Lower electricity bills are as attractive to home buyers as other features of a home. We have known this for years; the first empirical study was undertaken in 2011 by national laboratory Berkeley Lab, which conducts scientific research on behalf of the U.S. Department of Energy.
"We find compelling evidence that solar PV systems in California have boosted home sales prices," said Ben Hoen, the lead author of the study. "These average sales price premiums appear to be comparable with the average investment that homeowners have made to install PV systems in California, and of course homeowners also benefit from energy bill savings after PV system installation and prior to home sale.” The first study of its kind, the findings were reported widely by such news sites as CBS News and CNET.Get A Free Solar Quote Now
The verified boost in home value is great enough to offset the installation cost of the system.
"Roughly a 3.5% Premium"
Those conclusions were corroborated by a contemporaneous analysis by the independent National Bureau of Economic Research (NBER). "Using both hedonics and a repeat sales index approach we find that solar panels are capitalized at roughly a 3.5% premium," the researchers wrote.
More data in.
More recently, Berkeley Lab continued to crunch the numbers and add to our knowledge of the relationship between solar energy systems and home values. In 2017, the lab published an in-depth study of 22,822 home sales, 3,951 of which had a solar photovoltaic (PV) system. This time the scope was not a single state, but eight states.
"We find home buyers are consistently willing to pay PV home premiums across various states, housing and PV markets, and home types; average premiums equate to approximately $4/W or $15,000 for an average-sized 3.6-kW PV system," the researchers wrote. The scope of the study was host-owned PV systems across eight states and therefore excluded systems owned by a third party.
Property tax exemptions enjoyed by solar panel owners in many states mean that even though the value of the home increases, property tax does not. See if your state has the exemption here.
An Appraiser's Perspective
According to the National Appraisers Institute, the value of a home increases 20 times the annual savings in electricity. Let's say that a solar panel system saves you $1,000 a year on electricity. A good estimate of the corresponding bump in home value would be $20,000.
Expert real estate appraiser Sandra Adomatis has carved a niche for herself in the complicated realm of assessing and communicating the value of green energy systems to prospective home buyers. She says that the following characteristics of the PV system are crucial in appraising a home's value.
- Ownership status. "If the system is leased, a power purchase agreement, or owned but financed with a UCC filing, the system is personal property and not a fixture or part of the real estate."
- Size of system. "The size of each array or grouping of panels must be identified. Simply counting the panels will not give the system size because panels vary in wattage."
- Age of system. "The age of the system is important because as the panels age, the energy production will decrease each year. The reduction is small, but it will affect the energy production over the life of the system."
Adomatis describes these factors and more in her article An Overview of Solar Photovoltaic System Characteristics.
One of the key factors she mentions, you'll recall, is age. The age of the system was found to be an important factor in the aforementioned Berkeley Lab study too. Researchers tracked a drop-off in the home value premium once a PV system had aged 10 years. It comes as no surprise that home buyers are willing to pay more for newer amenities: a newer roof, a newer kitchen, a newer solar PV system.
“Solar homes move faster, sell for higher prices than non-solar homes.”
As home solar energy systems continue to appear on more and more rooftops in neighborhoods across the country, general awareness of their benefits will also grow. Buyers from all walks of life are increasingly savvy on topics of green, renewable energy. After all, it doesn't take a rocket scientist to appreciate lower utility bills.
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