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Green Building News

Green Label Gives Texas Homes a Boost

A study of thousands of single-family houses shows that green certification is worth an average of $25,000 in resale value

Green means higher resale. A Texas study shows that green certification brought a 6% to 8% premium to the resale values of single-family homes.
Image Credit: McCombs School of Business

A new study examined 3,800 green-certified homes built in Texas between 2008 and 2016 and determined that green certification was worth a 6% boost in resale value. Certification under the Leadership in Energy and Environmental Design (LEED) program gave single-family houses in the Texas market an added 8% in value.

The University of Texas said in a news release that the study was conducted jointly by the McCombs School of Business at UT-Austin and the U.S. Green Building Council. The USGBC created and now administers the LEED rating system.

Greg Hallman, faculty director of the Real Estate Finance and Investment Center at the McCombs School and the lead author of the report, said, “The average new home in our Texas MLS data set sells for $311,000, so a 6- to 8-percent green premium represents a significant gain for homeowners, developers, and real estate agents and brokers.”

The report notes that the average value for a 1- to 2-year-old house was $307,000, so the 8% premium for a LEED certified house added $24,560 to its resale value. However, the report notes, “We caution [against] placing too much reliance on this LEED-only estimate as our regression sample for LEED-only contained only 139 LEED transactions.”

Still, the study could provide a marketing boost for the USGBC, which acknowledged in the preface to the report that Texas is one of the strongest housing markets in the country but the proportion of green-certified homes is still low.

“Studies conducted in other markets have been helpful in demonstrating a positive premium in sales price associated with LEED homes, but the applicability of such findings to Texas was unknown,” the report notes. Researchers relied on Texas MLS (multiple listing service) data for single-family homes for the years 2006 through 2016.

Researchers had access to sales records for about 231,000 houses. Green certification was more likely with newer homes. Of the 16,728 new homes, 1,540 carried some type of “green” certification (8.43%) while only 86, or 0.51% were LEED-certified. In addition to LEED certification, the green category included Energy Star and Austin Energy Green Building.

A 2012 study of 1.6 million single-family homes in California found that homes with green labels sold for an average of 9% more than comparable houses without the label.

One issue the study does not address is whether original construction costs for green or LEED certified houses were higher than non-certified houses, and if so by how much.


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