Overview
- The City of Ann Arbor plans to adopt a new law that requires homeowners who are selling their property to obtain and publish an energy score report from a certified assessor prior to publicly listing their homes for sale.
- The U.S. Department of Energyhas a home energy score system Ann Arbor plans to use. The disclosure reports would be required to include an estimate of annual energy consumption by fuel type, including the amount generated by onsite renewable energy such as rooftop solar, and estimates of energy costs and greenhouse gas emissions, among other data like the year the home was built and the heated square footage. The city plans to use its climate-action millage funds to offer home energy assessments at no cost to homeowners. In addition to having at least one assessor on staff, the city plans to line up additional certified assessors from the private sector and offer free training to anyone who wants to get certified to become an assessor, with a goal of ensuring there’s never more than a five-day wait for an assessment.
- Ann Arbor’s A2Zero carbon-neutrality taskforce has worked on the new ordinance with the city attorney’s office, Energy Commission and stakeholders, including the Ann Arbor Area Board of Realtors. The A2Zero staff argue that there is currently no transparent or uniform way for prospective home buyers to gauge what the energy efficiency of a home will be. City staff told council that nearly 30% of home heating and cooling energy is wasted due to inefficiencies in home envelopes. “That means we pay, on average, 30% more on our utility bills than we need to in order to keep the home comfortable,” the staff memo states. “Identifying opportunities to improve building envelopes can also decrease several other potential problems and health concerns, including transfer of moisture, light, allergens and noise.”
- While the Ann Arbor Board of Realtors supports that A2Zero efforts to reduce greenhouse gas emissions related to home, they oppose the law in its current from for several reasons, including:
- The singling out by the city of a small group (1300-1500 single-family home sellers annually) for an added burden during the home selling process, which is already a notoriously stressful time. In addition, the law requires sellers to post the energy score on all public listings, which the AABR says is most likely an impossible task because there are a plethora of listing types within and outside of the city that feature homes for sale in Ann Arbor.
- The AABR also expressed that home buyers in the Ann Arbor market--where housing prices are far outpacing the average for the state of Michigan--are pressed to consider making offers on properties that are already a the top of their budget, and as a result the added information is not likely to be a factor in home choice.
- Concerns over long-term budgeting for the assessments and the heavy cost of funding the program. Tom writes, “The city will initially fund the program as a budget line item. All in with administrative overhead, 1 staff assessor with full benefit plan, contracted outside assessors for peak selling periods, technology systems for retainment and enforcement, annual taxpayer expense is likely at least $200-$300 K per year expense. The free report strategy is part of the implementation plan to help with stakeholder buy-in. An ongoing free report is not part of the ordinance. The city’s budget and the ongoing availability of Community Climate Action Millage dollars would determine if the city would continue with a free program on a year-to-year basis.”
- Evidence that although similar programs in other cities (like Portland) produce a valuable database of energy costs for the region, there is little proof that the ratings lead to no meaningful change in buyer behavior.
- The stigmatizing of older housing stock which tends to be less energy efficient and more difficult and expensive to add energy-efficiency improvements too.
- As an alternative to the law currently pending, the AABR requested that the the City of Ann Arbor to develop an incentive-based energy assessment program available to all Ann Arbor homeowners rather than a forced program. “Although we applaud the city’s efforts, this ordinance does little to help the city to achieve the A2Zero goals,” said Tom Renkert, CEO of the group of 1,100 local real estate professionals. Tom says, “By designing an attractive incentive-based energy assessment program, Ann Arbor can empower all homeowners to actively participate in achieving the A2ZERO goals, making the community more energy-efficient, environmentally friendly, and a model for others to follow.” (Source: *directly quoted*https://www.mlive.com/news/ann-arbor/2023/08/realtors-oppose-new-ann-arbor-law-to-disclose-home-energy-ratings.html)
Transcription
David Fair: This is 89 one WEMU. And I'm David Fair with this week's edition of Issues of the Environment. When Ann Arbor City Council next meet, it is expected to pass an ordinance that will require home sellers to acquire an energy score report from a qualified assessor before listing the property. The A2Zero Carbon Neutrality Task Force headed up the drafting of the ordinance as the city continues its march towards achieving carbon neutrality by the year 2030. Now, the task force worked on the ordinance with the City Attorney's office, the Energy Commission and other stakeholders, and that includes the organization headed by our guest today. Tom Renkert is chief executive officer of the Ann Arbor Area Board of Realtors and, while the organization fully supports the A2Zero carbon neutrality goals, feels this ordinance shouldn't be a part of the plan. Tom, thank you so much for making time today.
Tom Renkert: You're welcome, David.
David Fair: I presented the ordinance in its most basic form. It has a lot of moving parts that we need to explore. So, let's start with the concept. The A2Zero staff makes the argument 30% of home heating and cooling energy is wasted, and that increases utility bills. It says the ordinance is to address the fact there is no transparent or uniform standard for a homebuyer to determine what the energy efficiency of a home will be. You're on board with that part, right?
Tom Renkert: Oh, certainly.
David Fair: On the matter of cost, then. The ordinance calls for the city of Ann Arbor to use money from the voter approved climate action millage to render the process free to homeowners. But what is your understanding of what the responsibilities become when an efficiency assessment comes back below standard?
Tom Renkert: Well, there's nothing in the ordinance that requires the seller or the buyer to do anything with the report itself. It's simply a report that's given to them at time of uplifting the seller then is required to give it to the buyer and included in some kind of form of advertisement.
David Fair: So, does it then become a subject of potential negotiation between seller and buyer?
Tom Renkert: Well, it's an obvious concern that if a house has a low score, it's going to certainly be brought to the buyer's attention. We know from other markets that Portland, for example, the average score in Portland is a 4.5 on a 1 to 10 scale. And the largest group of homes in Portland in their initial 30-month study are 16% were a one. So, obviously, many of the properties in our service area--in the city of Ann Arbor--are an older piece of property. We have an older housing stock. They're going to score low. So, certainly, there's a concern that buyers will look at this score and that they'll know that they'll need to make a serious investment in order to improve that. And those serious investments likely won't dramatically decrease the amount of dollars that someone will actually spend monthly. A buyer can very quickly get a pretty good feel for what it costs to heat and cool that property by quality. They can see the last months and years of what it actually cost to heat and cool that house. And, yes, different people cool differently. But, generally, that average is going to be there. They're going to have a pretty good feel for what it costs to heat and cool and run that property.
David Fair: So, are you concerned that it's going to drive the sale price of homes down?
Tom Renkert: Let's face it. If it has a lower score, and I'm comparing a property in the city that likely is older to a property outside of the city and the township's that likely is newer, there's a concern there. Properties in the city are at an all-time high. The year to date average sales price for a home that's in the Ann Arbor School District, predominately the city of Ann Arbor, is currently at $630,000, more than $30,000 up than it was a year ago. So, prices are already rising across the country, but very specifically, you know, within the city of Ann Arbor itself. And, you know, that's certainly one of those considerations that they may choose to be elsewhere.
David Fair: We're talking with the CEO of the Ann Arbor Area Board of Realtors on WEMU's Issues of the Environment. Tom Renkert and his associates are opposed to a city ordinance that would require home sellers acquire an energy score report from a qualified assessor before listing the property for sale. Now, the city does plan to have a full-time energy assessor on staff and will identify others in the private sector that can meet ordinance guidelines. And it says there will be a maximum wait time of five days. Now, certainly on paper, that seems feasible. From your business perspective, is that cause for concern in what is already a laborious process in buying a house?
Tom Renkert: Yes, certainly. It's a very hectic time at that time of trying to list your house for sale. And I think one of the concerns with the ordinance itself is that it doesn't assure that the city will always compensate and pay for this audit, that, at any point, the city, when those climate action dollars run out, the city could simply move the cost to the seller. So, yes, initially, for at least this first year or two, whatever that period of time would be, the city does have it in the city budget. But if the city were to choose to make a cut, this is easily, you know, a $2-300,000 annual spend by the city. That's a pretty sizable amount of dollars that eventually could be back on the sellers' hands. [00:05:15][43.0]
David Fair: Referring back to that study in Portland that you mentioned earlier, it showed that the average cost for the process was $125 per home, and that there was a quick turnaround by assessors. That's not all that expensive. So, are those concerns perhaps more dramatic now than they might be five years down the line?
Tom Renkert: Keep in mind that Portland is a much larger city. They roughly do 7 to 8000 sales a year. In the city of Ann Arbor, most recently, 1300, probably up to a peak of maybe 1500 in really good times. So, that 125 is a competitive environment with a lot more inventory. You know, I would be surprised if it's only $125.
David Fair: I'm very curious. We already need home inspectors primed to get a lender on board if we're trying to buy a house. Do you think it would be an obstacle to kind of roll the energy assessment into an existing home inspection process?
Tom Renkert: Well, certainly that makes some sense. But I think we need to kind of keep in mind is that the Portland study basically stated that buyers do nothing with the report. And that's probably the greatest heartache. And some of the earliest research on this topic really has said that these types of audits really don't get used. Here's a quote from the Lawrence Berkeley National Laboratory from their study entitled "Behavioral Perspectives on Home Energy Audits":
"Despite success stories, the results of home energy audit programs overall have often considered to be disappointing. Relatively few households undertake audits, and when they do, upgrade recommendations are often not acted upon. And although there is clearly remaining technical potential, little has been proven about the overall energy savings that result from audits and resulting upgrades, not to the extent to which actual social potential can reach technical potential."
In other words, not only do we know from the Portland study that buyers aren't going to spend the dollars to do something, that they don't want to go further in debt. And, socially, it's not something that this study says that our behavior acts on. We simply are asking the city to really look at who would like to do this, who wants to do this. I mean, here's a great example. There are thousands of building permits pulled annually by Ann Arbor city homeowners. These are people that are making improvements to their homes. This is an ideal time. There's already an inspector there. Would that not be an ideal time to offer a home energy audit to someone that's already interested in improving their property, making a change to their property, and, obviously, has the financial ability to do something at that point versus providing this to buyers who have just moved into our town and putting the onus on sellers who are potentially most likely leaving our town to get this done?
David Fair: Obviously, you've put a great deal of thought into this, and you have thought of alternatives. And yet, as we move forward, it seems likely that not only is this ordinance going to pass and become regulation, it is expected to pass city council unanimously the next time it meets. So, have you come to a place of acceptance, or is the fight going to continue?
Tom Renkert: We'll continue to voice our concerns. This is really just aimed at the wrong group of people. Forcing it upon sellers to do it and giving it to buyers who will, you know, do nothing with it just simply seems like a real waste of city funds. Certainly, the city will get great information out of this. And there's some real tremendous value on that. But why targeted at someone that doesn't need it and give it to someone that won't use it?
David Fair: Might it come to pass that five or ten years down line, it's just part of the accepted process and the concerns that we've covered today just fade away?
Tom Renkert: You know, in other markets, let's face it. We know that it's just happening. And, certainly, this is another reason why someone would want to use a realtor, because a realtor can help them move through the transaction. There's no getting around it. I'm concerned for those that are trying to go out and on their own that many will know that they have to do this. And, you know, they run into a situation in the end where they're looking at a fine when they don't use a realtor to help them through this very complicated sales process.
David Fair: So, with that in mind, and understanding that this is likely going to become a policy in the near future, and then it goes into effect 180 days after passage and the fine you referred to--the $500 fine--that would go into effect 180 days after that, what would you like potential sellers and buyers to think about and ask as we move into this new process?
Tom Renkert: Well, we always want buyers and sellers to know that realtors are always out there looking to protect their home ownership rates. We are one of those few organizations that truly have a concern for the rights of the seller. And, moving forward, certainly, if this ordinance goes into play, we're going to do our best to help our customers ultimately fulfill the requirements of this city's ordinance and help them fully understand the benefits that could potentially be there, if there are any.
David Fair: Tom, I've appreciated your perspective today. Thank you for sharing your time.
Tom Renkert: You're welcome. Have a great day.
David Fair: That is Tom Renkert. He is chief executive officer of the Ann Arbor Area Board of Realtors--our guest on Issues of the Environment. For more information on the ordinance that is expected to win approval at the next Ann Arbor City Council meeting and for more on the Board of Realtors position, visit our web site at WEMU dot org. Issues of the Environment is produced in partnership with the office of the Washtenaw County Water Resources Commissioner, and you hear it every Wednesday. I'm David Fair. This is your community NPR station, 89 one WEMU FM, Ypsilanti.
Non-commercial, fact based reporting is made possible by your financial support. Make your donation to WEMU todayto keep your community NPR station thriving.
Like 89.1 WEMU on Facebook and follow us on Twitter
Contact WEMU News at734.487.3363 or email us at studio@wemu.org
