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Minneapolis Energy Disclosure Ordinance [2019]

This Friday, February 15, 2019 the Minneapolis City Council approves new rules requiring energy disclosure. 

 

If you are a resident of the city of Minneapolis then this is important for you to know. It should be important for you even if you are not a Minneapolis resident, this is something you need to know about because you may purchase a house in Minneapolis at some point. 

The Minneapolis City Council on Friday approved three measures designed to allow homebuyers and renters to learn energy-related information about a home or apartment in the city before they purchase a residence or sign a rental agreement.

According to a release, one new measure will extend the existing commercial benchmarking ordinance to cover residential buildings of 50,000 square feet or larger, and require an energy evaluation of properties with high savings potential. It will be phased in based on building size, with the first compliance date being June 1 of this year for buildings 100,000 square feet or larger. Another – the Time of Rent Energy Disclosure – requires residential building owners to disclose the average energy cost per square foot at the time of rent. That will go into effect in 2021.

The Time of Sale Energy Disclosure requires energy-efficient characteristics be included in the already-required Truth in Sale of Housing report when selling a home. It covers information on the home’s insulation, heating system and windows. That policy will go into effect next year.  (KTSP 5)

The City Council is expected to pass an ordinance giving homebuyers and renters access to more energy information.

 

 Minneapolis is expected to adopt a residential energy disclosure ordinance Friday that would offer homeowners and renters in the city more information about energy costs before they buy a home or sign a lease.

The ordinance would expand an existing commercial building benchmarking program to include larger multi-family buildings and also add new requirements to presale inspection reports to cover things like windows, insulation and heating systems. Renters would get information on expected monthly energy costs and buyers would receive an energy score and list of suggested upgrades.

“These policies represent a significant step toward our climate action and housing affordability goals,” council member Jeremy Schroeder, one of the ordinance’s authors, wrote in a statement.

If the measure passes as expected, Minneapolis would join a growing list of American cities with energy disclosure ordinances and be among a small handful extending the rules to cover residential buildings and single-family homes.

Minneapolis has a goal of reducing greenhouse gas emissions 80 percent by 2050 compared to 2006 levels. Homes and apartments represent about a fifth of citywide emissions.

The ordinance up for a vote Friday at the City Council would extend an existing commercial building benchmarking program to include about 440 multi-family housing buildings more than 50,000 square feet. Owners of poorly performing buildings receive information on suggested improvements and programs available to help with upgrades.

Building benchmarking scores would be posted to a public website. So would data from utilities on per-square-foot energy use for smaller rental properties. And renters, before signing a lease, would receive a disclosure that contains average monthly utility costs for the property, allowing them to compare costs.

“We’re hoping renters become savvier and landlords say ‘wow, I could get renters more easily if my building was more energy-efficient,” said council member Cam Gordon, who worked with Schroeder on the proposed ordinance. “This may push them in the direction of getting them help.”

For homebuyers, the ordinance would expand existing truth-in-housing inspections to include information on windows, insulation, and heating systems. (An earlier version of the ordinance would have required a blower door test, but the requirement was dropped due to cost concerns.) Chris Duffrin, president of the Center for Energy and Environment, said the value of the energy disclosure ordinance will be in presenting homebuyers with an understandable and comprehensive list of potential retrofits, as well as a rating based on a 1-to-100 scale.

Inspectors “are already collecting a lot of this data but it’s just not presented to the homeowner in a meaningful way,” he said. “The reports will give them actionable information they can make on what to do with their home.”

‘These policies represent a significant step toward our climate action and housing affordability goals.’

The Center for Energy and Environment, which helped craft the ordinance, operates an inspection service called Home Energy Squad. The staff has done both blower door and insulation checks on thousands of homes, Duffrin said, and has a keen understanding of the energy retrofit market.

Part of the push comes from an acknowledgment that an aging housing stock and the difficulty of outreach to homeowners and renters have stymied the aggressive goals of the city’s Climate Action Plan, where the idea of a residential disclosure ordinance was first proposed.

“The reality is we have to hit on everything we can to reduce carbon,” said Kim Havey, the city’s sustainability manager.  Benchmarking will allow people to make more informed decisions by providing transparency and disclosure, he said. The sale or purchase of a home also is a time when many people decide to invest in energy improvements, Havey added.

At least 70 percent of Minneapolis homes lack adequate insulation. A utility-sponsored energy efficiency program reaches 600 to 1,000 homes a year in a city with more than 76,000 single-family homes.

The sale of a home offers a rare chance for the city to interact with buyers and sellers on energy issues. About 7,000 homes are sold each year in Minneapolis, offering an opportunity to at least offer information on where a seller or buyer could invest to save on energy costs, Havey noted. Plenty of opportunities for retrofits exist because 90 percent of the homes were built before the city adopted an energy code in 1980.

Renters and buyers generally have little idea of energy costs. “The majority of people move over the summer months and may not have a good idea of energy use in a home or an apartment,” Havey said. “They may not have much idea now of how much utilities costs. We want to make sure people are aware of that. We’re hoping with some behavior nudging owners will make their apartments and homes more attractive and valuable to buyers and renters.”

Owners who have energy-efficient homes are likely to fetch premium prices, Duffrin said, but if they don’t, they are unlikely to make investments before they sell. “I doubt it will spur more action before sale,” Duffrin said. “I think it will spur action after sale, and that has been shown in other cities.”

Critics charge that Minneapolis will be the only city in the metro area to have an energy disclosure ordinance, but Duffrin said that could be an advantage: Homebuyers will have a better understanding of how homes perform in Minneapolis than they will of houses available in adjacent suburbs.

The Minneapolis Area Association of Realtors offered a set of different solutions to the problem of reaching more homes with energy efficiency solutions. Eric Myers, director of government affairs, said the city’s truth-in-housing ordinance is no longer effective or needed because all homes for sale already have appraisals that come with inspections due to financing requirements or buyers’ desire for an independent analysis.

Although the Realtors agree with the city’s desire to improve residential energy efficiency, the goal of retrofitting 75 percent of homes by 2025 cannot be achieved through the disclosure ordinance, Myers said. Only 6 to 8 percent of homes will be touched by the inspection, he added.

Instead, the Realtors suggest giving energy improvement credits to homes in reports commonly used by homebuyers to compare homes, such as the competitive market analyses and appraisals. Multiple listing services should also be broadened to include “green energy fields,” Myers said.

Those changes will have to come from the real estate community, he said, and those new data pools may emerge in the future. Although the Realtors disagree with the ordinance, the organization’s members understand that proposals in other cities are costlier than what has been proposed for Minneapolis, he added.

Elements of the ordinance will be rolled out gradually, with full adoption expected by 2021. The City Council is expected to vote on the measure at a meeting Friday starting at 9:30 a.m     (EnergyNews)

 

Here is a little more history and background information on the ordinance from Minneapolis Area Realtors® aka MAR

 

The Minneapolis City Council has directed city staff to craft an ordinance that would add Residential Energy Scoring Disclosure requirements to the Truth-In-Sale of Housing. We anticipate that draft language will surface at the Public Health, Environment, Civil Rights and Engagement Committee on January 7, 2019 meeting and may be up for a public hearing from that same committee at its January 28, 2019 meeting. The proposal’s chief authors are Jeremey Schroeder, Ward 11 and Cam Gordon, Ward 2, who is also Chair of Housing Policy and Development Committee. The ordinance is also supported by Center for Energy and Environment, a Minneapolis based non-profit that operates research, programs, and policy work in the clean energy sector. Authors state the purpose of the ordinance is to “address two ongoing and worsening crises: a local housing affordability crisis and global climate crisis”.

BACKGROUND

So, what would the additional inspection items look at? While the ordinance has not been developed yet and details remain unclear. We understand that the likely additional inspections items would include attic insulation, heating system age and venting type, window types, wall insulation inspections with a 2” inspection drill hole, and a blower door test. After inspecting these items, a home would be given an asset rating on a 100-point scale. This information would be required to be present just like the current TISH, there would be no required repairs. The cost of the TISH, now $275 would also likely increase by as much as $200 or more.

Minneapolis AREA REALTORS® (MAR) has been engaged on this issue from the beginning. Attending and hosting early stakeholder meetings. MAR submitted formal comments to all members of the Minneapolis City Council, Mayor’s Office, and staff on the issue on November 27, 2018 and listed six concerns and six alternatives to consider (see attached letter).

MAR’S CONCERNS:

  1. Presents Barriers to Homeownership—Especially First Time Buyers
  2. Increases Housing Costs
  3. Lengthens Inspection Times
  4. Offers Minimal Range of Effectiveness by focusing on only ‘For Sale’ Homes
  5. Creates Competitive Disadvantage for Minneapolis Homes
  6. Expands Original Scope of TISH beyond Health & Safety

MAR’S RECOMMENDED ALTERNATIVES:

  1. Increased Ease of Utility Bill Disclosure
  2. Voluntary Home Energy Audit Programs (i.e. Home Energy Squad)
  3. Low Interest Fix-Up Fund Programs with Interest Rate Reductions for Efficiency
  4. Leveraging Multiple Listing Service Data (i.e. Adding New Fields)
  5. Better Representation of Existing Energy Efficiency Systems in Competitive Market Analysis “CMAs”
  6. Strengthened Appraisal Valuations where Energy Efficiency exists

WHAT ACTION HAS TAKEN PLACE?

Minneapolis Area REALTORS® received a response letter signed by Council members Schroeder and Gordon on December 4. The letter defended the need to enact proposed ordinance citing affordable housing and climate change as crises. Supporting arguments on enacting Energy Scoring at TISH this list.

  1. Energy Disclosure will Increase Housing Affordability
  2. Faster progress on Reducing Carbon Emissions is needed
  3. Consumer Protection and Long-Term Costs

Council members Schroeder and Gordon agreed on a number of our assertions but view them differently. For example, they agree that only a limited number of homes are for sale in a given year but then respond that only 850-900 Home Energy Squad visits are occurring now. So, when they see 4,000 homes sold per year that four times as many possible inspections. They also agree the proposed ordinance increases transaction costs, but they also believe the long-term benefits out weight the one-time cost, paid by the seller.

Council members Schroeder and Gordon fundamentally disagree with the point about putting Minneapolis Homes at a Competitive Disadvantage. “We disagree that this level of consumer protection will create a competitive disadvantage for Minneapolis homes. In fact, we believe that over time, homebuyers will be drawn to Minneapolis homes specifically because of this level of transparency,” said Schroeder and Gordon.

Council members Schroeder and Gordon did share areas where they identified that our interest align: “We will continue to advocate for improving the TISH inspection process and making it more relevant by adding the proposed energy report, as one of many strategies to reduce carbon emissions across all building types and industries. We look forward to working with you on issues where our interests align, such as improving Realtor and appraiser education about energy efficiency, incorporating energy information in the MLS, and more.”

“It’s encouraging that Council members Schroeder and Gordon are engaging with REALTORS® on this issue. Especially with regard to the issues where we do align,” said Eric Myers, Government Affairs Director, Minneapolis Area REALTORS®. “Overall, we do agree with the premise that homes should be more energy efficient we just do not believe it will be effective to focus on only ‘for sale properties’ since less than 4% of homes are for sale in any given year,” said Myers.

If you have any questions feel comfortable to contact me, I’d be happy to talk and help!  You can call or text 612-345-9070 or fill out the quick form below 🙂

Sources:

  • https://www.mplsrealtor.com
  • https://energynews.us/2019/02/14/midwest/minneapolis-looks-to-residential-energy-disclosure-ordinance-to-cut-emissions/
  • https://kstp.com/news/minneapolis-city-council-approves-rules-requiring-energy-disclosure/5247945/
  • Photo: https://unsplash.com/@gregoryallen
  • Photo by Daniel McCullough
Summary
Event
Energy Disclosure Ordinance
Location
Minneapolis,

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