Lending and Energy Efficiency – How are they Related?

Editor — Thu, 05 Jan 2012 19:47:09 +0000

Back in October when I was at the GreenBuild conference in Toronto I sat in on an interesting presentation headed up by Philip Henderson of the Natural Resources Defense Council regarding lending and energy efficiency. How do those two concepts relate you ask? Here’s the premise: because energy costs can be a significant expenditure over the lifetime of a mortgage, the energy efficiency of a home can have a significant impact on a borrower’s finances and should be factored in by the lender.

According to Henderson, a homeowner’s expenses are roughly broken down as follows: mortgage (35%), taxes (25%) and everything else (40%), with energy costs making up a large part of that. For example, the total energy costs for a $175,000 home over the life of the mortgage are around $70,000. Given the significant amount of money an owner spends on utilities, a strong case can be made to include these costs in assessing the “credit worthiness” of a borrower. It would be done by looking at the energy efficiency of the home: the higher the efficiency, the less money is spent on heating and cooling.

If lenders factored this in by relying on a standard energy efficiency rating (such as ENERGY STAR), the lending market would gradually cause borrowers to shift to more and more energy efficient homes and, voila, you’ve incentivized energy efficiency through market forces. A very intriguing idea that is getting more and more traction.

More information can be found at ENERGY STAR’s Energy Efficient Mortgages.

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Energy Star – New Guidelines for Homebuilders

Editor — Tue, 13 Dec 2011 20:17:42 +0000

Since the EPA rolled out its ENERGY STAR Program for homes in 1995, 1.2 million new home received this designation. The designation is given to homes achieving established energy savings and reduction in greenhouse gas emissions.

In 2012, the standards for this designation will be 15% more stringent than those homes built pursuant to the 2009 guidelines. The focus of the program is on stricter criteria for home sealing, insulation, window design, heating, cooling and ventilation systems, and improved water moisture packages to protect roofs, walls and foundations. The Energy Star labeling will also be enhanced by an emphasis on the use of certified lighting and appliance. The ENERGY STAR labeling is granted after a third party verification program that is certified by the Home Energy Rater. The 2012 program for ENERGY STAR qualified homes (Version 3.0) is available for all qualifying homes that obtain their building permits after January 1, 2012.

Additional information regarding the Energy Star home program can be reviewed at The Next Generation of ENERGY STAR Qualified New Homes.

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Lending and Energy Efficiency – How are they Related?

Energy Star – New Guidelines for Homebuilders