ACEEE Research Report: Valuing Efficiency by Clicking on Energy Efficient Real Estate Listings: A Controlled Experiment

A first-of-its-kind empirical study shows that including home energy efficiency scores in online real estate listings would lead buyers to choose more-efficient homes with lower energy costs. The new study provides the clearest evidence to date that state or local policies ensuring that home energy information is presented to buyers would influence their choices, not only meeting their needs but incentivizing sellers to make home efficiency upgrades and builders to construct more-efficient new homes.

Homebuyers have said in repeated surveys that the energy efficiency of homes is a priority. Yet sellers rarely include efficiency information in their listings, so potential buyers using the major real estate aggregation websites—where 93% of home buyers begin their searches—generally cannot find this information. Only Portland, Oregon, requires home energy information in real estate listings; a dozen other U.S. cities or states mandate or suggest some type of home energy disclosure at various stages during transactions, often well after prospective buyers have evaluated competing options.

“We always thought home buyers would respond to energy efficiency information, but now we’ve shown it’s really true,” said Reuven Sussman, co-author of the report from the American Council for an Energy-Efficient Economy (ACEEE) and director of the organization’s Behavior and Human Dimensions Program. “Prospective home buyers have a lot of information at their fingertips, but usually, they know little about the energy efficiency of the homes they’re considering. Just getting the right information in front of people can make big differences in their choices. If we can help buyers find efficient homes, we can really stimulate demand for them.”

ACEEE used a panel research firm to recruit a national sample of 1,538 individuals who indicated they were planning to purchase a home within the next five years. Participants viewed a mock real estate website showing three sample homes at a time and were asked to select the home they preferred the most within each set. The listings—including information such as price, bedrooms, and square footage—were part of a “discrete choice experiment” that allowed researchers to determine the weight of participants’ preferences among competing factors.

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A sample home listing used in the experiment, showing Home Energy Score along a continuum—found to drive buyer preferences more than in any other presentation form.

Some participants saw information about the homes’ energy efficiency, presented in one of five possible ways: a simple Home Energy Score (HES), based on the U.S. Department of Energy’s rating system; an HES along a continuum (line) from inefficient to efficient; estimated annual home energy costs; estimated annual home energy costs plus HES along a continuum; or a HES for only above-average homes (simulating a voluntary labeling program).

Using the data on participants preferences, ACEEE found the following:

  • Energy efficiency information encouraged home buyers to avoid the least-efficient homes and choose more-efficient ones. Homebuyers with such information clicked on the least-efficient listing less often (23% less), and the most-efficient option more often (14% more), compared to those who did not see this information.
  • Presenting efficiency information for only the most efficient listings (mirroring a voluntary labeling policy) was not an effective strategy for encouraging choice of efficient homes.
  • Homebuyers valued efficiency most when it was presented as an image depicting the home’s efficiency score along a scale from inefficient to efficient, as shown in the image above.

The report recommends that state and municipal policymakers require efficiency information in all real estate listings and use an intuitive energy scoring system.

The report cautions that low-income home sellers could be adversely affected by energy efficiency disclosure requirements unless they are accompanied by complementary policies, given that homes owned by low-income households tend to be less efficient than those owned by non-low-income households. It calls for policymakers considering disclosure requirements to research and develop such complementary policies to help home sellers, especially low-income sellers, increase the efficiency of their homes.

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  • As an energy advisor who may end up providing these pre-listing assessments, I have mixed feelings about mandatory labelling of re-sale homes.  Our previous government in Ontario was moving toward requiring pre-listing assessments, but never got around to implementing. With a change in government, this idea is off the table for a long time.  But it made me think about what it would look like.

    The argument could be made that it will lead to sellers doing some upgrades to their homes before selling and that's a good thing, However, I expect that they would tend to cherry pick their upgrades and not do deep retrofits - which is what we really need.  Also, those lipstick and mascara jobs tend to close the door on more substantial upgrades. For example, they might insulate their basement to get their rating up; but they'll likely only insulate to R12 rather than R24. Once that's done, nobody will upgrade it for another 50 years. 

    If I do an audit for the seller, they don't really care about what I say.  That sounds cynical and not always entirely true. But even the most green hearted and earnest seller is not going to be as motivated as the buyer to do a deep and complete retrofit attending to the details in a fully concientious manner.  

    The unintended consequence of mandatory pre-listing audits that I foresee is that we will have a lot of low-ball advisors running around selling ratings.  Ratings alone don't produce savings.  What produces savings is a thorough report in the hands of a motivated homeowner.  The best way to get to that point, I think, is by marketing audits to new home buyers.  For small operators like me, we  need to get the information out to Realtors and Home Inspectors.  Larger organizations -state or province wide - need to lobby real estate associatons to include information on audit programs in their buyers packages.

     

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