It has been a controversial question in the home real estate market for years. Do houses with lots of energy-saving and sustainability features sell for more than houses without them? If so, by how much?

Some studies have shown that consumers’ willingness to pay more for Energy Star and other green-rated homes tends to diminish during tough economic times. Others have found that green-certified houses sell for at least a modest premium over similar but less-efficient homes.

A new study involving an unusually large sample of homes sold in California between 2007 and early 2012 has documented that, holding all other variables constant, a green certification label on a house adds an average 9% to its selling value. Researchers also found something they dubbed the Prius effect: Buyers in areas where consumer sentiment in support of environmental conservation is relatively high — as measured by the percentage of hybrid auto registrations in local ZIP Codes — are more willing to pay premiums for green-certified houses than buyers in areas where hybrid registrations were lower.

The study found no significant correlations between local utility rates and consumers’ willingness to pay premium prices for green-labeled homes. But it did find that in warmer parts of California, especially in the Central Valley compared with neighborhoods closer to the coast, buyers are willing to pay more for the capitalized cost savings on energy that come with a green-rated property.

The research was conducted by professors Matthew E. Kahn of UCLA and Nils Kok of Maastricht University in the Netherlands, who was a visiting scholar at UC Berkeley. Out of the 1.6-million-home-transaction sample, Kahn and Kok identified 4,321 dwellings that sold with Energy Star, LEED or GreenPoint Rated labels. They then ran statistical analyses to determine how much green labeling contributed to the selling price — eliminating all other factors contained in the real estate records, such as locational effects, school districts, crime rates, time period of sale, swimming pools and views.

The LEED certification was created by the private nonprofit U.S. Green Building Council and focuses on “sustainable building and development practices.”

The 9% average price premium from green-rated homes is roughly in line with studies conducted in Europe, where energy-efficiency labeling on houses is far more commonplace. Homes rated “A” under the European Union’s system commanded a 10% average premium in one study, while dwellings with poor ratings sold for substantial discounts.

Read the entire story at LA Times | By Kenneth R. Harney | posted July 22, 2012

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