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Homebuyers Paying Extra for Energy Star Homes May Be Losing Out in the Long Term

New research conducted by a Binghamton University environmental economist has found that homebuyers who pay extra for Energy Star homes may be losing out in the long term.

According to environmental economist Carmen Carrión-Flores, consumers pay extra for an Energy Star home, expecting its greater energy efficiency will save money. They apparently plan to recoup the extra cost of purchase by passing it along to the next owner — except they don’t.

“People who pay a premium expect increased value,” said Carrión-Flores. “Developers are selling houses at a premium, but when I analyze the repeat sale, the owners are not selling at a premium.”

Carrión-Flores, in collaboration with researchers from Brigham Young University, looked at home sales in Gainesville, Fla., from 1997 to 2009. She corrected for differing neighborhoods, arm’s-length transactions, house layout and the collapse of the housing market in 2008. The numbers tell a very real story: Within five years, owners no longer recoup the extra cost to buy Energy Star’s efficiencies.

Carrión-Flores has several hypotheses:

  • The federal Energy Star program didn’t keep up with local building codes. In the first years of the study, Energy Star homes were 20 percent more energy-efficient than houses built simply to code. But by the last years, local code had become more stringent, and Energy Star homes were only 13 percent more efficient. That makes the Energy Star home’s value difficult to compare.
  • Owners don’t know how to market their Energy Star homes. It’s not as simple as laying out a year’s worth of utility bills because of variations in individual energy use — such as how warm or cool one keeps a house, or how much laundry one does, or how long the lights are left on.
  • The original owners are satisfied with the lower utility costs and don’t feel the need to recoup the investment through a higher sale price.

Carrión-Flores notes that Gainesville is just one market. Others have different building codes, housing stock and energy needs. Energy in Gainesville is primarily electricity to power air conditioners, while other markets need natural gas or oil to provide heat. Some markets have older housing or static codes, or both.

“The story is more complex than we think,” said Paul Hirsch, an environmental studies professor at the SUNY College of Environmental Science and Forestry who focuses on environmental policy and sustainable development. “None of these things have one variable.”

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