Three Little Words Spur Energy Efficiency in Louisiana Real Estate

Energy performance is often left out of the equation when assessing real estate value. Whereas the average American household spends $2,150 each year on home energy bills — a cost that could be reduced by more than 20 percent through energy efficiency improvements, according to the Department of Energy — most home buyers don’t have the information they need  to consider energy use in their purchasing decision.  A new bill in Louisiana would attempt to fill in the gaps.

The Louisiana Law

In response to the lack of information on real estate energy performance, Louisiana lawmakers stepped up to the plate this summer to pass SB 648 into law. The one-page bill adds three little words, with potentially significant implications, to existing laws governing real estate appraisers. SB 648 adds “including energy efficiency” to the legal definition of appraisal, which now reads “an analysis, opinion, or conclusion relating to the nature, quality, value, or utility of specified interests in, or aspects, including energy efficiency, of, identified real estate, for or in expectation of compensation.” The bill also makes this addendum to the definition of “real estate appraisal” and “appraisal report.”

A National Movement

Louisiana’s move to make energy efficiency part of property appraisals reflects efforts nationwide to make energy information more widely available to product and home purchasers, vendors, and financiers. The Obama Administration is making progress toward vehicle and building labeling programs, including recent requests for comment from the Department of Energy on home energy rating and from the EPA/DOT on vehicle energy and environmental labeling.  In the legislature, Sen. Michael Bennet (D-Colo.) is expected to introduce the SAVE Act, a bill that would push mortgages to account for the expected energy use of a home, enabling larger energy efficient mortgages for more efficient homes.  Bennet’s bill, which would incorporate energy efficiency into national mortgage underwriting standards, has received support from Leading Builders of America — a coalition of 16 of America’s largest homebuilding companies.

Keep an Eye on Louisiana

 As of August 2010, Louisiana appraisers must consider energy efficiency when assigning value to a property. Although the law’s impact on appraisals, as well as appraisers’ ability to effectively value energy efficiency characteristics, are yet to be seen, this law could set a precedent in delivering information on home energy use to consumers.

According to the bill sponsors, the added information will drive purchasers toward properties that have energy efficient features and will give property owners security that investments in energy efficiency will be reflected in the price at resale. The bill also will help builders recoup the costs of high efficiency features in new buildings, encouraging construction and renovation of more high-efficiency buildings.

SB 648, which passed both the Louisiana House and Senate with unanimous support, is just one example of how states are taking on bipartisan, common sense, energy efficiency solutions. To keep up with other efficiency breakthroughs on the state level, visit the Alliance’s State Energy Efficiency Policy Database, which is updated regularly.