Homes are the second biggest source of carbon emissions in the City of St. Louis, according to an energy audit from 2018. (The biggest source: commercial buildings.) If you want to shrink those emissions, a logical start would be to make homes more energy efficient. Forcing homeowners to make upgrades is…one way. A far less intrusive way would be to require that they simply furnish information—and then market forces, the theory goes, would take care of the rest.
This mechanism already exists in other contexts. Say you’re browsing at a big-box store for a new TV or fridge. You spy one that you like. You check out its yellow “Energy Guide” label. The label estimates how much extra you’d have to pay in yearly electricity costs to run the machine, and it enables you to compare different models on that basis. The manufacturers know that you can compare models, so they compete to be more efficient.
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The yellow label must be there, by law, on that TV or fridge. Why don’t we require a similar label on the biggest purchase that most people ever make: a home?
Some cities do. In policy circles, it’s called “residential energy disclosure.” It has proliferated in Europe and the U.S. over the past decade or so. The details vary from place to place, but the general idea is this: When people who try to sell or rent out a home are required to gauge and reveal the property’s energy efficiency, many of those owners will freely choose to make upgrades—for example, by investing in the windows, appliances, attic insulation, and HVAC system. It’s supposed to be a double win: better transparency in the marketplace on one hand and a reduced carbon footprint for the community on the other.
The best evidence I’ve seen that such a policy actually works comes out of Austin, Texas. That city’s disclosure ordinance came into effect in 2009. It mandates that home sellers get an energy-efficiency audit of their homes and then hand out a standardized report of that audit to any potential buyers. Last year, the American Economic Journal published a study by a team of researchers who’d looked at years of resulting data. They found that, as was hoped, Austin’s policy “leads to quality-improving residential investments in energy-saving technologies.” Plus, when looking inside and outside Austin in the periods both before and during the policy, they detected a correlation in the city between (a) home sale prices and (b) the energy efficiency of those homes. Which meant, to the researchers, that “buyers pay attention to and value that [efficiency] information when it is made available.”
Now, if policymakers in the city or county want to design something like this, they’ll have a lot of variables to think about. For example, in Austin, an audit ain’t free: It costs $200–$300 on average. But sellers there are given the option to instead show that they participated in programs that offer free weatherization or rebates for efficiency upgrades. Another variable is how to handle noncompliance. In Portland, where sellers are required to post a home energy score in real-estate listings, a researcher found that when the city relaxed enforcement during the pandemic, “strategic behavior [was] exacerbated,” meaning sellers were less likely to publish if their homes were inefficient.
Perhaps the biggest fork in the road would be deciding whether to extend the policy to the rental market. That would complexify things legislatively: More stakeholders means more opportunity for pushback. Yet there are arguments in favor of trying it. First, fairness and transparency. The Midwest has frigid winters and infernal summers; an inefficient rental unit can lead to eye-popping utility costs that a renter didn’t expect when signing the lease. (Tim O’Dea, executive director of the nonprofit EnergyCare, recently told me, “We have clients who pay more in utilities than they do in rent or mortgage.”) Furthermore, rental-property owners and landlords “don’t have an incentive to make the upgrades,” says Heather Navarro, a former alderwoman and now the director of the Midwest Climate Collaborative at Washington University. But if the owners/landlords had to disclose a unit’s inefficiency, she says, they’d attract fewer prospective renters and would feel pressure to make tweaks.
On the sales side, a disclosure policy might draw resistance from realtors. That’s what happened in Minneapolis, says Jeremy Schroeder, the former City Council member who co-authored a disclosure ordinance that passed in 2019. “They were really concerned it would affect their ability to sell homes,” he tells me. “But once they were able to take a deep breath—and we said, ‘We’re serious about making this work for you’—then, to their credit, they started working for a solution.” In the end, Schroeder says, that legislation streamlined an energy-efficiency inspection with the pre-sale inspections that were already happening anyway.
But putting aside societal benefits, advocates argue that a disclosure policy would help burnish the region’s brand for a group that will only grow in the years to come: climate migrants.
“As more people are moving inland because of climate change, they’re looking at what kind of communities they want to live in,” Navarro said. “And to be able to say that St. Louis’ housing stock is efficient is a great way for us to set ourselves apart. This could make us ready for a growing population that we desperately need.”
Note: The City of St. Louis already has an energy disclosure policy aimed at commercial buildings called the Building Energy Performance Standards (BEPS) ordinance. (Because it’s fairly new, I’m planning to wait for data to come in and then write about it in a future edition of the Solutions newsletter.)
