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Leveraging the Power of Data to Reduce the Home Energy Burden

RMI’s Residential Energy+ team knows that one key to changing markets is by making the right information available to consumers. Energy costs are an important part of home ownership, yet most people have no easy way to estimate them. Nor do they have any idea what energy upgrades might be needed when they move into a home. By making energy performance and cost easy to find when people are comparing homes, the conversation around real estate changes, creating a positive ripple effect across the entire value chain.

Utility bills are a significant and growing expense of home ownership, placing a substantial burden on homeowners and renters, particularly low- to middle-income families whose energy costs represent a larger percentage of their incomes. In the past, Rocky Mountain Institute has written about why mortgage providers should pay more attention to home energy costs in the underwriting process as a means to reducing default risk and fulfill obligations to underserved customers.

But now, companies are leveraging the power of data to challenge existing assumptions about how much energy is actually costing homeowners across the U.S.—and it turns out the cost is higher than we previously thought.

This summer, ATTOM Data Solutions and UtilityScore released Power Conversion, a coauthored report analyzing the impact of utility costs on overall housing costs, home affordability, and home-seller profits.

Utility costs can make home ownership unaffordable

A combination of UtilityScore’s proprietary utility cost data and ATTOM Data Solution’s public record real estate data revealed that utilities, on average, add 25 percent to homeownership costs and 21 percent to renter housing costs. This is significant because it means that when utility costs are accounted for, 35 percent of real estate markets in the U.S.—analyzed by zip code and captured in this utility cost “heat map”—are not affordable for average wage earners (this is based on ‘affordability’ as defined by the Consumer Financial Protection Bureau’s recommendation of a 43 percent debt-to-income ratio for whole home housing costs). In 323 of the 931 U.S. counties included in the study, ATTOM and Utility Score found that utility costs tipped 122 more counties over this affordability threshold than when home costs were analyzed without utility cost data.

Fortunately, digging into this cost data can also reveal what homeowners and service providers can do to mitigate a homeowner’s energy burden, and the improvements that can provide the biggest bang for the buck.

Guiding decisions at market and homeowner levels

“Leveraging the power of data to reveal new thematic trends on home energy costs can help send a powerful signal to the financial and real estate communities that this is a problem that needs to be solved, but ultimately our end goal is to motivate homeowner action,” said Jacob Corvidae, manager of RMI’s Residential Energy+ initiative. “Utility Score has been an excellent partner in unpacking the problem by offering a set of solutions that homeowners can turn to based on their actual performance and location to save money and energy.”

For example, in Power Conversion, UtilityScore and ATTOM include an analysis on the impact of solar installation on home seller profits in the state of California over a period of seven years, revealing that sellers with solar PV installed between their original purchase and their sale of the home realized average profits that were more than double the average profits realized by home sellers who didn’t have solar installed.

While this trend presents an incredibly powerful sales tool for rooftop solar PV installers, real estate professionals, and perhaps appraisers, it likely does little to prompt action on behalf of a homeowner.

“Homeowners require a different level of granularity to understand how macro-level trends affect them, their home, and their pocketbook,” Corvidae continued. “We believe that online real estate platforms offer the most significant opportunity to localize and contextualize energy performance information at the same time—providing homeowners with a snapshot of how their energy use stacks up to the rest of the market, while also laying out actionable recommendations on what can be done to improve their energy use.”

Turning information into action

RMI is working with real estate portals and the services that provide energy estimates, specifically leading companies like UtilityScore along with Clearly Energy, Enerscore, and Tendril, to track and amplify the increasing global momentum toward improved energy transparency, while also facilitating partnerships between different industry leaders to facilitate taking action on the information.

These market actors—with the right level of visibility and scale—can help provide the missing link between information and action by changing the relationship that consumers have with their home energy use, and providing clear recommendations on what they can do about it.

A homeowner myself, I have looked up my utility score and experienced a twinge of energy envy learning that I don’t fare as well as I thought compared to my neighbors. While I have known for quite some time I should do something to improve the performance of my home (as admitted in our video), I find myself hamstrung by common culprits: a “not-so-bad” monthly utility bill, lack of time, etc. But looking at the projected monthly savings of installing PV, I was surprised to learn how much I could actually save and was finally motivated to call our local solar PV installer for a quote on a rooftop PV system.

It turns out I’m not alone. While most homeowners want better performance, they wait until a major equipment failure requires action to pull the trigger. Or, they simply have unrealistic expectations about how much energy and money can be saved through different performance improvements, resulting in disappointment and lack of action.

Data helped bridge that gap for me, and is helping to bridge that gap in pockets of the U.S. where it is more visible and available. Now just imagine what is possible for homeowners when energy transparency is the rule, not the exception.

Stay tuned for more on the power of home energy data, and the state of the energy transparency market.

Image courtesy of iStock.