The United States possesses a housing stock that is old, comparatively large, “leaky” in terms of energy loss, and operated inefficiently. That’s the good news, at least for those seeking to find cost-effective reductions in energy use and carbon dioxide (CO2) emissions.
While the U.S. buildings sector demonstrates these characteristics, the largest opportunities are in residential properties, where buildings alone account for 22 percent of the energy use and 21 percent of the country’s CO2 emissions.1 Moreover, many actions that households can take to reduce energy and CO2 emissions would come at “negative net cost”—that is, with dollar savings to the householders themselves.
The bad news is that it is very difficult to get the American public to embrace household energy reduction despite the promise of financial savings. Local government and utility programs designed to tap into these savings rarely achieve even a 1–2 percent household sign-up rate. However, in the offing could be a game changer to unlock the latent green premium in our homes: an energy-efficiency label equivalent to a miles-per-gallon rating for vehicles. This could provide homeowners and prospective buyers with a straightforward understanding of household energy efficiency relative to similarly sized homes in the community and region.
Our Housing “Pintos”
According to the latest census figures, there were about 130 million housing units in the United States in 2009, of which 113 million were occupied on a full-time basis. The majority of these homes (as much as 72 percent) were built before the adoption of modern energy codes in home construction in the late 1980s. (Energy codes impose minimum requirements for energy efficiency upon builders.) These are our “Ford Pintos.” Old homes, of course, can be renovated to achieve more modern standards, but in most cases they are not. It is estimated that 60 percent of our residences possess inadequate levels of insulation.2
Energy codes, applied in earnest only since the early 1990s, are no guarantee of energy efficiency. Unlike the Corporate Average Fuel Economy (CAFE) standards for vehicles, there is no national building/energy code standard to which states and localities must adhere. Rather, states and localities are allowed to choose whether to have codes and, if so, which vintage of code (codes are updated on a three-year cycle). Eleven states have yet to adopt any energy code, and several have only adopted dated versions. Moreover, regardless of the code adopted, compliance is variable.
Unfortunately, the turnover in our housing stock is slow, with the average home lasting about 50 years. It is estimated that between two-thirds and three-fourths of today’s housing stock will still be standing in the year 2050, with only one to two million new home units constructed each year.3 This means that if we are to find significant residential energy savings, we must give priority to existing, not new, homes.
Our Housing “SUVs”
New housing stock is being built to higher energy-efficiency standards, but energy savings are being offset by the “supersizing” of our newer houses. New homes are on average nearly 2,400 square feet—44 percent larger than the new homes built in 1973 and more than twice as large as a new home built in 1960. These are the “SUVs” of our housing stock. Researchers Alex Wilson and Jennifer Boehland note “a small house built to only moderate energy-performance standards uses substantially less energy for heating and cooling than a large house built to very high energy-performance standards.”4
Larger homes also provide more room for energy-guzzling appliances and electronics. The growth of electronics (in both number and size) is one of the defining features of the past two decades in home operations. And larger homes usually mean larger garages—to accommodate our actual SUVs.
The supersizing of our homes has not gone unnoticed, of course, and some of the largest are routinely known by the pejorative term “McMansions.” Still, there are rarely any roadblocks placed in the way of homeowners who want to build a structure as large as they see fit.
Age and Size Are Not Energy Destiny
Regardless of the age and size of a typical home, occupant behavior is a significant factor in energy use. It is frequently noted that energy use in comparable residences can vary by as much as a factor of 3.5
Homeowners, of course, have complete control over home temperature settings, and it is often easier to adjust the thermostat than to dress more appropriately. Additionally, the most recent Residential Energy Consumption Survey of the U.S. Energy Information Administration6 revealed that a large number of homeowners do not adjust the thermostat when they leave the home for extended periods or when they go to bed. Many homeowners are either ignorant of or indifferent to the energy and dollar savings resulting from more active thermostat control: while these savings vary according to climate, an adjustment of just two degrees can lead to as much as 10–15 percent in savings. Control over lighting and electronics energy output is also possible but frequently neglected.
In automotive terms, we know that Americans could achieve miles-per-gallon gains of at least 10 percent by using common “ecodriving” principles.7 The gains from behavioral change derived from more efficient energy use in the household could be far larger.
Unlocking a Green Premium
Efforts are underway across the country to make the home energy-improvement process easier and more attractive, thereby ending homeowner lethargy when it comes to energy efficiency. These efforts typically address the many obstacles to producing large-scale results through, for example, low-cost or no-cost audits; rebates on specific or significant home-improvement measures; a streamlined homeowner-contractor interface; on-bill financing of home improvements as opposed to up-front purchasing; and a bolstered contractor workforce. All of these measures are needed and laudatory, but they are unlikely to unlock key upgrades to our housing stock. Home retrofits will remain a hard sell to busy and distracted homeowners, even with the promise of energy and dollar savings over time.
A possible game changer is uncovering a premium in the sale of energy-efficient homes. A healthy segment of the real estate market believes there is a green premium for certified new homes today,8 with certification systems evolving that highlight a home’s green attributes. The largest national certification program comes from the U.S. Environmental Protection Agency—the Energy Star Homes program through which builders can apply for and receive the Energy Star label if their newly built homes are at least 15 percent more energy efficient than the most up-to-date building code. According to the EPA, the label has garnered significant market penetration, covering no less than 25 percent of all single-family houses built in 2010.9
Other national certification systems include the National Association of Home Builders’ green building standard and the Leadership in Energy and Environmental Design (LEED) green building rating system. These certification systems pair energy efficiency with other green attributes. In addition to the national level, there are regional and locally based programs, such as the Earth Craft Home (for the Southeast) and the Chicago Green Homes Program. Large private-sector builders, such as KB Homes and Beazer, are beginning to provide prospective homebuyers with an “energy performance guide” for the homes they build, highlighting the energy efficiency of their structures.
Evidence of a green premium for existing energy-efficient homes is more conjectural. A widely publicized study from California demonstrated that there was a substantial green premium for homes in the state with solar panels.10 We do not know, however, whether the same result holds for energy efficiency. The hope is that if homeowners recognize the added resale value from making their homes more energy efficient, they will perceive added expenditures as an investment rather than a cost. The green premium from a sale of a relatively efficient home could conceivably run into thousands of dollars of profit—an inducement, if validated, that would likely get the attention of even the most recalcitrant homeowners. To be sure, this green premium must be more than mere speculation or wishful thinking, and efforts are underway to provide validation. One of the easiest mechanisms for communicating a home’s energy efficiency to prospective buyers would be similar to the miles-per-gallon sticker now affixed to automobiles.
Home Energy Labels
A host of organizations are developing and testing home energy labels for existing homes, with the Home Energy Score (HES) from the U.S. Department of Energy perhaps the most promising. The initiative, launched by Vice President Biden’s Middle Class Task Force in 2010, has been developing, promoting, and testing its label and methodology for over a year. The public response in selected pilot projects was sufficiently positive to allow more extensive testing this year.
The ranking is calibrated against a series of typical household characteristics particular to the region. Besides giving a current score for each house, the evaluation offers home-improvement tips for boosting ranking. If the program is ultimately able to show that a home with a higher score can be sold at a premium or more quickly, then there should be considerable homeowner support for retrofitting.
The ranking methodology requires a simple walk-through by a qualified assessor, noting 40-50 separate data points critical to energy performance. These data points are then fed into a software package that subsequently determines the home ranking. The walk-through is designed to be quick and inexpensive for the homeowner, but nonetheless valid.
The HES is only one of several labels either already in existence or preparing for rollout. The home-auditing industry already has its Home Energy Rating Score Index (HERS) based on a full-audit methodology. State and regional examples include the California and Vermont Energy Rating Certificates, Oregon’s Energy Performance Score (EPS) developed by the Earth Advantage Institute, Minnesota’s Home Energy Improvement Index created by the Center for Energy and Environment, and the Tennessee Valley Authority’s eScore. Overseas, roughly 30 European countries have a somewhat similar rating and labeling scheme in response to the EU Energy Performance of Buildings Directive initiated in 2007.
Consequently, there is no shortage of rating models to build on, and intensive discussions revolve around which labels will most appeal to the general public. Probably more important, however, are the time and cost features of each, with a premium on the quickest and cheapest methodology that can produce reliable results. The HES home evaluation reportedly takes an hour or less and costs about $100; in contrast, a full audit now runs anywhere from $200 to $700. Low cost is critical to gaining the support of the real estate industry, which is understandably concerned about additional fees for home sales. Currently, the industry welcomes energy-performance labels if they are inexpensive and voluntary but opposes any mandatory government edicts.
With the number of labels now under development, or already in existence, it appears likely that we will finally have a real test of the green premium for existing homes—at a local, state, regional, or national level. The experience from Europe, where labels have been mandated across all EU countries, is both instructive and sobering.
Implementation across the board in Europe has been very uneven, partially due to pushback from local officials and the real estate industry. Two recent studies have concluded that, as currently designed and implemented, the European labels have had little impact on the real estate market, though in many cases these labels are only shown after a home purchase, defeating their primary purpose.11,12
If home energy labels were mandated nationally in the United States, we would anticipate a similar outcome. Real estate markets are essentially local, and it makes sense to begin at local levels and build outward. Some localities would embrace the label and incorporate it in their independently operated listing of real estate openings. If these listings do indeed indicate a green premium, the message will spread far and wide. Of course, a green premium in one community does not mean a green premium in all. The French researcher Francoise Bartiaux has asserted that understanding and accepting home energy labels is a process that must be “socially learned” over time.13 The miles-per-gallon sticker on a car, for example, was not immediately understood when it first appeared some 35 years ago.
Moreover, we should be realistic about the limited power of energy-performance labels. While a large percentage of the public expresses support and interest in energy efficiency vis-à-vis home purchases, we don’t know where that support ranks on the hierarchy of purchaser concerns. Using the miles-per-gallon sticker as a reference, we know that the concern for automobile energy efficiency is circumstantial: when gasoline prices spike, for example, so does the importance of efficiency. Labels, therefore, are simply an enabling feature to provide the public with more information. What the public does with this information is another story. But the introduction of a home energy performance score nonetheless provides a new and potentially promising policy tool for creating a more energy-efficient housing stock.