Home Energy Rating Systems (HERS)

A Home Energy Rating System (HERS) is a voluntary program to rate the energy efficiency of a new or existing home and to estimate the annual energy costs associated with the home.
An energy rater makes a physical inspection of a home's hot water system, heating and cooling system and building envelope and generates a report listing possible energy improvements, and the amount of time it would take a homeowner to recover the cost of the improvements.

Energy Efficient Mortgages (EEMs) are a financial recognition of the benefits of lower operating costs for energy efficient housing. EEMs can allow the buyer of an energy efficient house to qualify for a higher mortgage by "stretching" the existing ratio for income-to-mortgage payments (a 2 percent stretch is typical), or EEMs can allow new buyers to borrow mortgage money to make cost-effective energy improvements.

Although some form of EEMs have been around since the energy crisis of the 1970s, there has been no nationwide program that has been accepted by local mortgage lenders as well as the secondary mortgage market. Over 20 states have HERS programs now and many of the rest are in the process of developing a program. The U.S. Department of Energy published proposed voluntary guidelines in July 1995 that will enable states to establish programs with uniform standards that will be accepted by the mortgage industry. HERS/EEMs offer a significant tool to improve the energy efficiency of both new and existing housing stock. The acceleration and linkage of HERS and EEMs programs is being directed by three 1992 laws: The Energy Policy Act, the Housing and Community Development Act, and the Veterans Home Loan Program Amendments, as well as the Administration's Climate Change Action Plan.

Residential energy use accounts for almost 20 percent of total U.S. consumption and, in 1990, cost U.S. households over $110 billion. Even modest efficiency improvements would have a significant cumulative impact on both consumer disposable income and reduction in pollution associated with the production, conversion, distribution and consumption of energy.

Buyers and sellers of new and existing homes, and current homeowners are the principal beneficiaries of viable HERS/EEMs programs. Other pivotal players include builders, architects, real estate agents, appraisers, primary and secondary mortgage lenders, energy utilities and home inspectors. HERS/EEMs programs will have a positive impact on natural resource availability and pollution reduction.