Energy star ratings for homes? Good idea, but it needs some real estate flair

If you’ve ever bought a home you’ll know the feeling of deciphering real estate advertising spin. But those advertisements traditionally don’t tell you about how much it will cost to heat, cool and power your home.

The Australian Sustainable Built Environment Council (ASBEC) last month called for a nationally-consistent rating system for household sustainability. It follows hot on the heels of the COAG Energy Council’s National Energy Productivity Plan in December.

Both documents point to the need for improving the availability of energy-efficiency information to home buyers. Not only would it help them identify more efficient homes, but it could even influence how much they are willing to pay.

The idea of requiring sellers to disclose the energy efficiency of their home has been around for a long time. It’s been a requirement in the ACT since 2003, and we briefly saw a version of disclosure in Queensland.

But how effective would a national scheme be? And how can the information be presented in a way that will make a real difference to prospective home buyers?

Does the public support it?

Almost all studies conducted to date indicate that better energy performance is linked to increased property value. An ABS study of the ACT scheme showed that, for a median-priced home, improving its energy rating by half a star adds about 1.2% to its value.

Focus groups and surveys carried out by the Cooperative Research Centre for Low Carbon Living showed that consumers overwhelmingly support the disclosure of energy performance, and most are willing to pay for the information.

When prospective home buyers were asked to select (from a broad list) the factors they would take into account when buying a home, factors linked to energy efficiency were key considerations.

Top of the list was that a home should be a “comfortable home to live in”. Of course comfort is subjective, and much broader than just temperature, as shown by the following word cloud derived from our focus group research.

Word cloud derived from focus group research on the most important considerations for home-buyers. SOURCE, Author provided

Nevertheless, many of the strong associations people made with the word “comfortable” are consistent with the properties of an energy-efficient home. Irrespective of attitudes to the environment, people resonated strongly with the idea of homes that are naturally warm in winter and cool in summer, with good ventilation and natural daylight.

Seasoned purchasers (rather than first home buyers) were more likely to seek out information relating to comfort, despite a general lack of common terminology to express these concepts. Perhaps the advent of television home renovation shows has conditioned inexperienced buyers to value aesthetics over function.

If thermal comfort is important to people, it would be good to have a simple, verifiable and transparent way to communicate this information to prospective buyers. Inspecting a home at midday on a mild spring day gives the buyer very little insight into the comfort of the house when it matters most (summer afternoons and winter mornings). A simple energy-effiency rating could provide a useful guide.

Getting the public interested

Of course, this information will be useless unless it makes sense to home buyers. In a previous ABC radio report, an ACT real estate agent claimed that buyers never ask about the disclosed energy efficiency rating, which is surprising given that ACT buyers are paying more for homes with higher ratings.

This begs the question of whether the increased property values stem directly from the published energy rating, or whether it is instead linked with related house design qualities, or that energy efficiency is somehow subliminally self-evident.

Our focus group research highlighted strong recognition and interest in tangible energy-saving features such as insulation and solar panels. This suggests that the traditional real estate industry practice of identifying and marketing desirable features of a house could be crucial to getting an energy rating scheme to work in practical terms.

To test this idea, we made some mock real estate advertisements for various different homes: an energy-efficient one we called the “EnergyFit Home”; a home with extra non-energy desirable features (that the respondent had identified) called the “Features Home”; and finally a control home with no extra details.

We then asked survey respondents to rate the expected value of the home, their willingness to buy it, and the likelihood of visiting the home in response to the advertisement.

We found that the EnergyFit Home and the Features Home were perceived as significantly more attractive than the control home, as well as (and in spite of) sizeable increases in their presumed market value. Prospective buyers responded well to a range of alternative label designs, but responded even better when the labels were combined with explanatory text embedding energy-efficient design elements into more conventional selling points about comfort, lifestyle, and personal identity.

A layered approach

Unfortunately, the benefits of many energy-efficiency solutions vary depending on the house, climate zone and other factors. So there is unlikely to be a one-size-fits-all approach for disclosing this information. One big question is how technical the information should be: should it be simple but less informative, or more detailed and technical? The answer, predictably, is that it depends.

The new ASBEC policy proposal recommends a three-tiered approach, comprising technical information aimed at the construction industry; rating information that will allow consumers to compare houses against best practice; and simpler language for the media and the real estate industry to quickly communicate the value of property features.

Hearteningly, we found that renovators are highly motivated and want to be in control of their renovation. While simple ratings and communication tools may be important for the initial conversation, once engaged they are willing to invest substantial time and resources in making personal choices for their home and lifestyle. We can expect engaged renovators to explore all three levels of information resources.

So is home energy efficiency going to be the proverbial barbeque conversation-stopper? Hopefully not. With the right information available, in the right form, it could help home buyers to find better quality homes. And perhaps, one day, your stellar energy rating will beat that stylish kitchen benchtop for bragging rights with your friends.

The author acknowledges the contributions of John Gardner, Zoe Leviston and Lygia Romanach of CSIRO’s Land and Water Flagship, and Kath Hulse and Aneta Podkalicka of Swinburne University of Technology’s Institute for Social Research, to the original research described in this article.