Spending Green to Go Green: Are Buyers Willing to Pay More?

When starting on a new project, it is important for builders to take into consideration the desires of homebuyers.

The most in-demand style of housing continues to be single-family detached three-bedroom, two-bath homes with 1,900 to 2,500 square feet. Buyers are trending toward less yard space nationally and preferring half an acre or less. Suburban living and open floor plans still account for the most wanted features. 

When taking these features into consideration, where does green building fit?

The U.S. Green Building Council recently released the results of the 2021 World Green Building Trends report. It shows that despite all the changes from the COVID-19 pandemic — or perhaps because of them — green buildings continue to be a global priority. In fact, green building activity is projected to grow through the next three years. The combination of residential and commercial new construction projects is projected to represent close to 25 percent of the building sector. 

With growing public awareness of building health, sustainability and climate change, homeowners are asking for green features. There has been a steady climb in the percentage of certified green homes in the building market.

Various surveys state that buyers want and are willing to pay more for environmentally friendly homes, or that such homes sell faster.

• Freddie Mac research found that homes with high energy-efficiency ratings sold for 2.7 percent more on average compared to homes that did not.
• A new Zillow analysis shows homes with solar-energy systems sold for 4.1 percent more on average than others nationwide in the past year. 
• The National Association of Realtors’ (NAR) 2022 Substantiality Report states that 36 percent of properties with solar panels saw an increase in the perceived property value.
• Zillow research found that home listings with descriptions mentioning “eco,” “energy efficient” or similar terms sell more than two days faster than expected. Listings that mention drought-resistant landscaping can sell 13 days faster, while smart sprinkler systems and energy-conserving double pane windows are associated with homes selling more than a week quicker than expected.

These are fantastic indicators that sustainability is finally moving forward in the housing industry. 

But not so fast, another statistic from a recent National Association of Home Builders (NAHB) report is concerning. Although 78 percent of buyers report being concerned about the impact building their home has on the environment, only 15 percent are actually willing to pay more for a home described as “environment friendly.”

This is a huge disconnect. Do buyers really only claim they care about the environment but then flake if it costs a little more? 

In order to get a clearer understanding of this, the compared houses would have to be in a buyer’s price range. When that is taken into consideration, the key to what buyers really want and are willing to pay for is education. When features in a house are presented in a factual way that shows economical and environmental impact, buyers are willing to pay more. As energy costs continue to rise, it is understandable that energy-saving features are the most desired green features. These features can be calculated to demonstrate a return on the investment.

“On average, buyers would pay up to $9,292 more for a home in order to save $1,000 annually on utility costs,” according to the NAHB’s study.

In fact, NAR’s survey states, “57 percent are willing to pay $5,000 or more, on top of the price of the home, in order to save $1,000 a year in utilities.”

The NAHB’s latest edition of “What Home Buyers Really Want” cited energy-efficient features among the top “must-haves” for today’s homebuyer. The survey found that:

• 83 percent of buyers desire ENERGY STAR®-certified windows.
• 81 percent of buyers desire ENERGY STAR®-certified appliances.
• 80 percent of buyers desire energy-efficient lighting.
• 79 percent of buyers desire an ENERGY STAR®-certified rating for the entire home.
• 73 percent of buyers desire triple-pane insulated glass windows.

The chief motivation for these sustainable features is the potential savings they offer in annual utility costs. According to the U.S. Department of Energy, the typical family spends at least $2,200 per year on energy bills, but energy-efficient upgrades could reduce that cost by up to 30 percent.

Homeowners are also increasingly aware of the value of indoor air quality. While buyers can understand the health value of clean air, it is challenging for them to add monetary value to it. It is easier to lay out the options and values in new construction and give the client choices that fit individual needs. The learning curve is how to promote those benefits in an existing home. When buyers are presented with the values of a HVAC that promotes indoor air quality, they will usually want that feature. If it can be linked to an added value of $1,000 or less, then according to a NAR study, 19 percent of buyers will pay more. 

For the most part, buyers state that the added value of green features aren’t obvious to them. They don’t understand the difference and often have a bad impression of some features. Many still remember the frustration of original low-flow toilets. Some are confused about the difference between a modular and mobile home. Unless features can be explained in a simple manner, buyers don’t consider them an added value.

The NAHB survey found that buyers liked green certification and, when presented with a detail report, were willing to pay as much as $2,500 more for the house. In areas, such as California, where certification programs are part of a sale marketing campaign, buyers are willing to pay 9 percent more. 

Our homes have a huge environmental impact. Twelve years ago, The Guardian produced a report that stated, “Building a typical code house produces around 80 tons of carbon dioxide emissions, the equivalent of the emission of five new cars. Most of the environmental impact of a home occurs while people are living in them. Buildings use 41 percent of the energy in U.S. and are responsible for 40 percent of U.S. carbon emissions.” 

I keep thinking about what buyers say they want and care about, as compared what they are willing to pay for. 

The fact is that buyers will eventually pay more for those homes that are built just to code. As personal home energy and water costs rise, the less efficient systems will bring higher bills. 

The long-term effects of the climate impact of homes will eventually affect property value. We are at a point where building science can create a resilient home. The merging of smart and green features make it much easier to see in real time the added value of green features. 

Buyers care about the environment and, with proper education and effective marketing, they can see the value of up-front costs versus long-range return. 

Making wise decisions when purchasing or upgrading your home is empowering. What we do as individuals, living in our home, does have an impact on the environment. When we can connect the dots, we all have a sense of being part of something bigger. Our choices matter. 

Mary Love is the owner of Love The Green Real Estate Consulting Firm and Mary Love Consulting. She has been a lifelong advocate of green building and longtime supporter of Green Built Alliance. Mary is currently the chair of Green Built Alliance’s Board of Directors and grateful to be part of the organization. Connect with Mary at lovethegreen.org.

You can also view this article as it was originally published on page 54 of the 2022-23 edition of the directory.