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A bigger mortgage footprint for lower carbon footprint
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LA Times reporter and real estate expert Kenneth R. Harney reports that HUD Secretary Shaun Donovan is bullish on the idea of calculating the increased energy efficiency savings of a home into a homebuyer’s potentially higher mortgage amount.
Buying a more energy efficient home, he says, is a win-win-win proposition that encourages retrofits to existing homes, saves homeowners money, helps green-up the environment and provides even more incentives to consumers purchasing new construction. Energy saving mortgages are not a new concept, but in the past they have been poorly marketed, making them a little known-about entity.
Harney uses the following scenario to illustrate how this would work: “Picture this: You're shopping for a larger home, dropping by open houses on a weekend. Each house you visit has an easy-to-understand disclosure about something that's typically unknown today -- its energy-guzzling costs per year.”
Donovan, Obama’s top housing official, is a big believer in disclosure – reasoning that consumers deserve more information on the energy efficiency of the houses they buy, both resale and newly built. This translates into the idea that lenders should be able to offer lower rates or better terms to encourage purchases and retrofits that save energy.
"When you buy a car," he said, "you know very clearly what the energy efficiency of that is because there's a number on the window. It says: Here's the gas mileage. We don't know that for housing."
Donovan is a Harvard-trained architect who ran New York City's Department of Housing Preservation and Development for four years before coming to HUD. According to Harney, his agency was in the early stages of discussions with federal energy officials to develop ‘a relatively simple scoring system for housing that would allow you to understand what you're buying and at the same time allow lenders to factor that into their mortgage. Ultimately, if your energy bills are going to be lower, there ought to be some [mortgage] benefits to that.’
It’s a staggering statistic that the average American family spends over 50% of their income on a combination of housing and transportation. Going one further, Donovan also asks why lenders don’t factor in a homeowner’s commute as well. In most areas the most affordably priced housing are in the suburbs, from which there exists little or no public transportation. The move to outlying areas has traditionally been the trade off many consumers will make to have more room for their families while keeping their mortgage payments lower. But if prices are the kicker, then why not incentivize those people who purchase homes closer to work centers by adding the transportation costs they save into a higher mortgage amount as well?
Donovan believes that higher loan amounts for buyers to make energy-conserving improvements as well as lower mortgage rates for energy-efficient homes can be very powerful tools in residential energy conservation.
A great place to start, according to Donovan, would be with the booming Federal Housing Administration insurance program.
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