Building performance disclosure and rating is a growing trend in the property industry, with increasing attention being paid by prospective buyers and renters to energy bills. This article analyses the range of approaches for building performance disclosure and rating, suggesting a proposed path forward for the industry.
Evidence suggests property buyers and renters are increasingly willing to pay for high performance buildings. One recent study by the Institute for Market Transformation found customers will pay a premium of between 2-5% for high performance buildings compared to otherwise equivalent quality paired buildings.
There is also a growing case for property owners to undertake building performance improvements based on improved selling price alone, even setting aside the associated direct comfort and energy bill savings. A recent analysis by the National Association of Realtors ranked a range of improvements to determine the relative boost in property value relative to cost. The study found that attic insulation provided an average 117% valuation bump over cost, far outranking typical home renovations such as bathroom or kitchen remodelling.
Property sellers, landlords and the real estate professionals therefore have a strong incentive to market the thermal comfort and energy performance of properties for sale or lease.
However property listings more often than not fail to effectively communicate the thermal and energy performance benefits of high performance buildings. Of the reviewed buildings, most highlighted obvious features such as solar panels, but most failed to comprehensively identify the full suite of features. Furthermore, the uptake of performance ratings has been low outside those jurisdictions where mandatory energy performance certificate programs are in place. This is despite recent analysis from Elevate Energy suggesting an absolute valuation boost for disclosing energy performance regardless of the relative performance of the property.
There are several broad approaches for communicating building performance, each with inherent strengths and limitations, detailed below.
The simplest way to demonstrate building performance is a features-based approach. This involves identifying those features that are likely to lead to improved performance such as building orientation, insulation and solar panels, and marketing them within or alongside property listings. A leading example of this in the real estate industry is the 17 Things developed by the Centre for Liveability Real Estate. The strength of the features-based approach is the assessment may be quickly performed by a real estate agent with minimal training. The limitation of features-based approaches is that the assessment alone doesn't provide a comparable indicator of the thermal comfort and/or energy performance of the building.
Operational performance disclosure
Operational building performance disclosure involves analysing the actual energy performance of a building, based on historical billing data, and ideally expressing the data as a normalised metric, correcting for variables such as building area and climate. A key example of this approach is the Energy Disclosure Ordinance programs in the US or the NABERS program in Australia. The strength of this approach is that it offers a comparable metric of the real world performance of buildings, which is the ultimate interest of the buyer or renter. The limitation of this approach is that it requires access to historical billing data, which is not always available, and the measured performance of the building can be thrown off by unusual occupant behaviour or installed appliances.
Simulated performance rating
Simulated building performance rating involves collecting a description of the building features, as in the features-based assessment, and using those features to develop an estimate of the thermal comfort and/or energy performance of the building. An example of this approach is in the Home Energy Rating System (HERS) or Home Energy Score in the US, the Energy Performance Certificate program (EPC) in Europe, and the National Home Energy Rating System (NatHERS) in Australia. The strength of simulated performance assessment is that, like the operational performance approach, the assessment provides a readily comparable assessment of the thermal comfort and energy performance of the building however unlike the operational performance assessment, billing data is not required and the assessment does not depend on the prior occupant behaviour or installed appliances. The limitation of simulated performance assessment is that these assessments have been prohibitively expensive and time-consuming to perform, which has meant uptake has been poor outside those jurisdictions with mandatory rating schemes.
A recent report by the Rocky Mountain Institute provides several best practice recommendations for marketing building performance
- Display features: features should be displayed in clean, simple and visually intuitive graphics, situated prominently on property listings.
- Quantify the benefits: effective marketing is about communicating benefits rather than features alone. Best practice building performance ratings should therefore quantify and effectively communicate the expected thermal comfort and energy bill savings of the property.
- Provide comparisons: provide a visual comparison to similar properties, normalised for climate.
- Recommend actions: to add value, the rating should provide recommendations for improving building performance, ideally connecting to local product and service suppliers
- Publish transparently: the rating should publish the rating publically via a public rating database, alongside a clear description of the method for determining the rating
A path forward
At Ecologic we believe the best path forward is in combining the strengths of features-based, operational and simulated performance ratings.
Similar to best-practice feature-based tools, we identify and market the features of a property such as insulation, orientation, and solar PV.
Similar to best-practice operational performance disclosure tools, we quantify the benefits of building performance in terms of building comfort and energy bill reductions and provide a comparison to similar properties.
Similar to best-practice simulated performance ratings, we support assessments in the absence of billing data and provide a tailored action plan of recommended actions for improving performance.
Critically, we reduce the time required to perform advanced simulation-based energy rating and retrofit assessments by 80%, while still delivering a similar level of accuracy.