In the Government of Ontario’s “Climate Change Action Plan” released earlier this month, they included something called the “Home Energy Rating & Disclosure Program,” whereby any home, new or old, must undergo an energy audit before being listed for sale.
Of more interest to those of us who own real estate, the results of this audit must be included in the MLS listing.
This topic is going to enter us into a political debate, and while the results of that debate will never draw consensus, it’s a debate worth having nonetheless…
It’s going to take every ounce of strength in my being to not turn this entire blog post into a political rant.
I’m pretty much an open book, as evidenced by the last nine years of blogging, so it shouldn’t come as a surprise for any of you to hear that I’m a fiscal conservative, and a social liberal, with a lot of room for grey areas.
I’m not a huge fan of government intervention in free markets, or government over-regulation.
I’m shocked at the amount of tax dollars collected from hard-working Ontarians that go to waste.
I’m tired of various levels of government putting together “committees” to do “studies” and release “findings.”
“Hey, do you guys think the sky is blue?”
“Yeah, we do.”
“But do we know for sure?”
“I have an idea! Let’s put together a committee to investigate this. Find six people, pay them each $80,000 a year to do a study, and then we’ll release that report and never act on anything.”
But I think it’s one thing to put our tax dollars to waste, and another thing entirely to tell us what to do with our money.
Like the Liberals’ new Ontario Retirement Pension Plan. Why MUST I contribute to this? Who knows better how to save for MY retirement: me, or the provincial government?
Spending our money, telling us what to do with our money, and now with the new Climate Change Action Plan, telling us where our morals and ethics should lay.
I get it: human beings are killing the planet, and have been since the dawn of civilization.
But the Liberals have decided to spend $8.3 Billion over the next five years to reduce greenhouse gas emissions, and essentially telling us how to live our lives in many respects.
The results are going to be felt everywhere, and in everything we do.
And part of the CCAP is this new “Home Energy Rating & Disclosure Program,” which once again forces people to do something that should be, in my opinion, up to the individual.
Beyond that, they’re forcing Realtors to not only to put this “rating” on all MLS listings, but also to oversee all enforcement of the program!
In the Climate Change Action Plan, which you can read in full HERE, section 7 reads:
7) Help individuals and businesses manage their energy use and save money
By better understanding how people use energy, Ontarians can make informed choices on how to change their behaviours to help lower greenhouse gas pollution and fight climate change
So is that the case here?
Are they “helping” as they say?
Are they encouraging us to make “informed choices?”
What IS a choice anyways?
A choice is defined as “An act of selecting or making a decision when faced with multiple possibilities.”
So then are we actually free to choose?
No. We’re not.
The section continues:
Energy audits would be required before a new or existing single-family home can be listed for sale, and the energy rating will be included in the real estate listing.
How the HELL is that a “choice?”
How is that “helping?”
The word “requirement” doesn’t really signify a choice.
And the words “before a home can be listed for sale” shows us that they’re doing more than imposing their will – they’ll actually prohibit us from conducting commerce in a free market.
Most of the real estate community has no idea what’s going on here, but the President of OREA, Patricia Verge, put together a 28-page proposal to Bob Chiarelli, the Minister of Energy, which you can read in full HERE.
While I don’t agree with every point submitted, let’s go through the issues that OREA sees with the HER&D Program.
These are the bullet points, with selected excerpts:
1) HER&D Hurts Ontario’s Housing Market
Since 2009, Ontario’s housing market has been a bright spot for the provincial economy, creating jobs, economic activity and generating tax revenue to governments. Unfortunately, affordability in some markets is a growing concern. The HER&D program is another government-imposed cost that will hurt the housing market by making it more difficult for Ontarians to sell their homes.
On average, the sale of a home in Ontario generates $55,000 in ancillary consumer spending. In 2014, Ontario’s housing market contributed over $11 billion in ancillary benefits to the province’s economy and generated 76,000 jobs.
Mandating a home energy audit would be an enormously unpopular initiative that will hurt the housing market, delay real estate transactions and cost the provincial economy millions of dollars.
2) No Consumer Protection
Unlike most other professionals involved in a real estate transaction, energy auditors are not licensed by a provincial regulator, not subject to a rigorously enforced code of ethics/conduct and not required to carry errors and omissions insurance. The lack of effective regulation poses a significant consumer protection risk.
HER&D will present a maze of bureaucracy for consumers. Natural Resources Canada is responsible for the audit itself, standards for training and the certification process. However, the training and monitoring of individual auditors occurs through service organizations who are also certified by NR Canada. HER&D is a provincially mandated program, yet the province has nothing to do with the audit, auditor or NR Canada.
According to NR Canada, when consumers have a complaint about an energy audit, they must contact the service organization that employs the auditor.
With service organizations being consumers’ first point of contact when it comes to complaints, OREA is concerned about the potential conflict of interest. According to energy auditors OREA interviewed for this submission, consumers make their payment directly to the service organization which is then responsible for remitting it to the auditor.
With service organizations relying on their auditors for revenue, how can consumers trust that their complaints will be handled appropriately?
3) Privacy of Home Owners
Under some HER&D programs in Europe, the results of an energy audit are published online in a government maintained registry. As a result, the public can access property-specific information about homes where an energy audit was done after the home has come off the market.
Homeowners have a right to privacy. The results of an energy audit are the property of the individual who purchased the audit. Moreover, the audits themselves contain property-specific information.
4) HER&D Stigmatizes Properties
The HER&D program will stigmatize properties that have low energy ratings. As a result, homeowners will be forced to lower their listing price. OREA is also concerned about the impact that a low energy rating will have on the availability of insurance and financing. Homebuyers may not be able to get insurance or a mortgage due to a low energy rating. This will have a significant impact on the saleability of a home and unfairly penalize homeowners.
5) HER&D Enforcement And Realtors
The ministry has suggested that REALTORS® would be the enforcement mechanism for the HER&D program. OREA adamantly opposes any attempt by the province to force our members to police HER&D. Moreover, it would put REALTORS® in conflict with their obligations to their clients under the Real Estate and Business Brokers Act, 2002 (“REBBA”).
The enforcement proposal has three fundamental problems. It forces REALTORS® into a role (government enforcement) for which they are neither qualified nor want to perform. This requirement also puts REALTORS® in conflict with the Code of Ethics requirements under the Real Estate and Business Brokers Act, 2002 (“REBBA”) whereby real estate licensees are obligated to act in the best interests of their clients at all times.
6) Fails To Target Root Causes
Without the HER&D program, the housing sector is already becoming more energy efficient. According to the Ministry of Energy, average household electricity consumption in Ontario has declined 25 percent since 1990. In addition, direct emissions from motor fuel and residential consumption account for less than one third (27 percent) of total household GHG emissions. Further, Statistics Canada found that heating, electricity and appliances, only accounted for 12.4 percent of total GHG emissions from homes.
The proposal also ignores the commercial and manufacturing sector which is becoming the largest emitter in Canada. By 2020, commercial will surpass residential emissions. In addition, since 1990, commercial and industrial buildings emissions in Ontario have risen by 30.8 percent compared to an increase of only 10.1 percent for residential buildings.
7) Ontario Is Not Europe
The ministry’s consultation document references European programs that are similar to HER&D, suggesting that those programs and their results can be replicated in Ontario. The ministry’s consultation document does not reference some of the underlying factors that exist in Europe which have led to the success of their HER&D program.
These factors are not prevalent in Ontario and as such this province cannot expect similar outcomes.
First, the housing supply in Europe is old and less energy efficient than properties in Ontario. This means improving energy efficiency is more of a policy imperative for the residential housing sector there.
Second, Europe also has significantly higher energy prices then Ontario, meaning that the cost of energy is a significant incentive to improve energy efficiency of a home. It is also an influencing factor in determining the value of a property. Ontario’s average cost per kilowatt hour is half of the average cost in Europe.
Lastly, European electricity generation is more reliant on fossil fuels. For example, 45.5 percent of all electricity production in Europe is from fossil fuels. In the last quarter of 2014, only 7.1 percent of Ontario’s electricity production was generated through fossil fuels.Due to the overwhelming majority of electricity production from clean energy sources in Ontario, a reduction in home energy consumption in Ontario will have only a minimal impact on the province’s GHG targets.
With a much younger housing stock, low energy prices and a system more reliant on clean energy, Ontario has less to gain from a program like HER&D than Europe. In short, what works in Europe is not likely to work in Ontario.
8) Homes Sold Privately
The government’s HER&D proposal would exempt all homes sold privately and any other properties not sold on “a listing service”. Homes not sold on a listing service are no different from homes sold on MLS®. The government’s proposal to exclude private sales lessens any potential GHG reductions.
9) Unfairly Targets Single-Family Home Owners
The Ministry of Energy’s consultation document notes that the HER&D program will not extend to commercial, industrial or agricultural properties. In addition, the requirement will not apply to multiunit residential properties like condominiums and apartments. Instead, HER&D will unfairly target single-family homes.
The current proposal would exempt almost half of the entire residential housing stock in Ontario. Excluding other forms of properties exempts a large portion of GHG emitters from mandatory energy audits, putting an unfair burden on single family homeowners.
10) The Multiple Listing Service
REALTORS own and operate the Multiple Listing Services (MLS). In Canada, the MLS and REALTOR trademark are protected by the Canadian Real Estate Association (CREA) under contract from the National Association of REALTORS® (NAR) in the United States.
OREA rejects the ministry’s proposal and urges the province to pursue another method of achieving its policy objectives that does not directly involve the regulation of listing services in Ontario.
So there’s a good amount of “fluff” in there, I know.
The whole, “real estate is the Golden Goose” argument was used to try and combat the new Municipal Land Transfer tax, and it’s nothing new.
But I guess at the most basic level, I don’t like to see governments “forcing” people to do certain things, act a certain way, or take certain moral or ethical stances that would vary from person to person, or from political party to political party.
Then again, I could argue the opposite if I had to.
We have nutritional information on all our foods and drinks because people “need to know” how much fat, and how many calories, are present.
So do we “need to know” how energy efficient a home is?
And if human beings are slowly killing the planet, is it up to the elected body of government to make changes on our collective behalf for the greater good?
This debate could launch us into a whole other conversation about the role of government, but I’m already going to take enough heat (and probably get a bit of support too…) from readers based on my ideas thus far, so at this point – give me a “yay” or a “nay.”
Should “Home Energy Ratings” not only be mandatory for somebody who wants to sell a house, but also be a requirement on all active listings?