In a 2021 survey, 61% of Americans said sustainability was a key influence on how they decide to purchase products. One-third said they would pay up to a 25% premium on sustainable products like energy and utilities.
What does that mean if you are a homeowner with solar panels?
That means people view your home as being friendlier for the environment because it uses renewable energy.
That means people are willing to pay more for your home than for a home that is powered entirely by electricity generated from fossil fuels.
On a side note! If you’re in need of a reliable and high-performance portable solar panel, We strongly recommend the Jackery SolarSaga 100W Portable Solar Panel (Amazon Link).
With a high conversion efficiency and foldable design, this solar panel is easy to transport and set up, making it perfect for outdoor activities like camping, hiking, and RV trips.
The US solar cell technology used in this panel ensures that you get the most efficient and reliable solar charging possible.
There is also a 60W option that is more affordable (Amazon Link)
That is why homes with solar systems have a higher market value and sell for more than homes without solar. This article examines how much a solar system adds to the selling price of a residential property.
Does Solar Increase Property Value?
Not only does solar increase the resale value of a home, but it also makes the property sell 20% faster. The combination of a reduced electricity bill and the growing importance of sustainability among consumers make homes with solar a more attractive option for home seekers.
The increase in value only applies to homes where the solar system is owned by the homeowner. It does not apply to power purchase agreements or solar leases.
Reasons Why Solar Panels Increase Home Value Listed
There are three reasons why solar increases the value of a home. These are savings, sustainability, and resale attractiveness.
Energy savings
Since 2020, California has mandated that all new home constructions have solar. It is estimated that this mandate will allow homeowners to save about $633 per year on electricity costs.
Solar can eliminate the need to pay for electricity if the system is large enough. The typical homeowner in the U.S parts with an average of $118 per month for electricity. That is just over $1,400 per year. Solar saves an average of about $1,500 depending on how big the system is and where your home is.
These potential energy savings allow a homeowner to sell their home at an above-market price than a home without solar.
Sustainability
Consumers are becoming increasingly conscious of the environmental impact of the products they buy. More people are concerned about where the things they buy come from and how they are made.
Products that are ethically sourced or made from renewable material sell at a 25% premium. (Source)
Resale attractiveness
The combination of cheaper energy and sustainability means homes with solar are much more attractive when it comes time to sell them. Solar-powered homes spend less time on the market than homes without solar.
How Much Does Solar Add to Property Value?
Solar increases the value of a home by an average of 4%. The resale value varies between states and cities going as high as 9% for a median-valued home in New Jersey. The appreciation of value depends on your location and the solar system.
Location
The price of electricity varies with location. The more expensive electricity is, the more valuable it is to have solar. Homes that have solar in areas with higher electricity costs have a higher appreciation compared to homes in areas with cheaper electricity.
Solar system
The age and size of the solar system are important. A newer solar system will appreciate the value of a home more than an older system. With an older system, you have to account for the depreciation of components like batteries and inverters which have a short lifespan compared to solar panels. This increases the likelihood of having to make repairs or replace the system entirely.
A bigger solar system has a higher energy output which means either higher savings or even reducing the energy bill down to zero. This gives the home a greater value than a home with a mid or small-size system.
There are several ways in which you can calculate what the actual market value of your home will be. The simplest is to just add 4% to the present value of your home. If it is worth $500,000 for example, the added 4% would bring its value up to $520,000.
Another way to calculate it is to add up the savings on your yearly electricity bill and multiply that by the expected lifespan of your solar panels. If solar is saving you $1,400 per year and you multiply that by 25 that gives you an added value of $35,000.
A study by the Lawrence Berkeley Labs estimates that the resale value of a home with solar rises by $5,000 with every kilowatt installed. Using this formula if you had a 6-kWh system the value of your home would rise by $30,000. (Source)
For more on this, we recommend that you check out our post How Much Does A Solar Roof Cost? Is It Worth It?! (VS Solar Panels)
Does Solar Increase Property Taxes?
Solar does not increase property taxes in some states of the U.S. At present 36 states offer a property tax exemption on homes with solar installed. Tax exemption status depends on the state tax laws.
Different states have their tax laws with some offering both property and sales tax exemptions on solar panels. Some states offer only one while if you are in a state like Georgia there are no tax exemptions. You can find out which tax exemptions apply to your state here. (Source)
There is also a federal tax exemption that applies across all states in the U.S. In terms of the exemption up to 26% can be deducted from the upfront cost of a solar system. This rebate runs until the end of 2022. In 2023 it will be stepped down to 22% after which it will be scrapped in 2024. (Source)
For more on this, check out our post “Do Solar Panels Increase Property Taxes? What You Need To Know !“
Do Solar Panels Increase Home Insurance?
Solar panels may raise your premiums slightly. As solar panels become part of your property you may need to increase your coverage limit to account for any damage or loss of the solar panels.
Solar panel insurance is covered in terms of the dwelling coverage of your homeowner’s policy if they are mounted on your roof. Ground-mounted or solar panels attached to an outbuilding are covered by the other structures section of your policy.
Some homeowners’ policies do not cover solar panels. In this case, it might be necessary to get a separate insurance policy that covers your solar panels. (Source)