Three recent studies that address the advantages of energy efficiency as it relates to home ownership could have a significant impact on the way buyers finance home purchases in the near future. The studies, all released in March, point to a convergence among thought leaders in the financial, energy, and homebuilding industries, and may provide needed momentum for current efforts to change mortgage lending practices to include energy-related improvements.
Vision 2020 Economics + Financing Chair Robert Sahadi said the studies together are a cause for optimism that federal regulators will allow new-home mortgages to include additional funds for energy-related improvements. Sahadi, the director of energy efficiency finance policy at the Institute for Market Transformation (IMT), has been actively promoting this type of financing through proposed legislation known as the SAVE Act. Although this legislation failed to gain traction in the U.S. Congress in the past, Sahadi believes it has a much better chance this time around and he is working to attract new sponsors for the bill.
The recent studies include a multi-year research project, conducted by the University of North Carolina Center for Community Capital and funded by IMT, which, as previously reported on Ecobuildingpulse.com, shows that the risk of mortgage default is consistently and significantly lower—up to 32 percent less—for energy-efficient homes. Click here to download a PDF of the study.
“We’ve already met with HUD [U.S. Department of Housing and Urban Development] and they were very pleased with the study, it was very helpful to them,” says Sahadi. “In the next few weeks we’ll meet with Fannie Mae and Freddie Mac and their regulator, the Federal Housing Finance Agency. We also shared this with the Mortgage Bankers of America, the National Association of Realtors, and the National Association of Home Builders [NAHB]—these are all highly influential organizations in Washington—and they all received it very positively.”
A second report, by the American Council for an Energy Efficient Economy, concludes that energy cost savings calculated into mortgage underwriting would result in a 16 percent reduction in overall energy use and $10 billion in U.S. energy savings from 2014 through 2030. Click here to download a PDF of the executive summary of the study.
The third report, a recently published study by NAHB’s Economics and Housing Policy Group, called What Home Buyers Really Want, surveyed home buyers nationwide and found that what home buyers want “first and foremost” is energy efficiency. According to the study, nine out of ten buyers would choose a home with energy-efficient features and permanently lower utility bills than buy a less-expensive home without those advantages.
Sahadi believes the studies will help to produce action on energy-related mortgage innovations in the near term—within a year—but the larger goal is to create federal legislation that will institutionalize energy efficient mortgages through the SAVE Act.
“The SAVE Act might take a year or so to pass,” says Sahadi, “but it has a phase-in where you’re incorporating energy efficiency into the whole mortgage process. At this point in time, lenders aren’t going to do anything unless Fannie Mae and Freddie Mac have it in their guidelines. This will be evolving, [but] I think you’re seeing a lot of positive converging factors. It’s still going to be an uphill battle, but we’ve got a lot to work with. I would hope by that by [the Vision 2020 Summit] in September we would have turned a lot of this momentum into tangible strategy and plans.”
Building on its successful launch in 2012, ECOHOME’s Vision 2020 program continues in 2013, focusing on eight critical areas in sustainability. Track our progress all year as our panel of visionary focus-area chairs, our editors, and leading researchers, practitioners, and advocates share their perspectives on initiating, tracking, and ensuring progress toward sustainable priorities and goals in residential construction between now and 2020. The program will culminate in an exclusive Vision 2020 Forum in Washington, D.C., in September 2013, and with a special edition of ECOHOME in Winter 2013. Click here to see the 2012 Wrap-Up.