On January 1st, 2018, a new rule will go into effect requiring sellers of homes within the Portland city limits to:
- Obtain a home energy performance report, including a home energy score, from a licensed home energy assessor.
- Provide a copy of the home energy performance report to all licensed real estate agents working on the seller’s behalf.
- Include the home energy score and the attached home energy performance report in any real estate listings.
- Provide a copy of the home energy performance report to prospective buyers who visit the home while it is on the market.
- Provide a copy of the home energy performance report to the City of Portland for quality assurance and policy compliance.
Here are some questions and answers directly from the Portland Bureau of Planning and Sustainability:
Why is the City pursuing this now?
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.
What other cities have passed similar policies?
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.
Won’t the market take care of this on its own, like radon tests and sewer scopes?
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; a home energy score is an effective tool to make energy use in homes more visible, tangible and understandable to consumers. 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.
Is the City proposing any exemptions, waivers or deferrals to the policy?
Yes. See the Exemptions, Waivers and Deferrals information.
What is a “home energy performance report”?
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.
- 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 will the City enforce this policy?
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, 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.
When will the policy take effect?
The proposed effective date for the policy is January 1, 2018. Rulemaking is proposed to begin in July, 2017.
Would the policy apply to accessory dwelling units (ADUs)?
ADUs that are part of the primary residence will automatically be captured in the home performance energy assessment, which is based on all the rooms within the outer envelope of the home. Detached ADUs will not be covered by the policy.
In what geographic area would the policy apply?
The policy would apply to all single-family homes sold within Portland city limits.
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 PortlandMaps.com.
How much does it cost to obtain a home energy performance report?
As of July 2016, the market rate cost to obtain a home energy performance report is between $150-$250. This is the cost of having a trained, certified home energy assessor conduct a 45-minute, in-home assessment and generate the report based on the data gathered from the home visit. The information obtained through a home energy assessment goes beyond a typical home inspection, including a review of the home’s mechanical systems, insulation, air sealing and opportunities for cost-effective energy efficiency upgrades. Sellers pay a private-sector home energy assessor for the cost of the home energy performance report, not the City. Home energy scores are a market-based solution for making home energy performance more transparent in the homebuying process.
Experience from Austin, Texas suggests that as the volume of home energy assessments increases, the retail cost of the assessment declines. The cost of a home energy performance assessment in Austin is currently stable at $125.
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.