Report: California homes that meet environmental standards sell for 9 percent more

According to a new report conducted by researchers at University of California, Berkeley, and University of California, Los Angeles, California homes with "green labels" are selling at higher prices than homes that don't. Researchers conducted an economic analysis of 1.6 million homes built and sold in the past five years, and studied homes that were given green label certifications such as the U.S. Green Building Council's LEED designation, the ENERGY STAR seal and those that were GreenPoint Rated. The report found that green label homes sell for 9 percent more than homes lacking such distinctions of energy efficiency.

The study is the first to provide statistical evidence that a green label on a single-family home in California provides a market premium. Because real estate prices depend on many factors, the study used important variables that impact home values including location, size, age and desirable perks - such as swimming pools, enviable views and air conditioning. The added value of a green label home is significantly greater than both the approximate cost of adding energy efficient home improvements and the savings on utilities provided by those improvements. Efficient homes also offer intangible benefits such as better insulation, reduced draft and advanced ventilation systems, which may be additional incentives for consumers to purchase green homes for comfort benefits.

The report concluded that the resale premium associated with green labels varies from one California region to another. Homeowners in areas with hotter climates are willing to pay more for homes with energy efficient features due to the higher average costs of keeping a home cool. As a result, real estate in Los Angeles that features energy efficient improvements is valued at a premium.

Increased awareness of the "going green" ideology is another reason for the increased value of green homes, the report stated. The study found that consumers in neighborhoods with a high concentration of green homes may be willing to pay more to live there, as it is typically found that environmentalists often prefer to live by like-minded neighbors. However, consumers may be less likely to pay for green features as they become a more commonly available commodity.