Sustainability and Real Estate: What Agents Need to Know

BY MICHELE LERNER

When Christine Liaukus wanted to improve her home’s performance and value along with taking steps to eventually run it entirely with electricity rather than use fossil fuels, she was able to fund the updates with what she said was “essentially free money.”

“New Jersey has a great Home Performance with ENERGY STAR program that pairs tax credits with rebates for things like heat pumps and upgrading your electrical panel,” said Christine Liaukus, an architect at the Center for Building Knowledge at the New Jersey Institute of Technology in Newark. “I used that program on my 1926 Tudor-style house to have an energy audit. I followed their recommendations to add dense pack cellulose insulation, air sealing in the attic and basement, and bought a new water heater.”

The $14,000 of work was covered by a $4,000 rebate and a $10,000 interest-free loan.

“They try to work out the payment so that it matches the savings on your energy bill, so for me it was about $68 a month,” said Liaukus. “Once the loan is repaid, you get the full benefit of energy savings.”

Whether it’s driven by a desire to save money on utilities or a broader commitment to sustainability, homeowners can be part of the solution to reduce their environmental impact—and real estate professionals can help educate their clients about innovations and programs that can improve their home’s comfort, lower their utility costs, raise their home’s value, and get ahead of the curve of anticipated code changes.

To meet the U.S. commitment to cut greenhouse gas emissions by 50% by 2030 and achieve net-zero greenhouse gas emissions by 2050, builders, developers, and homeowners are likely to see increased focus on energy efficient upgrades. In fact, the Energy Department estimates all buildings, including homes and commercial buildings, account for 40% of the nation’s total energy use.

New Jersey ranked 14th in the country on the 2022 State Energy Efficiency Scorecard by the American Council for an Energy-Efficient Economy, a nonprofit organization dedicated to energy research. The state adopted high standards for the energy efficiency of appliances and the use of low-flow faucets and established targets to reduce electric and natural gas use.

Sustainability Trends

Builders and homeowners can take advantage of innovations and trends to reduce their carbon footprint. One recent trend emphasizes the benefits of electrification.

“Converting to an all-electric house–or building all-electric houses–is one of the greatest improvements builders and homeowners can make,” said Liaukus. “But it’s important to recognize that upgrading to more energy efficient systems works best in a building that is air sealed and well insulated.”

In addition, owners of older homes may have to upgrade their electrical panel so it can handle an all-electric house, said Liaukus. She recommends the RewiringAmerica.org site for more resources on electrification.

Real estate agents may want to recommend what Liaukus calls an “opportunistic retrofit” to their clients.

“When a homeowner plans to upgrade their siding, finish an attic or expand their house with an addition, they can add insulation while the walls are open,” said Liaukus. “We’re researching new options such as ‘renew-wall,’ which provides two inches of rigid insulation that can be installed underneath new siding, and high-performance windows that can be installed over existing windows.”

Many homes are built or retrofit with heat pumps, said Liaukus, which have significantly improved in recent years and provide excellent comfort in New Jersey and in colder climates.

While solar panels are not mandatory on new construction in New Jersey as they are in California, many homeowners and builders are adding solar energy to their homes, said David Arabia, Realtor® and broker/owner of Corcoran Infinity Properties in Alpine.

“Solar panels are very popular on high end homes depending on the way the roof faces,” said Arabia. “If the house faces south in the back, it’s much easier to put solar panels on without impacting the aesthetics of the house.”

Buyers, Sellers, and Sustainability

Many buyers, especially of older homes, ask about the utility bills and the types of upgrades the homeowners have made to the property, said Arabia.

“The biggest upgrades they want to know about are whether the windows and appliances are energy efficient and whether the heating and air conditioning system is energy efficient,” said Arabia. “Buyers are educated in this area, and they want to know about these things.”

Arabia suggests real estate agents selling older but upgraded homes get a full list of the upgrades with details including the R-rating of the insulation and windows, the model number of the heat pump, and the dates of all upgrades.

“That way you have the information immediately if buyers ask for it,” said Arabia. “If you’re working with buyers, ask for a seller disclosure with a complete and detailed list of upgrades.”

Real estate agents can provide education about energy efficient features to buyers and sellers, said Jill Biggs, a Realtor-Associate® with Coldwell Banker Realty in Hoboken.

“The more things people can see and understand, the easier it is to make a property stand out,” said Biggs.

Ancillary Benefits to Energy Upgrades

While some buyers and builders focus on the environmental benefits of energy upgrades, others may be more interested in the long-term benefits of saving money on their utility bills. Sustainability upgrades have other advantages, too.

“Triple glazed energy efficient windows keep the sound out, which is very important in the dense urban markets where I sell,” said Biggs. “When I’m showing a condo, I open and shut the windows so the buyers can hear the difference.”

“Extra insulation offers similar noise abatement benefits,” said Biggs.

“The Passive House program, which has very stringent requirements for energy performance, is popular not just because of the energy efficiency, but because they are comfortable and quiet homes,” said Liaukus.

“Both newly built homes and existing homes can be constructed or retrofit to meet several levels of energy efficiency such as ENERGY STAR certified, Zero Energy Ready or Zero Energy Ready with Renewable Energy, which includes solar panels,” said Liaukus. Zero Energy and Passive House programs refer to homes that are wellinsulated, sited to maximize natural light and shade in different seasons, and can produce as much energy with solar power as they use.

“In addition to the quiet and comfort of well-designed homes, many buyers are interested in saving space and in wellness benefits. For example, induction stoves contribute to

Sustainability Programs for New Jersey Residents

Whether you’re working with buyers who may want to make home improvements or homeowners considering presale renovations, you can be a source of information about state and federal programs that provide financial incentives for making sustainable choices.

Some resources for you to learn about and to share with your clients include:

• New Jersey Clean Energy njcleanenergy.com/rnc better indoor air quality and, because they are cool to the touch, are safer than gas or traditional electric stoves,” said Liaukus.

Rebates are available for homeowners who choose energy efficient appliances and heating and air conditioning systems, recycle their appliances, or participate in the Home Performance with ENERGY STAR program. Each of these programs is run by electric and gas utility companies in the state. Contact information for utility companies can be found on the New Jersey Clean Energy Site.

• A quick home energy check-up can be performed by a Building Performance Institute certified auditor in a customer’s home. The auditor can make recommendations for no-cost energy savings techniques as well as discuss other options to improve a home’s energy efficiency. The audit can be arranged through a customer’s utility company.

• The Home Performance with ENERGY STAR program offers homeowners the opportunity to work with their utility company to identify larger projects to improve the sustainability of their home. The utility company can help them find rebates, tax credits, and other financial tools to help pay for home improvements.

• Federal tax credits. The Inflation Reduction Act provides numerous tax credits for energy efficient upgrades energystar.gov/about/federal_tax_credits to homes dating back to Jan. 1, 2023 through Dec. 31, 2032. Real estate agents and consumers can also search for tax credits by Zip Code on the ENERGY STAR site.

Tax credits for home improvements are typically 30% of the project cost, with limits for individual projects ranging from $600 for energy efficient central air conditioning, hot water boilers, furnaces, gas water heaters and new windows to as much as $2,000 for heat pumps, wood stoves, and heat pump water heaters. Overall, homeowners may qualify for up to $3,200 annually in tax credits. In addition, the Residential Clean Energy tax credit provides a 30% tax credit for upgrades such as geothermal heat pumps, electrical panel upgrades, solar energy systems including battery storage, and small wind turbines.

“Condo buyers like tankless water heaters, too, because they save space, not just because they’re more energy efficient,” said Biggs.

New Construction and Sustainability

Builders are incentivized by some local programs to add green features to condos and single-family homes and many jurisdictions have codes that require specific sustainability measures to be met. For example, in condo buildings, builders who add a “green roof” with plants to their building are typically allowed to use more of the overall roof for a deck for residents.

In high-end condos in Jersey City and Hoboken, buyers expect their new homes to have “bells and whistles” that offer a more comfortable home environment, said Biggs.

“Buyer expectations are different now,” said Biggs. “They expect green features to be in newer homes and they expect smart home features so they can control their home from their phone even if they’re away. It’s saving energy, but it’s also convenient.”

Many custom home buyers opt for multiple zones of heating and air conditioning and upgraded insulation to reduce their energy use and for a more comfortable home, said Arabia.

As technology changes and building codes are adapted, real estate agents will need to stay educated about the upgrades buyers and sellers need to understand.