There is mounting evidence that the vast majority of home buyers prefer a green home and are willing to pay more for it.
When Dodge Data & Analytics conducted their green home study back in 2015, green home technologies were nowhere near as prevalent and popular as they are today. But even back then the writing was on the wall: Home buyers prefer green homes. In Dodge’s study, 69% of home builders and 78% of remodelers reported that their customers were willing to pay more for a home that featured green technologies—especially if the technologies also made the home healthier—with a whopping 80% of home buyers willing to pay more for improved air quality and other health related improvements.
Fast forward to research in 2018 conducted by Build It Green and funded by PG&E, to find that green features added a mean premium of over $26,000 (2.19%) to the sold price of homes in the study. This research adds to a growing body of findings nationwide that tie green home improvements to an increase in ROI.
“We already know that consumers prefer greener homes because they save money, conserve resources, and provide greater comfort and health benefits,” says Karin Burns, Executive Director of the nonprofit Build It Green. “Now we can add one more benefit to that list—greater resale value.”
As awareness, availability and affordability of these technologies increase over the next decade, green home technologies are expected to boost real estate values by millions (if not billions) of dollars. In addition to boosting home prices, green home technologies also provide home builders and home owners with tax breaks and other benefits from federal, state and local government entities.
What are green home technologies?
Generally speaking, a green home technology is any feature in a new or renovated home that conserves natural resources, produces an alternative source of energy, or otherwise works to conserve energy, diminish waste, and improve the environment.
Green-aware real estate investors can capitalize on home buyers’ interest in these technologies by incorporating into their construction plans features that conserve energy and provide other desirable green home benefits. For example, a green-aware real estate investor might purchase an older home, update the insulation and HVAC with the intention of making it more energy efficient, install solar panels and design water-conserving landscaping, then re-list the improved home, emphasizing the new green home technologies to buyers. This scenario can be a win-win-win for the investor, the buyer and the environment.
Why should real estate investors care about green technologies?
From a purely altruistic perspective, real estate investors can have a positive impact on the environment by including green technologies in their projects. According to Credit Suisse, more than half of the world’s natural resources are consumed by the real estate sector in some way, and more than 40% of that is for cooling, lighting and ventilating buildings. By incorporating green home technologies into their investment projects, real estate investors can lower this outsized drain on energy and resources.
From a purely profit-centered perspective, environmentally responsible features are increasingly important to home buyers. With a strategic plan that balances the cost of green features against their impact on ARV, the more green you put into your real estate investments, the more green you could see in your ROI.