Valuing Passive Houses fairly

17 June 2020 by Jason Quinn

How much extra is a certified Passive House worth? That is a very good question. I have some answers, but probably not the one answer you were looking for.

I’ve been bitter for years about professional valuers not assigning value to Passive House certification. I think the industry is out of touch with changing attitudes. They, on the other hand, argue their valuations are based on market prices, so it comes back to what buyers value and what features make them dig deeper into their pockets.

The problem is almost none of New Zealand’s Passive Houses have come onto the market. I know in one case, the couple that bought a former PH show-home liked the look of it and had no idea they were buying a Passive House or even what one was. I also know that they very well understand the benefits of living in one now and value it very much.

So I was interested but resigned when a Passive House architect wanting to build his own home came to talk to me. He needs to borrow to finance the construction. We were both worried his valuer wouldn’t value all the extra features of a certified Passive House. That’s certainly how the initial conversations were heading.

And then? The final valuation got bumped up a whopping 12% on the basis of its non-standard features. The valuer was coy and not all of this is due to the PH certification, but it’s implied that it was a large factor.

This is only one example and it’s located on the outskirts of Auckland and Auckland is its own real estate market. But, it may yet serve as a data point for valuers in other parts of the country. At any rate, I believe it is only a matter of time before high-performance homes backed up by independent certification sell at a reliable premium. We will follow the trend already established overseas.

I armed the architect with the results of some solid US studies that investigated the value added by other certifications that focus on environmentally-friendly features (which typically include better insulation and energy efficiency, among many other things). He helpfully provided all this information to his valuer. Find links below.

But you have to ask a bigger question: worth more to whom? It was worth a lot to designer and homeowner Jessica Eyres, who we caught up with over the level 4 lockdown. She and her family had not long moved into the certified Passive House she designed and her husband built. It was cold already in March in Wanaka and her relief about going into winter knowing their home would continue to be warm and dry was palpable.

How much dollar value do you put on your little kid’s asthma going into remission? How much do you value not having to wipe condensation from windows every morning in winter—and scrub mould off wall linings? How much do you value getting out of bed into a room still as comfortably warm as it was the night before? Or not having to trek to the woodshed in the rain so you can get the fire started?

And if we are as miserably status conscious as real estate marketing and reality TV programmes make out we are—I don’t believe it myself—what value do you put on your friends’ envy when they visit and can’t believe there’s no heater running in your beautiful warm, dry house?

Some things can be readily monetised. A certified Passive House will use 90% less energy for heating and cooling compared to a Code-minimum build. Take as an example, a 150 m2 house that uses electric heating. A Passive House would cost about $250 a year to heat compared to a Code-minimum house that would cost $2200: that’s less than 12%*. Over 10 years, that represents a cost saving of about $19,500. By way of comparison, $250 is about the annual running cost of a beer fridge in the garage.

Shall we talk about the reduced carbon emissions as well?

The general public is a bit obsessed with how much extra a Passive House will cost to build. They just can’t get their head around just how fast the payback period is (as well as the extent of the non-monetary benefits).

The following information was provided to the valuer:

Green Homes Sales Prices in Northern California – An appraiser-led study that analyzes the price premium of green home features and explores barriers to mainstreaming green real estate

Sandra Adomatis, SRA, LEED Green Associate, Adomatis Appraisal Service, 2018

“Sandra K. Adomatis is a real estate appraiser, instructor, author and nationally recognised expert on the valuation of green and high-performing homes. The study, Green Home Sales Prices in Northern California, is the first appraiser-driven study of its kind in California, and uses a rigorous paired sales analysis.”

Results: an average 2.19% increase across 1,386 GreenPoint Rated and LEED-labeled homes in the Bay Area.


The capitalization of green labels in the California housing market

Matthew E. Kahn and Nils Ko, Regional Science and Urban Economics, 2013

“We conduct a hedonic pricing analysis of all single-family home sales in California over the time period 2007 to 2012, and find that homes labeled with a green label transact at a small premium relative to otherwise comparable, non-labeled homes.”

Result: found roughly 2-4% increase with third party green labeling


What is Green Worth?: Unveiling High-Performance Home Premiums in Washington, D.C.

Sandra Adomatis, 2015

Used comparable sales methods via appraiser.

Results: “High-performance homes marketed with green features (such as a solar photovoltaic array or LEED certification) sell for a mean premium of 3.46% compared to homes without green features.”


The Value of LEED Homes in the Texas Real Estate Market: A Statistical Analysis of Resale Premiums for Green Certification

Greg Hallman, 2017

Uses a regression methodology similar to Kahn and Kok (2012).

Results: “indicate a statistically significant (p < 1%) price premium of roughly 6%”.


*Of course there are a number of assumptions. I used $0.33c/kWh to calculate costs and assumed the use of a heat pump for space heating. Many people living in a Code-minimum house would use less heat and be uncomfortable some or all of the time. The costs skyrocket if electric resistance heating were used, although the percentage saved remains the same.

—Jason Quinn
—revised 19 June 2020