Energy Efficiency Mortgages (EEM) enable homeowners to add energy efficiency to their mortgage at time of sale, taking advantage of long-term and very low rate financing. To qualify a purchaser must undertake an HERS rating to assess the work scope and calculate payback. It seems like a no-brainer. Target homeowners during a transaction and during a period in which they traditionally spend substantially more on home improvements. One NAHB Study showed that a buyer of an existing single-family detached home tends to spend about $4,000 more than a similar non-moving home owner, including $3,600 during the first year. While focusing on a home purchase a trigger for an energy efficiency upgrade seems extremely logical, it has not been working in the market. This “trigger point” continues to be the focus of government programs, whitepapers, and both State and National legislation, yet EEMs have not achieved more than a toe hold in the market, and the numbers continue to fall. Total US Energy Efficiency Mortgage (EEM) Loans Per YearSo the question is, why is something that makes so much sense on paper failing to such a degree in the marketplace?
1) People buy solutions to problems Unlike kitchen, bathroom remodels, and new flooring, energy efficiency and comfort are not visible to a homeowner that has not yet paid a bill or spent a cold winter (or hot summer) in their new home. As the trigger to get people to invest in energy efficiency and comfort solutions for their home tends to be based on solving a pain point, it is hard to motivate a new buyer to take action on issues where they have yet to experience the problems. 2) Buying a house is stressful enough The process of buying a house is full of stressful decisions, complexity, and risk - and for most people constitute their biggest single investment. Adding another moving part to this process, one that will require more inspections and general make transactions take longer is just not a priority for most home buyers. 3) There's no money in EEMs Nationally, Energy Efficiency Mortgages add and average of only $7,500 for energy efficiency upgrades onto the base mortgage (based on data from HUD). When you consider that time is money, and that the brokers and realtors who are shepherding the transaction through the process get paid when it is completed, there is no wonder we don’t see realtors jumping up and down excited to promote EEMs. On the typical EEM, realtors make no money, as their commission is based on the sale price, not the added value of the EEM. Realtors make no more money on an EEM than a traditional mortgage yet they incur risk, extra time, and expense. As usual the answer is simple - follow the money! I was lucky enough to go the ACEEE Summer Study this year, and among the many interesting conversations and very engaging sessions I attended was a presentation on the DOE Home Energy Score. In this session there was one slide in particular that peaked my interested and got me thinking about use cases. Just how good is good enough? The following slide in particular raised some questions for me. If the these various tools have the degree of variance that the stud presents (HES wrong by greater than 25%, 39% of the time, Rem/Rate wrong by greater than 50%, 25% of the time), what is the use case for these labels? While many tools seem to be doing well on predicting how pools of homes function, individual homes are a different story with wide variance. If you are one of the homeowner that receives a label that says your house is 50% worse than it is (which will include potentially millions of American homeowners if we roll any of these systems out), you probably don't really care that the label is right on average. My question is simple. How should we use any score that has the potential, on a given house, to be wrong by such a large degree?
This is a particularly interesting article, written for Fast Company Magazine, as it relates to the current push in many states for a code based energy label for homes. These labels, often referring to a HERS rating, are based on comparing the energy attributes of a building to the same building as built to current code. This is also often referred to as an asset rating, as it rates building and not the behavior or actual energy usage.
While on paper these ratings sound like smart public policy, they are in fact having an unintended consequence, as new homes inevitably have better ratings than older building stock, as new homes are built to current code, the new housing industry has figured out that a HERS rating will in fact drive consumers to buy new home's rather then the existing building stock. These new homes are generally much larger than older homes (meaning that they may be better than existing homes when compared to code AND still use more actual energy to operate), and of course have major embodied energy, etc. It is no wonder that, if you have been following RESNET over the last year, there has been a land slide of MOUs with builders across the country. They realize that a HERS rating will have the impact of driving consumers away from existing homes and into their newly constructed buildings. I think that as we promote HERS ratings as public policy that there is a real unintended consequence that in many cases may work against our macro energy and environmental goals. ------------------------------------------------------------- FAST COMPANY Is It Time To Stop Constructing New Green Buildings? Making a new building is notably worse for the environment than fixing an old one--no matter how many solar panels you put on it. By Ariel Schwartz Step into a new building in certain parts of U.S. and chances are pretty good that it has been built with the environment in mind (and that there is a plaque bragging about it). Maybe there’s natural lighting, a smart HVAC system, or incredible insulation. It doesn’t really matter. No matter what LEED-certified credentials the building can offer, retrofitting the teardown that came before would probably have made more environmental sense. Preservation Green Lab, a Seattle-based think tank, released a study this week showing that, in the think tank’s words, "the greenest building is the one that’s already built, in almost every case." It’s something that intuitively makes sense, but up until now, the evidence hasn’t been quantified quite to this extent. The study uses life cycle analysis (a method of measuring impact from cradle to grave) to compare the environmental impacts of reuse and building renovation versus construction over 75 years of use. Preservation Green Lab measured six building types-- single-family home, multifamily building, commercial office, urban village mixed-use building, elementary school, and warehouse conversion--across four U.S. cities with varying climates (representative of Portland, Phoenix, Chicago, and Atlanta). The results are surprising, if not entirely shocking. It can take 80 years for a new "green" building to make up for the climate impact of its construction process with energy efficient features. If Portland reused and retrofitted all the commercial office buildings and single-family homes it plans to tear down over the next decade, the city could save 231,000 metric tons of CO2. That’s 15% of the country’s CO2 reduction targets for the next 10 years. The report also presents an alarming statistic from The Brookings Institute: one-quarter of today’s buildings in the U.S. are being demolished between 2005 and 2030, creating massive amount of CO2 emissions. But at least some people are getting the hint. According to the U.S. Green Building Council, most buildings across the world that use LEED certification are now retrofits. Up until December 2011, new buildings claimed more LEED certifications. There are numerous high-profile examples of LEED retrofits, including the Empire State Building (it expects to cut energy use by 38%) and San Francisco’s Transamerica Pyramid, which saves $700,000 each year in energy costs thanks to an onsite co-generation plant. And yet, there’s still something exciting about a new tricked-out LEED building. It’s a novelty that will hopefully fade with time. Ariel Schwartz is an Assistant Editor at FastCompany.com. She has contributed to SF Weekly, Popular Science, Inhabitat, Greenbiz, NBC Bay Area, GOOD Magazine and more. |
AuthorMatt Golden, Principal Archives
October 2017
Categories
All
|