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Published: 7/22/2012

Study: Green-certification label supplements house's selling value

BY KENNETH R. HARNEY
WASHINGTON POST WRITERS GROUP

WASHINGTON -- A study involving 1.6 million homes sold in California between 2007 and early 2012 has documented that, holding all other variables constant, a green certification label on a house adds an average 9 percent to its selling value.

The study found no significant correlations between local electricity rates and consumers' willingness to pay premium prices for green-labeled homes. But it did find that in warmer parts of California, especially in the Central Valley compared with neighborhoods closer to the coast, buyers are willing to pay more for the capitalized cost savings on energy that come with a green-rated property.

The research was conducted by professors Matthew E. Kahn of UCLA and Nils Kok of Maastricht University in the Netherlands, a visiting scholar at the University of California at Berkeley.

Out of the 1.6 million-home transaction sample, they identified 4,321 dwellings that sold with Energy Star, LEED, or GreenPoint Rated labels. They then ran statistical analyses to determine how much green labeling contributed to the selling price -- eliminating other factors such as location, school districts, crime rates, time period of sale, and amenities such as swimming pools and views.

Energy Star is a rating system jointly sponsored by the U.S. Department of Energy and the Environmental Protection Agency that is widely used in new home construction. It rewards designs that sharply reduce costs for heating, cooling, and water use and that improve indoor air quality.

The LEED (Leadership in Energy and Environmental Design) certification was created by the private nonprofit U.S. Green Building Council and focuses on "sustainable building and development practices." The GreenPoint Rated designation, created by a nonprofit group called Build It Green, is similar to LEED and can be used on newly constructed as well as existing homes.

The 9 percent average price premium from green-rated homes is roughly in line with studies conducted in Europe, where energy-efficiency labeling on houses is far more commonplace. Homes rated "A" under the European Union's system commanded a 10 percent average premium in one study, while dwellings with poor ratings sold for substantial discounts.

The National Association of Realtors has lobbied Congress and federal agencies to thwart adoption of any form of mandatory labeling of existing houses, arguing that an abrupt move to adopt such a system could have severely negative effects.

The National Association of Home Builders, on the other hand, has embraced labeling as a selling advantage for newly constructed homes. But there can be an environmental downside to new homes: Many are in subdivisions on the periphery of metropolitan areas and require higher fuel expenditures -- and create more air pollution -- because these homeowners have longer commutes to work.



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