MORTGAGE LENDING AND THE SAVE ACT
Lenders, too, need better information so they will look more favorably on energy-efficient homes. The fact is that occupants of homes that consume less energy will pay lower utility bills. With more money in their pockets at the end of the month, the owner of an efficient home is better able to make his or her next mortgage payment. (IMT and the University of North Carolina are researching the link between energy efficiency and a reduced risk of mortgage default.)
IMT is a key supporter of the SAVE Act, a bipartisan bill introduced to Congress last year by Sens. Michael Bennet (D-Colo.) and Johnny Isakson (R-Ga.). SAVE, which stands for Sensible Accounting to Value Energy, instructs federal loan agencies to assess a borrower’s expected energy costs when financing a mortgage.
The average American homeowner spends more than $2,000 per year on energy costs, which is more than they spend on either property taxes or home insurance. But underwriting rules do not take those costs into account. The SAVE Act would remove this blind spot. In addition, SAVE would enable more homeowners to finance the cost of energy-efficiency improvements as part of their mortgage, lowering their utility bills for years to come.
The bill would increase demand for energy-efficient new homes and improvements, creating an estimated 83,000 jobs across the U.S. economy and $1.1 billion in consumer energy savings by 2020, according to an analysis by IMT and the American Council for an Energy-Efficient Economy (ACEEE).
In fact, a recent joint analysis from ACEEE and IMT showed that the SAVE Act could greatly accelerate the supply of—and demand for—energy-efficient new homes. The groups estimate that passage of the legislation could increase market penetration of new energy-efficient homes by 2% in 2013 (about 15,000 homes annually), rising to a steady state level of 25% by 2020 (approximately 250,000 homes annually).
Backing the SAVE Act is a broad coalition of business, real estate, and industry groups and environmental organizations, including IMT, ACEEE, Leading Builders of America, Appraisal Institute, USGBC, U.S. Chamber of Commerce, National Association of Manufacturers, Alliance to Save Energy, American Gas Association, Center for American Progress, and Natural Resources Defense Council.
The potential for better code enforcement and appraisals to improve access to mortgages and create jobs illustrates how market transformation spans sectors and disciplines. To truly transform the market and make high energy efficiency a baseline, we’ll have to drive change in the ways buildings are designed, constructed, inspected, retrofitted, valued, bought and sold, and insured. It sounds like an impossible task, but momentum in one area will push on the others, starting a “virtuous cycle” of improvement in our buildings’ energy use.
Cliff Majersik is executive director of the Institute for Market Transformation and Vision 2020 chair for Market Transformation.