Power Savers – Energy Efficiency in the Residential Sector

Reprinted from REALTOR® Magazine January 2010 with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2010. All rights reserved.  from my February Newsletter:

According to the U.S. Department of Energy’s 2008 Annual Energy Review, the residential real estate sector accounts for roughly a fifth (22 percent) of all energy consumption in the country. This considerable share of all energy consumption has led lawmakers to propose policies to improve energy efficiency in homes. At the same time, homeowners and home buyers are showing a greater preference towards energy efficiency for reasons varying from a desire to become more environmentally conscientious to cutting down on their monthly energy bills. When formulating policy, however, there are several factors to consider.

Older vs. Newer Homes

Older homes consume more energy than newer homes. According to the Department of Energy’s 2005 Residential Energy Consumption Survey, homes constructed before 1970 consume roughly one and a half times what newer homes consume, on a per square foot basis. It should be noted that the average size of homes has been steadily increasing since the 1970s, though older homes still in existence tend to of similar size compared to recently built homes. However, recently there has been a decline in the median size of homes. This is likely due to the slowing of the housing market over the past couple of years as well as rising energy costs.

Also, according to the 2007 American Housing Survey, older homeowners tend to occupy a larger share of older homes. This is an important point as it may have ramifications in terms of public policy. Government restrictions or mandates that require energy audits or upgrades may place an excessive burden on older home owners who often are retirees with less flexible incomes or restricted in their geographic mobility.

Cost Variations

Regionally, great variations persist in terms of energy consumption and costs. Some of this is attributable to climate variation throughout the country. The Pacific and South Atlantic regions are generally warmer in the winter; in the case of the Pacific the weather is also milder in the summer than in areas like New England or the Middle Atlantic. This variation in climate means that certain regions have lower demand for heating or cooling.

Consequently, energy costs for the typical household can vary widely, according to the DOE’s 2005 Residential Energy Consumption Survey. In the Northeast, the typical yearly energy bill was $2,319, compared to $1,491 in the West. Federal legislation regarding residential energy policy should take into account these regional variations when it comes to energy costs.

Similarly, energy consumption varies by state. For instance, the typical yearly energy bill for a home in New York was $2,409 while in California the typical bill was $1,396. A major reason for the difference is heating costs, which account for almost two–fifths of energy bills in the Northeast and Midwest, compared to approximately one–fifth in the South and the West