Sustainability: It’s Good Business

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REALTORS® are increasingly seeking answers about how to build, value, and sell resilient homes and communities. In a 2019 National Association of REALTORS® survey, 59% of REALTORS® said their clients were interested in sustainability. NAR is responding in a variety of ways—from gathering information about state and local REALTOR® association sustainability initiatives to beginning work on a 10-year sustainability action plan. That plan, which is being crafted by a newly formed presidential advisory group, is expected to be completed before the end of this year.

The demand for information and action on sustainability is escalating in part because of the frequency and severity of natural disasters. The National Centers for Environmental Information, a division of the National Oceanic and Atmospheric Administration, tracks disaster events with losses exceeding $1 billion in damages. There were 28 such events in 2018 and 2019, ranging from a Colorado hailstorm in July 2019 that caused an estimated $1 billion in damages to hurricanes Florence and Michael in September and October 2018, which caused a combined $50 billion in damages.

As a result of such big-ticket disasters, leading investment firms are increasingly taking climate risk into account when they make investment decisions, according to a 2019 report from the Urban Land Institute and Heitman LLC, a real estate investment management firm.

In January, Larry Fink, chairman and CEO of asset management giant BlackRock, made headlines when he posed a number of troubling questions in a letter to other CEOs: “Will cities, for example, be able to afford their infrastructure needs as climate risk reshapes the market for municipal bonds? What will happen to the 30-year mortgage—a key building block of finance—if lenders can’t estimate the impact of climate risk over such a long timeline, and if there is no viable market for flood or fire insurance in impacted areas?”

These and other questions are top-of-mind with BlackRock’s clients, Fink said in the letter. He announced steps that BlackRock—a company that manages $7 trillion in assets worldwide—would take to build sustainability into its investment approach. And Fink predicted that other investment firms would do the same: “… because capital markets pull future risk forward, we will see changes in capital allocation more quickly than we see changes to the climate itself.”

Taking a Leadership Role

The sea change is driving communities and organizations to put more urgency into their sustainability planning—and NAR is no exception. At an NAR-hosted sustainability summit in New Orleans last October, attended by members of NAR’s Sustainability Advisory Group and guests, NAR President Vince Malta (then president-elect) discussed challenges the PAG would address.

“Extreme weather events are increasingly affecting property values, communities, and transactions,” Malta said. Many homes aren’t built to withstand rising sea levels, higher coastal inundation, and increased rainfall and cyclone activity due to higher water temperatures and air temperatures globally. “It’s important that we advocate for and take a leadership role in development that helps areas withstand this change and bounce back quickly.”

While the PAG works on the long-term plan, the sustainability advisory group continues its work of keeping NAR leaders and members informed about new developments. Among other things, the group is developing a how-to guide for listing high--performance homes and recommending changes to NAR land use policy where sustainability is a factor.

It’s also gathering case studies of state and local associations’ successes in the arena of sustainability and green building. New Hampshire REALTORS®, for example, has a sustainability working group that received NAR’s EverGreen Award in 2018. The group serves as a resource and education hub on renewable energy and green building for its local members. That association offers a database of state incentives, guides on energy efficiency, checklists and fact sheets for agents, and more.

REALTORS® in Santa Barbara, Calif., are demonstrating that the association itself can serve as a model for sustainability and resiliency. When association executive Bob Hart started at his job in 2013, he was troubled by the time and resources going into maintaining the office’s front lawn “despite lack of rainfall and reservoirs getting dangerously low.” The city was in the verge of declaring a drought and imposing restrictions on water use that were only lifted last year. But local REALTORS® didn’t wait for the declaration to take action.

“We decided to design our front area as a community demonstration garden to help encourage homeowners from throughout our community to take similar action,” Hart says. That meant replacing grass with native, drought-resistant plants and adding landscaping features that would encourage water retention rather than runoff. The environmental contractor donated the site design and his time, and the association hosted a hands-on workshop for the community on sustainable landscaping. As a result, the Santa Barbara association received the Water Hero Award for 2013 from the city of Santa Barbara. The association also added recycling and installed a solar photovoltaic system for roughly $56,000 that reduced its electric bill from $10,000 per year to $1,500.

The Santa Barbara association is one of many REALTOR® associations—including NAR itself— that have taken steps toward sustainability. The national association’s Washington, D.C., office became the first building in the District of Columbia to achieve LEED Silver certification for construction when it opened in 2004. The building went on to achieve LEED Gold certification for existing building operation and maintenance in 2009 and upped that to LEED Platinum in 2017. NAR’s Chicago building has also achieved LEED Gold certification. (LEED, which stands for Leadership in Energy and Environmental Design, is a certification offered by the U.S. Green Building Council.)

Resources for You

How to measure and sell sustainability remains an evolving enterprise. Chris Chopik, an agent with Sage Real Estate in Toronto, spent 18 months studying how climate risk affects real estate values in his market. Chopik spoke at the October summit in New Orleans, proposing the concept of a real estate climate risk index based on his research and use of public data. The index, similar to the Walk Score, would be something that brokers and agents could use to aid clients in their search for property. “Understanding risk and protecting assets is where there are opportunities,” Chopik told summit attendees.

But opportunity also lies in being able to provide guidance adeptly on the high-performance features being built into homes. “It comes back to education,” says Cynthia Adams, a former REALTOR® and now CEO of Pearl Certification in Charlottesville, Va., which provides third-party certification of high-performing homes.

Adams serves on NAR’s Sustainability Advisory Group and is heading up a work group that’s developing the how-to guide on listing high-performing homes. The guide will include advice on how to start the dialogue with clients about high-performing features, information on third-party scores or labels, and tips on how to market the homes—even describing what fields to use in the MLS. The group expects to release the guide in the spring of this year.

Strategic Priorities

The National Association of REALTORS®’ 15 sustainability priorities, released last year, focus on three areas: planet, people, and profit. These priorities set the stage for the creation of a 10-year sustainability plan, currently under development.

1. Planet. Example: Develop real estate industry resiliency, risk management, and disaster preparedness and prevention strategies.
2. People. Example: Integrate sustainability into all NAR events, education, and professionalism offerings.
3. Profit. Example: Use real estate data and best practices to demonstrate the total cost of ownership and highlight the economic and community advantages of sustainable development.