The Impact of Green Certifications on Rental Value

Are you considering obtaining green certification for your rental property? It’s becoming increasingly popular to focus on energy efficiency and green building rules these days, as our impact on the environment is of critical importance. While having a green certification makes sense for personal and environmental health reasons, it’s crucial to consider the financial implications as well. How does having a green certification affect the rental value of your property?

What Are Green Certifications?

Green certifications are an indicator that a property meets a certain set of green building standards. This designation can be received from a variety of sources, including governments and non-profits that certify green buildings. Common certifications are LEED (Leadership in Energy and Environmental Design) from the USGBC (U.S. Green Building Council), the Energy Star designation from the EPA (Environmental Protection Agency), and the Living Building Challenge from the International Living Future Institute.

What Makes Properties Green?

In order to be considered green, properties have to meet certain criteria. These include the following:

• Energy efficiency
• Greater use of renewable energy sources
• Improved water use efficiency
• Incorporation of environmentally friendly building materials
• Better indoor air quality and ventilation

Advantages of Having a Green Certification

Not only do green certifications make personal and environmental sense, they can also provide a rental property with some significant financial benefits. Some of the advantages of having a green certification include:

• Increased demand. When tenants are presented with the option to rent a unit that meets green standards, they are often more likely to choose it, knowing that it’s better for the environment.
• Curb appeal. People are generally more attracted to properties that have a green certification, considering it to be more aesthetically pleasing.
• Decreased utility costs. Since green properties are designed to be more energy efficient, their utility costs are often lower.
• Tax incentives. In some cases, landlords can receive tax breaks for having green certifications.

The Bottom Line: How Does It Affect Rental Value?

When it comes to a property’s rental value, having a green certification can be a major driving factor. Research shows that the rental value of a green building is often higher than that of a non-green building, due to its increased demand, curb appeal, and other advantages.

The Price Is Right

Just how much of a difference does having a green certification make? According to a recent study by the real estate consulting firm Jones Lang LaSalle, green certified buildings have commanded rents that were 7 to 19 percent higher per square foot than non-green certified buildings.

Location, Location, Location

It should be noted that the impact of having a green certification on rental values can vary based on location. In some less densely populated areas, tenants may not be as aware of the benefits of green buildings, thus decreasing the financial incentive for landlords. On the other hand, in highly populated cities, having a green certification can be a huge draw for tenants, thus driving up the rental price.

The Growing Trend

The trend of green certification for rental properties is only going to become more popular as time goes on. With climate change becoming an increasingly larger concern, tenants are going to be increasingly likely to choose rental properties with green certifications. For landlords, this means that the advantages of having a green certification are sure to only increase over time.

Conclusion

The answer is clear: obtaining green certification for a rental property is a smart move. Not only is it good for the environment, but it can also have a huge impact on a property’s rental value. The bottom line is that green certifications make sense both personally and financially, and it looks like they are here to stay.

What are common green certifications for rental properties?

1. LEED (Leadership in Energy and Environmental Design): LEED certification evaluates rental homes on sustainability features such as energy efficiency, water conservation, materials selection and indoor environmental quality.

2. ENERGY STAR: ENERGY STAR certifies rental properties as being energy-efficient, with 15-30% more efficient than standard homes.

3. Green Globes: This certification assesses rental properties for their environmental benefits such as water and energy efficiency, building materials, indoor environmental quality, site selection and management of emissions and waste.

4. National Green Building Standard (NGBS): NGBS evaluates rental properties on a range of criteria such as resource efficiency, site design, heating and cooling systems, insulation, green materials, energy efficiency, water conservation, and indoor air quality.

5. EcoBroker: The EcoBroker designation is a specialty program that evaluates rental properties for their efficiency and environmental performance.

6. BREEAM (Building Research Establishment Environmental Assessment Method): BREEAM evaluates rental homes on sustainability aspects such as energy and water usage, waste management, materials used, ecology, and indoor air quality. It is particularly popular in Europe and the UK.

What types of green building certifications exist for rental properties?

1. LEED (Leadership in Energy and Environmental Design) is an internationally recognized certification provided by the U.S. Green Building Council (GBC). It recognizes buildings and homes that are designed and built for better energy efficiency, environmental protection and occupant health.

2. Green Globes is a Canadian-based green building certification system that rates buildings based on 10 key areas related to energy efficiency, water conservation, materials selection, indoor air quality, waste management, building envelope, site planning, and innovation.

3. Living Building Challenge is a certification program based on environmental design and performance, including net-zero energy and water use. It sets standards for buildings beyond sustainability, focusing on how materials are sourced, land use is managed and how much the building gives back to the environment.

4. National Green Building Standard (NGBS) was developed by the National Association of Home Builders and is used as a rating system for green rental properties. The standard covers the construction and design elements related to energy efficiency, water conservation, resource efficiency and indoor air quality.

5. ENERGY STAR is an EPA-sponsored program that labels rental properties that meet its standards for energy-efficiency, helping tenants save money on their utility bills.