How much is that ‘green’ label on your house worth?

Eve Troeh Jul 31, 2012

How much is that ‘green’ label on your house worth?

Eve Troeh Jul 31, 2012

Tess Vigeland: During the real estate boom, developers touted granite countertops and hardwood floors as must-haves for the modern home owner. These days, they’re trumpeting their green credentials: Solar panels, triple glazed windows, recycled building materials. Potential buyers are often told they could save money over the long run by buying a “green home.”

But as Eve Troeh reports from the Marketplace Sustainability Desk, they’ll almost certainly end up paying more than they would for the regular home next door.

Eve Troeh: Some people would say the community of Playa Vista can never been truly green. It’s on the beach, just south of Los Angeles. Staunch environmentalists fought to save the wetlands here. They lost. Today new houses, condos and shops fill the space. Rich Rocheleau works at nearby Loyola University. He remembers that debate.

Rich Rocheleau: You know, I felt pretty strongly one way against development, but over time really have come to see what the developer has done with the area, and that it is a very positive place.

In fact he moved here, to cut out his long commute. Rich and his dog Scout live in a brand new three-bedroom, two-bath condo. It has the highest green building rating under a system called Leadership in Energy and Environmental Design — or LEED — it’s platinum.

Troeh: Do you tell people who visit it’s LEED Platinum?

Rocheleau: Yes I do, proudly. Yeah. And nobody knows what that means.

Well, almost nobody.

Rocheleau: But then I take the opportunity to explain it, talk about the lower energy bills, talk about the origin of materials.

Rich’s building, called Primera Terra, doesn’t have some of the features you might associate with “green.” No solar panels. No rainwater collection barrels. Instead, it has super-efficient insulation and lighting, a community garden, eco-friendly carpet and paint. The combination of cheaper power bills, non-toxic materials and feeling like you’re doing something for the planet… That’s worth something. How much is hard to say. But green building advocates are trying.

Nils Kok is a Dutch professor who followed 1.6 million home sales in California, over five years.

Nils Kok: What this study basically shows is, if you make your home better, or more efficient, and it’s labeled, on average it leads to a higher price.

Up to 9 percent. The label part of that is important. Kok tracked the higher values only in houses with certified green credentials. He says it’s hard to tease out why buyers paid more for those homes. But he did see something he calls the “Prius effect.”

Kok: So you got a street, lots of Prius vehicles. In that street, the premium paid for a green home is going to be higher as compared to a neighborhood where there’s no hybrids.

Let’s go back to Rich in Playa Vista. He didn’t buy his $700,000 condo because of the green certification. It was more of a bonus after he fell in love with the place.

Rocheleau:When I walked in it was a beautiful sunny day and I knew instantly that this was the place. The floor plan, the light.

Professor Kok says that makes sense. Location, view, or layout will always trump a home’s green selling points. Green features are harder to put a value on because, for the most part, you can’t see them. Plus, green is subjective. It changes neighborhood by neighborhood.

Joann Sweiven: Backyard chicken coops are popular here. Might not be so popular in Beverly Hills.

That’s Joann Sweiven, a real estate broker on the east side of the city, a suburban area called Eagle Rock. Most of the homes she sells are decades old. She says people in her neighborhood are into green, but few have a certified home.

Sweiven: If you see a house in our neighborhood with solar panels or some other obvious green upgrade, there’s a very slim chance it’s going to be LEED certified because they’re older homes. They would have to rip them down and rebuild them from the ground up.

It’s a lot harder to earn one of those labels with a retrofit than new construction. Sweiven hypes features like passive solar — that’s when the house was designed with the sun in mind.

Sweiven: In the winter, when the sun’s lower, it hits your windows and heats your house. And in the summer when the sun’s higher, it’s blocked by eaves and is shaded. It’s something that I look for, most people don’t know to look for, and if I see it I’ll point it out to buyers.

Troeh: Do they care? When you do tell them?

Sweiven: Um… sort of.

It does add to the impression that the house had a lot of thought put into it. Sweiven says smart design increases price. And if green builders can align their efforts — and their labels — with that, they’ll get a lot more popular.

I’m Eve Troeh for Marketplace.

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