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Study: Home Energy Ratings in Real Estate Listings Would Steer Buyers to Efficient Choices

August 6, 2020
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Washington, DC—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.

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Home buyers 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.

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. Home buyers 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.
  • Home buyers 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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