The City of Portland has passed a law that goes into effect on January 1st, 2018 that requires all sellers of homes within the city limits to get a home energy performance report that includes a home energy score. This score needs to be made available to any buyers considering the property.
Your Oregon First real estate agent can get you a list of certified energy assessors, and we will make sure the information is made available to prospective buyers, and attached to the listing information that other Realtors get.
This report will also go to the City of Portland who will be keeping a database of homes in Portland and how energy efficient they are.
What is the purpose of the new law?
The purpose is to make energy performance in residential buildings transparent, to enable more knowledgeable decisions about the full costs of operating a home, to motivate energy efficiency investments in homes that lower utilities, to reduce carbon emissions, and increase comfort, safety and health for homeowners.
The energy efficiency industry has developed scores and labels for building energy performance, but their use has not been widespread. Requiring home energy scores is one of the policy tools the City has available to catalyze change in the residential sector.
In 2010, the City established Clean Energy Works, now known as Enhabit, to provide access to low-cost financing for energy upgrades. Stakeholders considered this an important prerequisite to an energy scoring policy. Enhabit’s activity in the energy upgrade financing market has resulted in local banks and credit unions offering specialized financing products for energy efficiency.
Energy Trust of Oregon, in partnership with non-profit lender Craft3, now offers a moderate income energy upgrade financing program. There are also new specialized energy efficiency mortgage products available exclusively to buyers of homes that have a U.S. Department of Energy Home Energy Score.
In addition, until a few years ago, the housing market was severely affected by the Great Recession. Recognizing this, the City directed initial policy efforts at the commercial market. Now that the housing market has bounced back and commercial disclosure is in effect, it is time to address the residential market.
Several U.S. cities have passed similar disclosure policies for the homes market, including Austin, Texas; Berkeley, California; Santa Fe, New Mexico; and Boulder, Colorado. Internationally, residential disclosure policies are in effect in the United Kingdom, Denmark and Australia.
Does this policy affect housing affordability?
In today’s market, it costs between $150-$250 to obtain a home energy performance report. The policy does not require upgrades. According to Home Mortgage Disclosure Act data for Multnomah County, the majority of people transacting in the real estate market – almost 80 percent – are not low income. In many instances, these buyers are paying a premium for Portland homes. The modest cost of acquiring the score will be a very small line item in the total transaction. The City is working on solutions to cover the cost of the home energy report for low income-qualified sellers.
An information policy requirement like home energy scoring will not constrain the supply of affordable housing. Housing affordability is primarily a function of supply and demand. The City currently faces a shortage of housing options, especially affordable housing, and is helping to increase supply through zoning and direct investment in affordable housing. The requirement, however, will help those buyers understand the full costs of home ownership, including energy costs.
Does this policy harm vulnerable people, like elders on fixed incomes, who may need to sell a home they have lived in for decades?
Long-time owners in Portland have benefited significantly from the market’s overall appreciation. Between 2011 and 2016, the median home sale price increased by 51 percent to $354,500. The cost of getting a home energy score is low ($150-$250). The cost of doing an upgrade to increase the total value and selling price of the home, as well as giving the home a better home energy score, ranges from $5,000-$15,000 on average.
The policy will begin to help the market more correctly value homes by clearly recognizing energy costs as a component of the cost of owning a home. In a down market, homes that have below-average home energy scores may not compare as favorably to similar homes that have better energy scores. Oregon fortunately has a robust set of service offerings and financial incentives aimed at assisting low-income sellers and homeowners with upgrading their homes for energy efficiency. The City of Portland has strong relationships with these service providers and will continue to assist Portlanders in accessing these resources.
No. Experience with voluntary home energy scores over the last eight years demonstrates that while uptake is growing slowly, it is also incremental. The pace of adoption is not rapid enough to match the need to reduce carbon emissions that result from heating and powering our homes. Energy efficiency remains the most cost-effective way to reduce carbon emissions from homes and other buildings. But consumers are still largely in the dark when it comes to understanding energy use in their homes. Home energy scores correct a market failure and provide consumer protection. It is an appropriate role for local government to help correct for gaps in information that make markets function better and produce outcomes that benefit consumers and the common good at the same time.
Will this policy lead to more demolitions of older homes?
No. In analyzing all the scores delivered nationwide to date, the U.S. Department of Energy has found a very weak correlation between home vintage and low home energy scores. This means that smaller, older homes will not necessarily score lower than newer homes. DOE found a much stronger correlation between square footage and low home energy scores. This means that larger homes of any age are likely to score lower than smaller homes.
Will this policy help Portland to reduce carbon emissions?
Yes. The City of Austin passed an energy audit report disclosure requirement in 2009. The City found that from 2009 to 2011, about 6 percent of homes undertook home energy retrofits as a result of disclosure. To accelerate consumer action in favor of energy upgrades, the City of Austin moved the time of disclosure earlier in the transaction to better inform consumer decision-making. Berkeley also moved its disclosure requirement earlier in the sale process for a similar reason. Portland has learned lessons from the experience in Austin and Berkeley and is thus specifically requiring disclosure at time of listing to maximize the positive benefits of the policy.
In the commercial buildings sector, a number of jurisdictions have passed disclosure or benchmarking policies. Commercial disclosure requirements work under the same principle as residential; by providing access to information, commercial building owners and managers can make more informed choices about how to manage energy use. Results from New York City’s program showed a 6 percent energy savings from 2010 to 2013, and San Francisco’s program showed an 8 percent reduction in energy use between 2010 and 2014.
OPower, a customer engagement and energy efficiency technology company, applies behavioral science to motivate changes in energy use. OPower provides utility customers with information about their energy use in context to their neighbor’s energy use, similar to the type of comparison provided by the US DOE Home Energy Score. Evaluations of OPower’s business model have demonstrated reliable and persistent energy savings in the range of 1.5-2.5 percent, simply by providing consumers with information on energy use in comparison to their neighbors.
What type of homes does the policy apply to?
The policy would apply to all single-family homes sold within Portland city limits. More specifically, a person should not use a property’s address to determine whether it is subject to the Program. That is because an address, by itself, does not necessarily signify which governmental jurisdiction the property is located in. To confirm the jurisdiction, visit PortlandMaps.com. It applies to any residential structure containing at least one dwelling unit or house, regardless of size, on its own lot.” It includes attached single dwelling units where each unit extends from foundation to roof, such as row house, attached homes, common-wall homes, duplexes, and townhomes. However, it excludes multi-story units stacked vertically, such as an apartment or multifamily structure; detached accessory dwellings units or manufactured dwellings.
For newly constructed homes that have never been occupied, the Report and the Score may be produced based on design documents prior to the construction through a “Pre-construction Assessment”. High Performance Homes for sale may be granted a waiver upon application to the Portland Bureau of Planning and Sustainability Director. A “High Performance Home” is one built to exceed the requirements of the Oregon Building Energy Codes Program. (See, https://www.energycodes.gov/adoption/states/oregon.)
Is the City proposing any exemptions, waivers or deferrals to the policy?
Yes. They include: (a) Publicly noticed distressed housing sales, such as foreclosure or trustee sales, deeds in lieu and short sales; (b) Property tax foreclosure sales; (c) Sales of distressed properties by court-appointed receivers; (d) Sales where a senior mortgage is subject to a notice of default; (e) The property is deemed uninhabitable due to casualty; (f) The property has been condemned by a government entity; and (g) If compliance would pose a financial hardship for the seller. See the Exemptions, Waivers and Deferrals for more details.
When should the assessment be conducted?
Prior to a home being “listed publicly for sale”. However, this phrase is defined to include the use of printed advertising, internet postings, or publicly displayed signs, including, but not limited to, Regional Multiple Listing Service (RMLS™), Redfin, Zillow, Trulia and other third-party listing services. All such public listings are required to disclose the Report and Score. The Program will apply to For-Sale-By- Owner (“FSBO”) properties, including those listed with a brokerage but not officially appearing on the local MLS.
What is a “home energy performance report” and how does it work?
Each home subject to the Program must undergo a “Home Energy Assessment” (“Assessment”). This is essentially an on-site audit conducted by a licensed Home Energy Assessor (“Assessor”), which results in a Home Energy Performance Report (“Report”). The Assessor is required to be licensed by the Oregon Construction Contractors Board to determine home energy performance scores, and authorized as a qualified Home Energy Assessor under the Program. (See https://www.pdxhes.com/sellers/) A home energy performance report is defined in Oregon Revised Statutes 469.703 and 469.040 and in Oregon Administrative Rule OAR 330-063-0000, and includes the following information:
- A score and an explanation of the score, a sample Report can be obtained at: https://www.portlandoregon.gov/bps/71421.
- An estimate of the total annual energy used in the home, by fuel type.
- An estimate of the total monthly or annual cost of energy purchased for use in the home, in dollars, by fuel type.
- The current average annual utility retail energy price, by fuel type.
How is “Energy Performance” determined?
It does not depend on personal usage or number of occupants. Rather, the calculations are based upon energy generated from the home’s “physical assets”, i.e. those providing heating, cooling, lighting, water heating, or energy used for powering or fueling other end-uses in the building and related facilities through electricity, natural gas, propane, steam, heating oil, wood or other products sold for use in a building, or renewable on-site electricity generation.
The City will spot-check a variety of listing services, including RMLS, Craigslist, home sales apps like Zillow, Trulia and Redfin. We will cross-reference this information with the City’s public database of disclosed scores and County Assessor records.
The City does not intend to impose penalties for non-compliance initially. However, if a violation is deemed to have occurred, a “written warning notice” may be issued describing the violation and steps necessary to comply. The draft code language includes a provision that allows the Director to assess a civil penalty of up to $500 after 90 days of non-compliance and another $500 for every 180 days out of compliance thereafter.
The City intends to monitor and evaluate the policy’s performance within 30 months of the effective date of the policy. The evaluation will include but is not limited to accuracy of disclosed information, rates of compliance, other program impacts and recommendations for ongoing review. If evaluation suggests widespread lack of compliance, then the penalties may come into fuller effect.
Where will the information be published or disseminated?
The City of Portland will receive the home energy performance report from the seller and will make the information available to the general public through GreenBuildingRegistry.com or PortlandMaps.com. Printed copies of the Report must be made available and visible to all prospective buyers who visit the home, including buyers of newly constructed homes, while they are publicly listed.
Who is responsible for assuring that the assessment is performed, the Report is generated, and then posted to the website?
Home sellers are personally responsible for obtaining and distributing the Reports, but they may designate an agent to act on their behalf to do so. However, for liability and insurance reasons, some real estate companies may decline to accept such responsibility. The Program applies to individual sellers owning the property, or LLCs, corporations, and all other forms of entity ownership as they appear on title.
How long is the Report good for?
Printed and electronic copies of the Report expire after two (2) years from the date of Assessment. Following the expiration date, a seller listing a home publicly for sale is required to have the Report reissued. However, this does not require a new Assessment – just the utility costs, and emission factors must be updated. Reports will not be available after eight (8) years from the date of the Assessment, and would thereafter require a new Assessment if the property was to become publicly listed.
What if a home is remodeled or new energy systems are installed after a report has been issued and before it expires?
If changes have been made to the home since the last onsite Assessment, a new Assessment may be required in order to generate a new Report. The original Report is considered void if alterations or remodeling of the home affect the heated square footage, the quality and type of windows, insulation, HVAC equipment, or remodeled spaces such as basements or attics, as they can be expected to impact the home’s estimated energy use.
What software tools will be eligible to produce a score in Portland?
The City will align with tools and software that are compliant with Oregon House Bill 2801, which became law in 2013 and gives authority to the Oregon Department of Energy (ODOE) to approve home energy scoring tools in Oregon. The City will provide temporary waivers to homebuilders using software tools that do not meet the Oregon standard, including new homes with Energy Trust of Oregon Energy Performance Scores (EPS) or Home Energy Rating System (HERS).
The U.S. Department of Energy’s Home Energy Score tool supplies the energy data as required by HB 2801 for a home energy performance report. The report includes a score that is a number on a scale from one to ten, where ten represents a more energy-efficient home and five is the performance of the average home. This number provides an easy-to-understand reference point for the comparison of energy performance between single-family homes.
Like miles-per-gallon labels for cars, the Home Energy Score is an asset rating, which is based on how the home is built, not how the home is used. An asset rating considers the structural characteristics and large equipment in a building. Asset ratings rely on a home energy assessment, which includes an on-site inspection. Asset ratings provide the homeowner and perspective buyers with the ability to identify:
- Cost-effective energy efficiency improvements.
- Opportunities for more energy savings.
- Opportunities to improve comfort.
- Opportunities for improved indoor air quality.
Disclosure of asset ratings differs from disclosure of utility billing information. Looking at the utility bills of past occupants can be misleading, because energy usage can vary widely depending on occupant behavior, family size and other factors. Asset ratings enable different homes to be compared on an apples-to-apples basis.