How Australia’s widespread adoption of Energy Scores holds important lessons for the U.S. residential housing market
Last month REA Group—the global online real estate advertising company and owner of realestate.com.au—launched Energy Scores on its popular real estate platform in partnership with U.S.-based Tendril to provide an instant snapshot of whole home energy performance across more than 80 percent of Australia’s home market.
Based on Tendril’s HomeFit platform, Energy Scores delivers an energy score of 1 to 100 by aggregating both electricity- and gas-related cost and consumption data for single and multifamily properties. Energy Scores also provides details specific to a particular address to help owners better understand total cost of ownership, the estimated value of their home, and relative efficiency compared with other similar homes by size or neighborhood.
Several factors, including consumer demand and competitive advantage, motivated REA and Tendril’s partnership.
“In Australia’s deregulated utility environment, electricity is expensive. In response, homeowners have embraced renewable energy and energy efficiency to lower their bills, but they have lacked the basic information on what performance measures make the most sense for their home, and how these changes will impact overall home operating costs or real estate value,” said Jeff Woodward, business development manager with Tendril. “REA therefore saw a consumer need that it could fulfill with the Energy Scores tool.”
Mounting evidence shows that the economic benefits of improved energy performance are inspiring action among homeowners. Survey results included by realestate.com.au in the Energy Scores media release state that about 79 percent of homeowners were actively trying to conserve as much energy as they could to reduce costs.
Energy Scores’ “claim your home” feature empowers renters and homeowners to capture more energy savings. Renters and homeowners can use the feature to improve their listing’s score on realestate.com.au by adding additional information about their energy usage, habits, and any completed energy upgrade projects for their home.
“Nobody wants a low score,” said Woodward. “It’s positive to see that homeowners are motivated to boost their rankings by making updates that have the biggest bang for the buck, such as attic insulation, which can improve a monthly bill and has a higher return as compared to other renovation projects.”
What the U.S. Can Learn From Australia
Signaling increased global momentum toward improved energy transparency in the residential market, REA Group’s announcement follows the release of similar tools on U.S. platforms, including Hotpads (a Zillow Group property which, like others, is working with UtilityScore) and Estately (which recently announced a partnership with Clearly Energy). This market trend is something Rocky Mountain Institute’s (RMI) Residential Energy+ team is following closely as a way to institutionalize energy performance and upgrade value, and make that value visible to consumers.
There are fundamental differences between the Australian and U.S. real estate markets. For example, Australia does not have a multiple listing service (MLS). Real estate agents in Australia also only act as sellers’ agents and don’t represent buyers. Regardless, growing integration of energy performance metrics into property listings indicates where the market is heading. That integration can motivate real estate platforms, homeowners, service providers, and realtors looking to gain competitive advantage and move the market in the “race to transparency.”
Achieving transparency at scale is key to influencing customer behavior
Both U.S. and Australian homeowners are equally concerned with the cost and performance of their homes. However, these groups differ in their willingness to do anything about it.
Two-thirds of U.S. homeowners consider home energy performance a top priority, yet almost half of homeowners have done nothing to improve it, and the adoption of energy upgrades in the U.S. is currently increasing at a rate of less than 1 percent per year. Meanwhile, 76 percent of Australian homeowners are worried about growing energy costs, but this concern is, as mentioned above, being channeled into actions that improve home performance (for example, 20–25 percent of Australian homeowners have installed rooftop solar).
Lack of homeowner action in the U.S. can be attributed to several factors. First, there isn't yet a widely used equivalent to a miles per gallon (mpg) metric for homes for U.S. homes—meaning consumers don’t have easy access to data about a home’s performance or the full cost of homeownership. Also, home energy upgrades don’t have broad appeal in the way they are being marketed and delivered today. Energy upgrades also usually can’t be seen, so they don’t have the same visibility or curb appeal of, say, rooftop PV—although residential service providers have an opportunity to help homeowners better showcase these upgrades.
“Currently, U.S. real estate platforms offering energy scores represent a small fraction of the market,” said Rachel Gold of RMI’s Residential Energy+ team. “This shows great leadership by early movers, but also leaves a large market gap for a big player to step in and provide the home energy performance data that America’s 83 million homeowners need to make informed decisions and gain significant competitive advantage—as evidenced by the scale and positive outcomes achieved by REA.”
Industry support is also important in making home energy upgrades a “must have”
REA and Tendril point out that consumers in Australia were the driving force in the successful release of Energy Scores. But additional influences on consumer decisions can help homeowners channel heightened awareness into action.
In the U.S., realtors, contractors, and installers looking for a competitive edge can play an equally powerful role in promoting the benefits and transparency of home performance to influence a customer’s decision in the absence of a widespread energy score for homes, as detailed in RMI’s newly released Peer Diffusion report. One way this can be achieved—notes the report—is for service providers to communicate with homeowners that better-performing homes are simply better homes.
“A home energy score, while providing an at-a-glance rating for overall efficiency and carbon footprint, is also a description of the performance and comfort within a home. This comfort and performance comes from quality construction practices that reduce the inherent symptoms of shoddy construction, like air infiltration, noisy equipment, leaky ducts, cold floors, the list goes on,” said Steev Wilson, owner of Forum Phi Architecture, an award-winning firm based in Colorado. “I believe that as scores become more prevalent, they will not only be valued as a means to identify energy efficient buildings, but will become a measure of the quality of the product being purchased and gauge the expectation for the quality of life and health that product is associated with.”
Making Efficient Homes the Sought-After Standard
As leaders like REA, Tendril, and others offer new solutions that provide the transparency needed in the market to inform demand among homebuyers for greater energy performance—including the options available for energy upgrades—the scales will continue to tip in the direction of both improved supply of and demand for home energy upgrades as a means to boost property value, comfort, air quality, and monthly cost savings.
Australia lights the way for North American real estate businesses, which have yet to live up to the promise of sharing this critical information with consumers.
“It’s only a matter of time until smarter, more efficient homes are the sought-after standard because comfort and performance are marketable as earmarks of a luxury product,” said Wilson. “I look forward to homes having a metric for evaluating these qualities and giving them value in the marketplace.”
Meanwhile—homeowners take note. Home energy upgrades and whole home performance won’t be invisible for long.
Image courtesy of iStock.