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RESNET White Paper on Introducing Rationality into Home Financing Process

Jan 7, 2021


In the U.S.,residential and commercial buildings are responsible for the greatest share of carbon production. No national climate policy can be effective unless it addresses reducing energy consumption and carbon production in homes.

The good news is that improving home energy performance is a very cost-effective way of reducing carbon and providing long term cost savings to the homeowner.  The domestic housing market has demonstrated the power of this.

To aid the incoming Biden – Harris Administration and the new Congress RESNET has published a climate proposal, “Introducing Rationality into the Home Financing Process”.

The proposal makes the argument that in order to reduce energy consumption and reduce carbon emissions) in homes, The U.S. Department of Housing and Urban Development (HUD should issue guidance that  directs mortgage underwriters to consider energy efficiency measures included in the home that will lower operating expenses for purposes of calculating mortgage qualification, home value and qualifying interest rate.

The benefits of such action would be:

• Rationalizing of the mortgage market were energy costs are considered as a cost of housing.
• Boosting the construction and purchase of energy efficient homes.
• Making energy efficient homes more affordable to American families.

Currently, there is no method for consideration of home energy performance in the mortgage underwriting practices. The widely used mortgage underwriting model has ignored energy (and cost) saving features in homes. This lack of transparency creates obstacles for homeowners with moderate to middle incomes to finance energy efficiency retrofits, which would save them significant amounts of money over the long term. It also prevents new home builders from investing in energy efficient features because they might price-out homebuyers, even though the total cost of ownership would in fact go down. This policy gap could be addressed by using the Administrative Procedures Act or otherwise encouraged by the private sector itself.

Adopting a new formula for calculating mortgage qualification will bring rationality and a greater flexibility as to how mortgages are calculated in the U.S. housing market.

The policy paper will be the foundation of its advocacy to the incoming Administration.  The RESNET network is encouraged to review the paper and send it to their Congressional representatives.

To download the policy white paper click on White Paper on Introducing Rationality into the Home Financing Process