Think Home Buyers Won’t Pay Extra for Energy Efficiency? Think again: Studies show otherwise.

By: Nick Sisler

According to a national survey of 116 single-family homebuilders, developers, and remodelers performed by McGraw Hill in 2013, 73% of those surveyed said that homebuyers will pay more for a green home. This is up from 61% in 2011. (The study defined a green home as one that incorporates environmentally sensitive site planning, resource efficiency, energy and water efficiency, improved indoor air quality, and homeowner education.)

Ekotrope Chart 1

This graph shows how much builders think that home buyers are willing to pay for green features on a new home. Source: McGraw Hill Construction

What Builders Think

A breakdown of how much those surveyed expected buyers to pay additionally for a green home is shown in the graph above. The most common estimate was that buyers were willing to pay an additional 1% to 4% for green features.

The same builders were asked how much it would cost to incorporate green features. Their estimates are shown in the pie chart below.

Ekotrope Chart 2

Source: McGraw Hill Construction

The most common estimate was that building green would cost an additional 5% to 10%. So on average, builders think it costs more to build green than homebuyers are willing to pay.

What Home Buyers Say

In another national survey, this time of recent and prospective home buyers performed by the National Association of Home Builders (NAHB) in 2012, home buyers said they are willing to pay an additional $7,095 (about 3.5%) up-front for a $1,000 annual savings on their utility bills, and 91% of them said they wanted an Energy Star rated house (28% said that Energy Star was essential, while 63% said it was desirable).

What Home Buyers Do

In a study of 1.6 million home sales in California from 2007-2012, it was found that homes with an Energy Star, LEED for Homes, or GreenPoint certification sold for an average of 9% or $34,800 more than homes with no such certification. The study also estimated that the incremental cost for builders to achieve theses certifications was at most $10,000.

A much smaller study in the Seattle and Portland areas found similar results: 68 certified homes in Seattle sold at an average price premium of 9.6% and 24 in Portland sold for a 3% to 5% premium. The certified homes also sold 18 days faster than non-certified homes. A similar study has not been performed on a national level to date.

So, while builders think buyers will only pay an extra 1% to 4%, and home buyers themselves say they will pay 3.5%, in reality (on the West Coast at least), green homes are selling for about 9% more. That’s $34,800 more, in fact. So isn’t it high time we readjusted our thinking about the perceived value of green homes?

Nick Sisler is a co-founder and engineer at Ekotrope, which provides software and energy consulting for builders. Ekorope’s software is a RESNET accredited HERS and IECC Performance rating tool. Nick holds a bachelor’s degree in Mechanical Engineering from MIT.  You can contact Nick via Ekotrope’s LinkedIn, Facebook, and Twitter pages.