The statutory requirements of the Home Energy Rebates program (HER) under the Inflation Reduction Act (IRA) contain a crucial provision: Homeowners receiving rebates must also obtain a third-party certification detailing the home improvements made.
What might at first glance seem like a minor administrative requirement has significant implications for one of the IRA’s primary goals — creating a more energy-efficient and higher-value housing market at scale — otherwise known as market transformation. In fact, by requiring certification of energy-efficient home improvements to access rebates, states can address the three primary blockers to market transformation.
We’ll surface each of the barriers below, but first, let’s define market transformation.
What is Market Transformation?
Market transformation is both a process and a goal — a strategy for driving the adoption of energy-efficient home features at scale and a success state wherein the U.S. housing market is far more energy-efficient, individual homes are worth more, and energy-efficiency has become embedded in the products and practices that serve the market.
Unsurprisingly, market transformation starts with building homeowner demand for energy-efficient homes and home features. The challenge is sustaining demand even after IRA rebates are expended; homeowners should be motivated to install energy-efficient and electrification features in their homes without requiring a rebate to drive them to take action. That’s where tools like certification come in.
Three Barriers to Market Transformation
Barrier 1: Knowledge of Benefits
One of the most significant obstacles to market transformation is the lack of homeowner awareness regarding the benefits of energy-efficient home features beyond utility savings. This gap must be bridged to drive the adoption of IRA rebates and achieve market transformation once rebate programs end.
For over a decade, national studies have indicated that consumers value energy-efficient homes. Studies carried out by a range of reputable firms, from Consumer Reports to the National Association of Realtors (NAR, 2023) and the National Home Builders Association (NAHB, 2021), consistently show that a large proportion of homeowners value efficient homes and efficient home features. Homeowners often cite ENERGY STARⓇ windows, lighting, and appliances as essential features. Surveys consistently show these elements rank among the top ten homebuyer “must-haves.” In one NAHB study, over 80% of respondents considered them either essential or highly desirable.
According to these surveys, what often interests homeowners is the high performance that energy-efficient appliances and systems provide — consistent indoor temperatures, improved air quality, and humidity control. Contractors have understood this for decades; few sell on the cost savings benefits of, say, an ultra-efficient heat pump. Instead, they sell comfort and health solutions and introduce energy savings into the conversation to lower cost sensitivity. A contractor working for CroppMetcalfe interviewed in ACHR News described the value of energy and comfort in sales conversations:
Energy efficiency is not even the first, second, or third thing [the sales team] mentions when talking to customers. Instead, CroppMetcalfe focuses on comfort, health, and safety. “We want to make sure a customer’s home is comfortable, that it’s healthy, and that it’s safe,” Oser said. “And if you do that, energy savings comes along as a side effect. Sealing up the home and duct system and making those things tighter improves the customer’s comfort, health, and safety, and we’re able to say, ‘Oh, by the way, this work should also reduce your energy bills.’”
While utility bills are seldomly discussed during sales conversations, there’s another, highly impactful benefit that is even more rarely brought up: the resale value and equity that energy-efficient upgrades add to a home. As with homeowner priorities, studies have repeatedly shown that energy-efficient homes sell for a premium compared to inefficient homes. Making energy-efficient upgrades to a home can help build equity and increase the return on a homeowner’s investment at the time of sale or refinance. It’s a significant benefit but one few homeowners, real estate agents, and appraisers know about.
It’s also the path to market transformation, a key goal of and milestone within the IRA. That’s why educating consumers, agents, and appraisers about the financial advantages of energy efficiency is critical if states want to empower them to make more informed and proactive decisions about their homes. An easy and proven way to do that is with certification.
Energy-efficient asset certification can address this knowledge gap if it captures not just energy consumption and savings but all the benefits of these upgrades: comfort, health and safety, cost savings, and added equity, in addition to simple usage savings.
Pearl’s Certification Report helps overcome this knowledge barrier by documenting a home's energy-efficient features and translating the value those features add to the home into language that homeowners, appraisers, buyers, and lenders understand.
The Certification Report provides a comprehensive overview of what makes a home "high-performing," approaching the house as a system of features working together to enhance comfort, indoor air quality, and energy efficiency. For example, it may highlight how proper attic insulation can impact the performance of heating and cooling systems, ultimately contributing to superior comfort and cost savings.
Pearl also provides information through tools like the Appraisal Institute Green and Energy Efficient Addendum, and our homeowner app, Green Door. Green Door helps homeowners continue their journey to greater energy efficiency through customized home improvement plans, an incentives search, maintenance reminders, and access to local, vetted contractors.
Finally, Pearl equips real estate agents with educational resources and access to request Certification Reports for their clients, complete with home marketing kits that make communicating the value of the home’s energy-efficient features easy.
Barrier 2: Valuation Challenges
The benefits of energy-efficient homes and home assets must be apparent to drive homeowner demand. Crucially, that includes home value. Multiple studies have shown that energy-efficient homes sell for more when properly appraised and marketed. Yet efficient homes are often undervalued due topoor access to data, lack of awareness, or lack of training by parties involved in the sale. This is particularly true in low—and moderate-income housing markets, where energy costs, comfort, health, and maintenance issues are prevalent.
Pearl incorporates the Appraisal Institute's Green and Energy Efficient Addendum into the Certification Report to ensure that energy-efficient features are not overlooked during the home appraisal and that the home is valued accurately. Notably, homes certified by Pearl that include this addendum command a 3-5.5% higher sale price than non-certified homes.
By rewarding homeowners who make energy-efficient upgrades and increasing the return on their most significant investment, Pearl’s Certification drives demand outside of the presence of incentives. By tying a certification to incentives — in other words, by lowering the cost of making upgrades and capturing the added value in a Pearl Certification Report — states can amplify homeowner ROI further and accelerate the transformative effect.
Barrier 3: Convenient Access to Tools
Knowledge of the benefits of energy-efficient home assets and accurate valuation can only go so far if homeowners cannot make the improvements that net these benefits. Convenience plays a significant role in whether homeowners take advantage of opportunities to upgrade, especially during equipment failures when decisions must be made quickly. Therefore, homeowners need easy access to:
Home improvement advice tailored to their specific goals and focused on energy efficiency improvements and other performance benefits
High-quality contractors capable of performing the necessary work
Financing options, where applicable
States can assist homeowners and drive change at scale by providing two essential resources: home improvement plans designed to achieve energy efficiency and access to a pool of high-quality contractors who can complete the work.
The value of the first resource is self-evident. It’s important to remember, however, that homeowners have different motivations for achieving energy efficiency — lowering the cost of running their homes, adding equity, improving comfort and health, or protecting their families from the effects of extreme weather. States must provide a variety of home improvement plans that achieve energy efficiency while prioritizing the homeowner’s goals. Frequent promotion of these plans not only addresses the full spectrum of homeowner purchase considerations but can also help preempt the purchase of inefficient equipment during emergencies.
Pearl Certification supports homeowners throughout their energy-efficiency journey through its Green Door app, which provides personalized energy-efficiency roadmaps that guide homeowners through identifying and prioritizing improvements tailored to their goals.
Green Door provides access to its network of vetted contractors, ensuring homeowners can confidently select professionals for their energy efficiency projects. Our platform also includes a rebates finder, helping homeowners discover available incentives to maximize their savings. Additionally, Green Door offers maintenance reminders, ensuring that energy-efficient systems continue to operate at peak performance, saving homeowners both energy and money in the long run.
Pearl Certification’s Role in Achieving Market Transformation
The IRA rebate programs present a unique opportunity to accelerate market transformation by making energy-efficient home improvements more accessible, affordable, and — if paired with the right certification — more valuable to homeowners.
The right certification must:
Educate buyers (and sellers) on the myriad benefits of energy-efficient home features
Provide appraisers with the information they need to assess the home’s value accurately
Offer real estate agents tools to showcase the home and its features effectively
Come with tools and information that make the decision to upgrade to energy-efficient features easy and convenient for the homeowner
The journey to market transformation hinges on overcoming critical barriers of education, access to data, and convenience. The right certification addresses and overcomes these barriers for states, while amplifying and accelerating the impact of the Inflation Reduction Act.
For more insights into formulating market transformation plans and developing effective strategies, access "The Pearl Certification Playbook for the Marketplace" here.
About Pearl Certification
Pearl Certification is the gold standard in high-performing home certifications, bringing visibility to the valuable features that make them healthy, safe, comfortable, and energy- and water-efficient. Now a Public Benefit Corporation, Pearl is the only national sponsor of the U.S. Department of Energy’s Home Performance with ENERGY STAR® program and partners with the National Association of REALTORS® Green Resource Council.
