Energy Efficient Homes Less Likely to Default on Mortgages

The University of North Carolina at Chapel Hill Center for Community Capital and the Institute for Market Transformation released the study on March 20, 2013, which found that energy efficient homes are 32% less likely to default on their mortgages and 25%. The study, which analyzed a sample of 71,000 ENERGY STAR rated and non-ENERGY STAR rated single family homes in the United States, also found that among ENERGY STAR rated houses, the default risk is lower in the more energy efficient homes.

The study suggests that a home's energy efficiency should be taken into consideration when underwriting a mortgage. Perhaps the details of a home's energy efficient features or the results of an energy audit should be required before determining mortgage rates.

Green Homes Sell for 9% More

This study is not the first win for energy efficient homes. It rides the tails of a July 2012 study, "The Value of Green Labels in the California Housing Market", which found that homes with green certification sell for 9% more than conventional residential properties. The study, performed by researchers from University of California at Los Angeles (UCLA) and the University of California at Berkeley (UC Berkeley), surveyed data from 1.6 million homes sold in California in the last 5 years, and found that those labeled by LEED, ENERGY STAR, or GreenPoint increased the price. A conventional home priced at $400,000 would increase by $34,800 with these green certifications.

The combination of these two studies may suggest that green homeowners can more easily afford their mortgages because of energy savings, even if their homes are priced slightly higher. Of course, those homeowners will benefit when they sell the home at a higher price, along with energy savings that will continue after their mortgages are paid.

LEED for Homes and Mortgages

This study is good news, not only for ENERGY STAR rated and energy efficient homes, but also for the LEED for Homes rating system. The rating system uses ENERGY STAR as a measure of energy efficiency for the homes seeking certification, so it is directly linked to UNC and IMF's study.

LEED for Homes, which launched in 2008, announced a significant milestone in mid-2012: 20,000 homes had been certified, and an 79,000 additional Homes projects were in the pipeline. The rating system will likely continue to see such rampant growth as a result of these findings, which prove the financial benefits of building a sustainable, certified home.