For most people, finding and making a home is a very personal process of self-expression and self-determination. This is as true for low-income families with few options and significant immediate challenges as it is for individuals and families with many options. And it’s true for long-term renters as well as for first-time homeowners.
However, for the building industry, housing is largely a commodity. Designing, constructing, and financing homes demands quantitative comparisons of measurable data such as square footage, bedroom count, and the ubiquitous countertops. This is not a criticism, but simply a fact of operating effectively at a large scale.
A core challenge for developing green buildings is that the added value of many efficient, healthy, and sustainable attributes of housing isn’t quantitative or easily measurable, and certainly not at a large scale. Because this added value isn’t broadly measured, developers, lenders, and investors essentially don’t “see” it. A recent effort by the (NAR) and NeighborWorks America will begin to change this.
For financial institutions, the value of a building is largely determined by appraisers, typically by looking at recent sales of comparable buildings in the same market. In the home buyer market, this comparison is most often done through reference to a local Multiple Listing Service (MLS), which can contain hundreds of fields of information about the features of a property. These fields are determined by local associations of Realtors or groupings of such associations, and according to NAR, there are at least 800 distinct MLSs in the United States.
Last month, NAR and NeighborWorks formally launched an initiative to encourage Realtor associations to incorporate green building into their local MLSs. This effort, calledGreening the MLS, involved numerous subject matter experts to develop a toolkit for local groups, compile case studies of successful existing efforts, and link to relevant research and education. Recommendations include collecting specific data about appliances, insulation, windows, doors, roofing, landscaping, and overall green building certifications, and implementing a process to ensure that such fields remain current over time.
By collecting this data through the MLS, developers, lenders, and home buyers can begin to specifically measure and quantify how much green improvements increase residential property value and improve sales. For example, Atlanta collected green building data in its MLS throughout 2009. During that year, green homes sold 3.6 percent closer to the original list price and 31 days (23 percent) faster on average than all other homes. Although this is an early result in just one large market, it captures all sales, and so it is some of the most comprehensive data available. And it’s just the beginning.
Although the MLS doesn’t apply to rental housing, this effort to more accurately incorporate the value of green building in financing and project underwriting is growing, especially where the federal government is involved. Legislation in both the House (H.R. 2336) and the Senate (S. 1379) would require appraisals on federally related transactions to consider the value of any energy conservation measures, and would also affect appraiser certification and licensing requirements.
We know that individual families looking for a place to make home are concerned about typical green building practices resulting in lower utility and maintenance costs, increased durability, and particular attention to occupant health. We also know that lower operating costs and safer environments make for a more stable housing investment product, for both the private sector and the public sector. Greening the MLS is an attempt to measure and quantify that additional value, and there is much for the affordable housing and rental sectors to learn from this effort.
Casius Pealer is director of the Affordable Housing Initiative at the U.S. Green Building Council, where he focuses on advocacy and public policy. Pealer previously worked as an associate at a Washington, D.C.-based law firm and in-house at the District of Columbia Housing Authority, where he was responsible for structuring and negotiating mixed-finance affordable housing transactions. He holds an M.Arch from Tulane University’s School of Architecture and a J.D. from the University of Michigan Law School.
