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Selling price of an eco-friendly house in California increases by nearly 10 percent

Go green, get green.

Go green, get green.

illustration by priscilla garcia

California homes that meet environmental standards, such as energy efficiency and proximity to public transportation, are selling at higher prices than homes that don’t, according to a new report.

The study, “The Value of Green Lables in the California Housing Market,” conducted by researchers at UC Berkeley and UCLA, looked at homes that were labeled green by Leadership and Energy and Environmental Design, GreenPoint Rated, and Energy Star—rating systems that give green-label certifications to homes. To be certified, each rating system has a list of criteria homes must meet, including well-insulated ceilings and walls and energy-efficient lighting.

“This is the first systematic evidence of the financial value of green-label homes as measured in the marketplace,” said one of the study’s researchers, Nils Kok. “Green labels seem to inform and influence the opinions of consumers.”

A green label increased the selling price of a single-family home by an average of 9 percent compared with nongreen-label homes. Researchers controlled the data for the age, location and size of the home so that all homes were comparable. They studied data from 1.6 million homes sold in the state in the past five years.

Based on the average California home price of $400,000, a green label increased the value of a home by an average of $34,800.

Consumers value green-label homes because of the increasing cost of keeping a home cool, the report said.

“The value of a green home will be higher in a hotter area like the Central Valley than a more moderate area like Santa Cruz,” Kok said. “It seems like consumers are rational or quite smart in pricing in this value and the benefits of a more efficient home.”

Another reason the price of green homes is increasing is because of an increased awareness of the “going green” ideology, the report released late last month said.

Researchers calculated the number of hybrid-car registrations in different areas across the state. Where there were more hybrid-car registrations, people paid more for green homes.

The report termed this the “Prius effect.”

Specific green-home updates can include installing insulation with 30-percent post-consumer recycled content; high-efficiency toilets with dual flush; an energy-efficient heating, cooling and ventilation system; and solar panels.

If a homeowner is making green updates from scratch, the most basic green renovations cost on average about $10,000, said Janine Kubert with Build It Green, a nonprofit that promotes energy- and resource-efficient homes in California. The organization launched GreenPoint Rated, its own green-home-rating system, in 2006 and has since green-label certified a little more than 13,000 single- and multi-family homes.

Because there are many home builders and homeowners claiming their homes are green in one way or another, it’s important to have third-party rating systems that prove the label means something, Kubert said.

Green labels are given when construction is completed, and currently, there isn’t a system that checks on the maintenance and upkeep of a green home, said Nathan Krantz, director of technical services at Build It Green.

“That’s probably the next wave of influence,” Krantz said. “Right now, homeowners just want to know if there’s a green label at all. … That will be a more sophisticated buyer at that point. I feel like we’re still a ways from that being an issue.”

Still, potential buyers should ask when a green label was given, Kubert said. “A home that was rated more recently has a better guarantee of being green.”

Kok said in his study he did find that the more recently labeled green homes seem to have gone up in value relative to the beginning of the sample period.

“It might be various reasons,” he said. “Maybe brand recognition or slowly the market is picking up, and buyers are taking these features more into account.”