April 3, 2013

The Greater Boston Real Estate Board (GBREB) and The Building Owners and Managers Association (BOMA) International recently announced the release of “An Economic Perspective on Building Labeling Policies,” a report co-authored by Harvard University Environmental Economist Robert N. Stavins that examines the extent to which mandatory building energy labeling results in reduced energy use. The research and the resulting report were sponsored by BOMA International and GBREB.

The project was prompted by increased interest in laws mandating energy scores and energy efficiency programs throughout the United States and in Massachusetts. It seeks to answer the question of the effectiveness of these programs.

The City of Boston is currently considering mandated reporting for office buildings, apartments and condominiums. On Thursday, Professor Stavins presented his findings in testimony before the Boston City Council.

Although BOMA and GBREB are committed to energy efficiency and many other measures intended to protect the environment, both organizations are opposed to policies that arbitrarily intervene with market forces, assign market value to buildings, stigmatize property or otherwise interfere with transactions.

According to Professor Stavins and his colleagues there is no credible evidence to date that a regulatory approach is effective in achieving these goals for which they are intended. The Report analyzes the effectiveness of mandatory energy labeling for commercial buildings in the U.S. The report finds:

  • Building labels could affect property values, with properties that receive a "green" score seeing appreciation in their market value and properties receiving a brown score experiencing depreciation.

  • Building labeling programs that are now in effect in select cities throughout the U.S. vary in the quality and usefulness of the information developed and the requirements and costs imposed on property owners. There is insufficient history, therefore, for any City to employ best practice in this area.

  • Building energy labels differ greatly from the energy labels currently placed on many consumer products such as refrigerators and automobiles. While product labels provide consumers with information on the energy savings from their product decisions, building labels provide no information on energy costs or savings. Moreover, they provide no information on how building owners can cost-effectively improve their building’s energy use. Building labels are also unique to each building, thus making them more costly to produce and more prone to error.

  • The premium associated with labels may “overvalue” the underlying energy savings, suggesting that other factors could be affecting market decisions.

  • If building scores are concentrated in particular neighborhoods, it could affect property values across neighborhoods. Likewise, building sectors may see overall appreciation or depreciation if scores tend to be high or low within individual sectors.

Click here for more information on the Boston Proposal