Unlocking Home Value: The Impact of the Inflation Reduction Act on Energy Efficiency and Equity

The Inflation Reduction Act (IRA) rebate programs present an opportunity to help homeowners implement energy-efficient upgrades and subsequently boost the value of these homes. This potential premium can transform the market by showing homeowners that efficiency upgrades, like air-sealing and insulation, hold comparable value to traditional upgrades like kitchen remodels.

While higher home values and market transformation are good things, assessing the potential for unintended consequences, like gentrification and displacement in low-income and disinvested communities, is essential. States and program implementers should consider a few questions as they plan for IRA:

• Are their IRA rebate programs likely to support the much-needed increase in home equity and wealth-building that have historically eluded BIPOC homeowners?
• Or will they drive up property values and contribute to neighborhood displacement and gentrification?

To address these questions, Elevate, in partnership with Pearl Certification, recently interviewed professionals of diverse backgrounds who provided insights based on their knowledge of environmental justice, housing justice, community development, and real estate. Interviewees were selected based on their professional and personal experience with energy efficiency, real estate, and gentrification. Semi-structured interviews were conducted to get their perspective on the social and economic impacts, both positive and negative, of potential benefits provided by the IRA and selling high-performance homes in low-income and disinvested communities. Additionally, we discussed potential gentrification and displacement consequences in communities of color that could result from increased home value from energy upgrades.

The interviewees were passionate about the topics we discussed and thoughtful with their responses. Our full paper will be released towards the end of the summer of 2024, but our findings are summarized here.

Key Finding #1: Energy efficiency investments and certifications in disadvantaged communities can begin redressing legacies of injustice.

Interviewees highlighted the positive impacts of home value increases. Historical and current policies and practices have limited access to disinvested communities, creating challenges and obstacles for loans or building wealth through homeownership. Interviewees agreed that the tangible improvements and value added by upgrading and certifying homes could help start correcting inequitable home quality and value issues.

As one housing professional put it:

Additionally, several interviewees commented on the ripple effects of energy efficiency upgrades, including lower energy costs and a safer and healthier home.

Recommendation for States

Rather than shying away from energy efficiency programs that deliver home value, State Energy Officers should prioritize them, particularly in historically disinvested communities. By enhancing home energy performance, these initiatives can contribute to increased home values and lower operating costs, making homeownership more sustainable and equitable. This approach not only aids in building wealth for homeowners but also fosters healthier and safer living environments, addressing long-standing home quality and value disparities.

Stay tuned for our next key takeaway, or read the full blog post for more in-depth insights.