Minneapolis program puts energy audits into hands of potential homebuyers

Minneapolis saw near-perfect compliance and few complaints during the first year of a new ordinance requiring energy audits prior to all home sales.

The city’s residential energy benchmarking program generated more than 6,200 reports disclosing the conditions of windows, insulation and heating systems for prospective buyers and new owners. The information is also publicly available online.

That’s more than six times the number of home energy audits typically conducted each year through a voluntary program.

“That’s an incredible gamechanger,” said Kim Havey, the city’s sustainability director, “but we need to be able to do that each and every year if we are going to be able to meet some of our goals for climate change.”

Sellers complied with the requirement for 95% of listings, but the city doesn’t yet have data on how the audits are affecting the housing market. Real estate agents said it’s unlikely energy efficiency is a deciding factor given how quickly homes are selling, but the reports could provide a useful roadmap for future home improvements — and in at least a few cases they have already spurred projects.

Minneapolis has a goal of reducing carbon emissions from a 2006 baseline by 30% by 2025 and 80% by 2050. Buildings represent more than 70% of the city’s greenhouse gas emissions, and homes and apartments represent about a fifth of citywide emissions. 

The city began requiring energy benchmarking for commercial and government buildings in 2015 and has seen energy use intensity decline 5.5% during the first three years of that program. This year multi-tenant buildings must comply with a “time-of-rent” disclosure that provides data on per-square-foot energy costs.

Single-family home energy audits have long been voluntary, but beginning last year they are now required for any home being listed for sale. Isaac Smith, residential program development manager for the Center for Energy and Environment, which oversees the program, said the biggest surprise was the lack of protests from homeowners or realtors. “We didn’t hear a lot of grumblings or anything after it all started,” he said. “It went really smooth, and we haven’t got much pushback.”

Smith credits the lack of complaints in part due to the city’s decision to fold energy audits into existing Truth In Sale of Housing inspections, which focus on safety and health aspects. Training sessions helped inspectors add energy audits into their work. By combining the two inspections, assessors complete their work in one visit and keep the additional energy audit cost somewhere between $25 to $100.

The city eliminated a proposed blower-door test because it would have required additional cost and equipment, making it more challenging to integrate with the existing health and safety inspections.

To get the word out about the program, the city sent 10,000 mailers to targeted households and added information to water bills and neighborhood newsletters. Program sponsor CenterPoint Energy also reached out to customers about the program via email.

Potential buyers can view energy scores online within 24 hours of a home being listed for sale, and copies are required to be available at open houses and included in closing documents. 

The two-page reports rate homes on a 0-100 scale based on inspectors’ findings in four areas: attic insulation, wall insulation, home heating systems and storm windows. The most often recommended improvements were for attic insulation, suggested in 4,190 inspections, and heating system issues, found in 4,023 homes. Inspectors discovered wall insulation lacking in 1,726 homes and storm windows missing in 392 houses.

Smith said the reports prioritize recommendations based on energy savings and include information on rebates and home improvement financing. Many homeowners have little idea whether they have enough attic or wall insulation or their heating system status. The reports “bring awareness to home energy use and the opportunities for energy savings when someone moves into their new home,” Smith said.

The city does not know how many homebuyers made improvements based on the energy disclosure data, but the Center for Energy and Environment reported that 225 buyers reached out for more information on energy efficiency programs and rebates.

Real estate agent Nate Pentz said the energy disclosure prompted one client, a committed environmentalist and Tesla driver, to have wall insulation installed before moving into his Minneapolis home. 

Such improvements can be expensive and messy — often more convenient to have done before moving in. Contractors typically have to drill holes in walls, which must be filled, covered and painted after the insulation is added. “There was plaster and dust everywhere,” Pentz said of his client’s new home.

Storm windows may be a good investment for efficiency but they add little long-term value to most homes. Heating systems cost thousands of dollars and most homeowners don’t make the investment until systems stop working, Pentz said. About the only relatively inexpensive improvement, attic insulation, still costs $1,200 to $1,800. When clients have to bid on homes they have too little cash available for upgrades, he said, even if they care about efficiency.

Jasmine Smith isn’t a typical homebuyer — her brother Isaac runs the disclosure program and she shares his interest in energy conservation. The suburban principal used the energy disclosure scores while searching for her first home in South Minneapolis, opting not to buy one house because of its low energy score before ultimately finding a more efficient and less expensive home that met her needs. “The report makes you a more informed consumer,” Jasmine Smith said.

Arbor Otalora-Fadner, a program coordinator at the Center for Energy and Environment, looked at the scores online of homes in neighborhoods where he and his wife wanted to live. They recently moved into a 1919 home in South Minneapolis with a good energy score. The couple primarily selected their home based on its location but “were mentally and financially prepared” to make retrofits should their final choice have a low energy rating, he said.

“It’s so competitive that it’s hard to be particular in what you want,” Otalora-Fadner said. The program, he hopes, will enlighten buyers on how investments can decrease their energy bills. 

Lakes Sotheby’s International Realty broker Todd Shipman thinks the energy disclosures have the potential to improve the quality and integrity of the city’s housing stock. But he concedes that the buyers he works with have not spent much time studying energy disclosure reports.

It’s been such a hot seller’s market that buyers barely have time to drive by homes to see “what color” they are before deciding whether to make a bid, he said. “It’s just such an odd market.”

Both the city and the Center for Energy and Environment view the information as a start toward reducing carbon emissions but concede it may take a few years before homeowners begin to act on the energy disclosure data. Realtors, moreover, note that the less expensive homes located in older neighborhoods have been among the most sought after by buyers, leading to bidding wars that leave winners with little cash left over for energy retrofits.

As the number of homes with reports in the database grows, so will the potential uses. City and program officials could use the data to identify neighborhoods with the most potential for energy conservation outreach and marketing.

Minneapolis City Council Member Jeremy Schroeder, who helped author the energy disclosure ordinance, said the data from his South Minneapolis neighborhood came as a revelation. Many homes in his ward have received efficiency-related renovations as part of an airport noise settlement with the Metropolitan Airports Commission. “I expected down here to be much better than it was, on average,” he said. 

This year the city and its partners plan to continue reaching out to homebuyers. The Minneapolis Area Association of Realtors plans to offer a continuing education course to help realtors identify energy efficiency features and advertise them in their listings, Smith said.

The next step for the energy disclosure ordinance might include tracking whether homebuyers participated in utility rebate programs, Smith added. Whether eventually multiple listing services, Zillow and other homebuying sites will feature energy scores remains to be seen.

The city will also send letters this year to recent homebuyers with a copy of their energy disclosure reports and encourage them to contact the Center for Energy and Environment if they want to make energy improvements.