Unintended Consequences

By: Victor Normand

Alternative_EnergiesRecently the Massachusetts legislature passed and the Governor signed a new energy bill H4568, “An Act to promote energy diversity.” Most of the bill had to do with expanding the Commonwealth’s efforts to encourage alternative energy sources by using offshore wind farms and hydropower to generate electricity.

The bill keeps Massachusetts ahead of most other states in the areas of energy conservation and the use of alternative/clean energy sources. It is innovative in its advocacy of off shore wind power generation, challenging in its intent to double the amount of electric power generated by clean sources, and most importantly, it is proactive in its scope as it anticipates the not-to-distant future when local utilities will no longer have the use of nuclear power plants.

The Great and General court is to be commended for bringing forth such an important piece of legislation, hailed by most conservation and clean energy organizations as a very good bill. But not everyone is pleased with the law, most notably, the Mass Energy Consumer Alliance and many State Senators, including Senate President Stan Rosenberg who favored a more expansive bill.

One of the sections that passed in the Senate and was stricken from the legislation by the conference committee and not included in the final House version of the bill would have required that every home sold in the Commonwealth have an energy rating before it could be listed for sale and an energy audit before closing. This idea, similar in principal to gas mileage ratings on automobiles, has benefit for consumers, but major pitfalls for most homeowners.

Last year nearly 50,000 homes were sold in Massachusetts. Newer homes in many communities did come with a very sophisticated energy rating, called a HERS rating (Home Energy Rating System), but that was only 6% of the market. Even though implementation of the bill could have taken years, the broad scope of the rating requirement would be overwhelming.

Implementing new laws and regulations is nothing new to the real estate industry, lead paint certifications, home inspection notifications and closing disclosures for example. It is the significant unintended consequence such a rating and audit requirement would have on owners of older homes; homes more often concentrated in lower income, urban neighborhoods that would be problematic. Especially since Massachusetts has the second oldest housing stock in the country with a median age of 54 years.

There would be a cost associated with both the energy rating and the energy audit, and a time factor to get them accomplished to be considered. The burden to implement this would fall on the home seller, who would be under no obligation to make energy improvements.  But as a practical matter, home buyers would be looking to sellers to make identified improvements or in the alternative, to discount the sale price. Even home buyers who are in the market for an older home who are prepared to live with the added cost and discomfort of a less energy efficient house would be well advised to take advantage of the situation in preparation for the day when they will find themselves in the home sellers shoes.

The Massachusetts Association of Realtors lobbied to get the energy rating section of the bill removed. Their economic and social arguments were effective this time, but the advocates will be back next year. So, it is not enough to rely on lobbying efforts alone. Those of us in the real estate business need to continue to take energy conservation seriously by making sure potential home sellers include energy saving efforts on the list of important worthwhile home improvements. The unanimous vote of the State Senate in favor of this measure in the just ended legislative session is not insignificant.