning system of blackout notices that can give you from one hour to 48 hours to prepare. The system is designed to avoid the problems caused by the rolling blackouts of years ago that came with virtually no warning from the from CAISO.

Forecasting blackouts, of course, is problematic. Power plants fail without warning, energy producers cut off supplies and other power grid events can occur quickly.

To help get you information as quickly as you can, California's Office of Emergency Services (http://www.oes.ca.gov) added power alerts, including blackout bulletins to its list of other e-mailed emergency and disaster bulletins including child abductions (Amber Alerts), weather warnings, fire conditions, earthquakes and other events. Anyone can get this information sent to them in a variety of ways from a variety of providers, for free.

The alert service is available to anyone from California's Emergency Digital Information Service (EDIS) .

Incident.com, as the original provider, offers an uncomplicated interface and a proven track record. California does not endorse any of the providers. Always read and know the privacy policy of services that gather your personal information.

Originally published, June 20, 2001

By Broderick Perkins
DeadlineNews.Com

FOR EVERY $1 you save on your annual fuel bill, your home's value will jump by $20 or more, according to a pair of little known scientific studies that quantify the effect energy efficient home improvements have on the value of your home.

Unfortunately, that doesn't necessarily mean your more energy efficient home will sell for more than a similar home without the work.

In a Catch 22 for home owners, appraisers say they don't calculate energy improvements because standards don't exist to accurately measure increased value from energy related upgrades.

Standards don't exist, largely because the data base of home owners with energy efficient home improvements is too small to consider during a typical home sale, refinance or home equity loan appraisal.

And home owners aren't compelled to help increase the data base by completing more energy efficient home improvements because they don't enjoy the increased value that typically comes with more value-tested home improvements including kitchen and bath remodels, master bedroom suite redos, room additions and other popular alterations.

"Energy efficient home improvements are the things that also make your home more comfortable, but except for your windows you don't see them." As a result, many home owners forego energy efficient home improvements, said Ken Willis, president of the Ontario, CA-based League of California Homeowners, a membership group of homeowners dealing with home improvement issues.

That may be changing, thanks to California's energy crisis, which is also spreading through the West. More and more often, home owners are compelled to insulate, install high-tech windows and buy the latest Energy Star rated appliance, among other similar improvements, if only to cut skyrocketing energy bills.

A catapult to greater numbers of home owners lifting a hammer to energy conservation also could be two little-known, government financed, private research efforts completed in the late 1990s.

The first, in 1998, "Evidence of Rational Market Evaluations For Home Energy Efficiency" concluded for every $1 you save on your annual fuel bill, your resale home value will jump by $20 or more.

That doesn't mean you can simply set back the thermostat or stop heating your home to boost its value. You must actually reduce your home's fuel requirements by completing energy efficient home improvements.

"The implication for home buyers is that they can profit by investing in energy efficient homes even if they do not know how long they might stay in their homes," says says Rick Nevin, vice president of ICF Consulting, a Fairfax, VA-based international consulting firm that conducted the research with funding from the U.S. Environmental Protection Agency and the U.S. Department of Housing and Urban Development.

"If their reduction in monthly fuel bills exceeds the after-tax mortgage interest paid to finance energy efficiency investments, then they will enjoy positive cash flow for as long as they live in their homes and can also expect to recover their investment in energy efficiency when they sell their homes," Nevin added.

The report has gone largely unrecognized. except by the appraisal trade industry -- until recent energy crisis news captured the public's attention.

"The research we've done, I would hope, should reassure people that they aren't the only ones who value energy efficiency. This was conducted in the 1990s when fuel prices were low and this was not front page news, but people were willing to pay more to spend less on energy," said Nevin, who co-authored the research reports for ICF, a consulting firm for energy efficiency, environmental, housing and community development, transportation and other issues.

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Second report

There's more.

A year later, a second ICF research report, "More Evidence of Rational Market Evaluations For Home Energy Efficiency," found that cost vs. value home improvement studies likely underestimate the added value of new energy efficient windows.

"In fact, this analysis shows that the value associated with high-performance low-e windows could fully recover the cost of replacing wood-frame, single-pane windows and may well exceed the cost of replacing metal-frame windows," the second study says.

"Nobody was interested in the 1990s, but I'm certainly getting calls now. It should reassure people about making investments in energy efficiency and particularly the Energy Star program which is the nationwide GoodHousekeeping stamp-of-approval for energy efficiency that people will recognize," said Nevin.

Nevin concedes, however, appraisers don't fully consider the increased value derived from energy-efficient home improvements.

"The implication for appraisers is that cost-effective energy efficiency investments do appear to be reflected in residential housing market values. Therefore, the appraised value of energy-efficient homes could understate their actual resale value if the comparables used in the appraisal do not reflect the value of a cost-effective energy efficiency investment," Nevin's report says.

The Uniform Residential Appraisal Report version used in most residential real estate transactions includes two areas for making notations about energy efficient home improvements. The report's "Sales Comparable Analysis" area offers an "Energy Efficient Items" line, and the "Comments" area specifically asks for "special energy efficient items, etc."

"It's right there on the first page of form along with a description of improvements and heating cooling equipment. We have been pushing appraisers heavily to get them to look at this issue. They are saying there are no standards and they aren't setting values, but that's the appraiser's job to set those values," said Alfred King, a Fannie Mae spokesman.

Appraisers bound by rules

Appraisers disagree. They say they can't set values without a statistically significant number of comparables and today's fast paced market doesn't allow them to cost effectively find all the necessary comparables in a given area -- if they exist.

More home energy news.

"The only way we can determine what something contributes to the value is if we can find a half dozen homes that have the same work and compare them to a half dozen of homes that didn't have that," said appraiser Greg Stephens, owner of San Jose-based G. E. Stephens and Associates. Stephens is also a spokesman for the California Association of Real Estate Appraisers and the national Appraisal Institute.

Lenders typically require official building permits to verify home improvements that are calculated as part of a home's value. Energy efficient home improvements including installing insulation, weatherizing with door and window strips, caulking and plugs and buying Energy Star major appliances, may not always require a permit. Appraisers could be liable for factoring in home improvements that don't follow lenders' guidelines.

"Not only is it no comps, there's no repository of data. Until that exists nobody is going to make adjustments. We react according to our lenders and if the lender says 'No permit. No value.' we will ignore it. If we make adjustments, there's a huge potential for liability," says Apple Valley appraiser Paul Jacobs of the Enterprise for Economic Excellence, which provides continuing education for appraisers.

Also, says Jacobs, measuring energy efficient home improvement's reduction of energy costs and translating the data into increased value, is a nebulous measurement that could be affected by regional climatic differences, the age of the home and host of other factors difficult to consider without more history.

"It's very difficult to quantify it on a regional dollar spent-regional dollar return basis. National studies are wonderful things, it's a good start, but from a practical standpoint, you can't even do a statewide study and have it be meaningful to home owners. It's meaningless to appraisers because they can't verify it," said Jacobs.