A new study finds that people who held mortgages on homes with Energy Star certifications were, on average, 32 percent less likely to default than those with mortgages on homes with no energy-efficiency improvements. Energy Star homes, which include newly built homes and renovated dwellings, can provide measurable savings of 15 percent or higher on utility bills compared with houses containing minimal energy improvements.
The study was conducted by the University of North Carolina (March 2013) and involved a major sampling of 71,000 home loans throughout the U.S. that originated 2002-2012. Researchers statistically factored out aspects beyond energy-efficiency savings that might cause any conspicuously different results by borrowers regarding their mortgages. The average sale price of all the homes in the study was approximately $220,000, eliminating the likelihood that the energy-efficient properties were high-end houses purchased by families who were less likely to default. To further equalize the sample, the study was controlled for house size; age of the house; neighborhood income levels; house values relative to the area median; local unemployment rates; borrowers’ credit scores; loan-to-value ratios; electricity costs and even local weather conditions.
So, with an unsteady economy and a home mortgage industry in distress, what explains the difference between the mortgages and utilities of energy efficient homes and those without that “green” touch?
In a Washington Post interview by Kenneth Harney, Cliff Majersik, executive director of the Institute for Market Transformation, the Washington think tank that sponsored the research, thinks it’s a logical outcome: “It stands to reason,” he says, “that energy-efficient homes should have a lower default rate because the owners of these homes save money on their utility bills, and they can put that money toward their mortgage payments.”
Robert Tomczak, president of Hi-Tech Building systems, echoes the sentiment: “For more than 25 years, customers have sought our ThermaSteel materials. ThermaSteel materials are not only eco-friendly but wallet friendly also: they help reduce the operating costs of a home by lowering energy needs.”
Hi-Tech is an authorized ThermaSteel distributor of steel insulated panel systems (SSIPs). The SSIPs are verified building materials that provide strength six times that of wood and can withstand extreme weather, winds, mold, mildew, off-gassing and insects.
Now, the authors and sponsors of the study hope the study results will get the attention of lenders so that they start factoring energy efficiency into their underwriting. They’re hoping by meeting with officials from the mortgage industry, Congress and government agencies, that eventually loan applicants who demonstrate significant energy-bill savings can receive a break on upfront fees or debt-to-income ratios, or lower down payments, perhaps even lower loan rates.