Do Solar Panels Increase Home Value?

Rooftop Solar Panels Can Help You Build Long-Term Financial Gains for Your Household

Savvy homeowners, potential buyers and appraisers know that modern solar installations can increase your home’s value on the real estate market.

Specific numbers vary between each installation and property. Yet recent studies show an average increase in resale value between $4,020 and $5,911 for each 1 kilowatt of solar panels installed.^1,2 

At $4,020 per kilowatt, a 5 kilowatt solar panel installation would add an average of $20,100 to the market value of a mid-sized U.S. home. Or in California at $5,911 per kilowatt, a small 3.1 kilowatt system would add an average of $18,324 to the value of a mid-sized home.² 

That’s an appreciable amount that homebuyers are willing to pay. And, a solar home’s selling price is typically 3.74% higher or more than comparable properties without solar.³

The price of an average rooftop solar installation is generally recouped in the home’s sale price. Plus, households purchasing solar are rewarded with lower energy bills and healthy tax incentives that can cover the system’s costs multiple times over the life of its warranty.

Buyers Appreciate Solar’s Added Value 

Buyers definitely consider monthly electric bills when purchasing a home. So when assessing the long-term financial value, they’re increasingly open to the premium of a solar-ready home.

The National Renewable Energy Laboratory notes that installing solar panels is viewed as an upgrade, just like a renovated kitchen, and homebuyers across the country are willing to pay a premium for the economic and environmental benefits of a solar home.⁴

So, you can add a sizable percentage to your property value if you purchase a solar energy system. With lower monthly electricity bills and tax incentives for new installations, homeowners can realistically anticipate not only recovering their initial investment but also gaining a handsome return on their investment.

The return on investment from buying a solar installation is encouraging more Americans to go solar every day. It’s the smart, sustainable energy solution.

Factors Influencing Solar’s Added Value

It’s beneficial for homeowners purchasing solar panels and for potential buyers of their home down the road. Yet, the added property value from a solar energy system constitutes many factors and varies by market. 

The value added to a home from solar panels depends on the following: ^5,6,7

• Region of the country
• Local price of electricity
• Solar installation prices
• System replacement value
• Environmentally conscious community
• Frequency of power outages
• Age of solar system
• Amount of energy generation
• State incentives
• Local understanding of solar technology and benefits

Homeowner/Seller Incentives for Installing Solar Panels

In addition to increased property values over comparable non-solar homes in their community, homeowners purchasing solar are realizing many financial benefits including:

• State rebates and incentives 
• 30% federal solar Investment Tax Credit (ITC), which steps down starting in 2020
• Replacing grid electricity with a sustainable, often cheaper option¹

And, as the seller of a solar property, there are tremendous advantages in the real estate market such as:

• Higher asking price than comparable homes without solar⁴ 
• Solar panels are viewed as an upgrade by potential buyers⁸
• Homes with solar panels often sell faster than those without⁸
• 100% return on solar investment upon home sale1 

Homeowners with a solar energy system who may want to sell should note that prospective buyers are interested in documentation showing that the installation was done properly from reputable solar dealer, and proof that the system is reducing electric bills.⁸ Sunrun solar advisors can show you how to document the cost savings on your electricity bill.

Homebuyer Incentives for Purchasing Solar 

These home seller incentives for investing in solar panels are parlayed into homebuyer incentives because a property’s market value may increase as electricity prices rise. 

With a home solar installation, the buyer could potentially receive a 200% return on the sale price premium. You’ll be hard pressed to find another investment matching these financial benefits:

• Monthly/annual financial gains throughout lifetime of solar energy system (25- to 30 years)
• Reduced carbon footprint
• Higher resale value of home¹

Environmental Goals and Economic Rewards

Solar is about protecting the individual and the environment. Solar-powered homes are friendly to an  owner’s electricity budget and foster a sustainable energy future. These two valuable aspects play a large part when homebuyers consider paying a premium on a solar home. 

Home solar energy is yours to control and add property value. Research shows, however, that the wattage generated by a solar installation does not proportionally raise the value of a home. So, installing a massive solar array on your rooftop won’t necessarily equate to a resale value that is extraordinary for your community. 

Homebuyers are attracted to the solar lifestyle and building a healthier community in addition to locking in lower electricity costs and avoiding outages. Thus, for an average-sized, grid-tied home, a more modest solar energy system with battery storage may actually return a much higher margin on your investment in the local real estate market.

Do Solar Homes Sell Faster?

The length of time that a solar powered home is on the market often varies by region of the country. While early analysis performed in six states by Lawrence Berkeley National Laboratory found that solar homes take an extra eight days to sell,⁹ new research shows the opposite. A solar energy installation will help sell your home 20% faster than residences without solar panels.¹ 

Today’s rapid expansion of solar across the country is increasing appraiser and homebuyer understanding of the reliable, long-term benefits of grid-tied solar, thereby, accelerating a home’s speed of sale and raising the seller’s revenue.

New vs. Older Home Solar Systems

A newly purchased solar system with  efficient technology, more time on its warranty, and less need for maintenance may significantly add to  property value. Homeowners with older solar systems should factor in some depreciation and anticipate a slightly lower premium upon sale. 

Even if you sell your home in the future, updating your house with a solar installation is a sound investment versus other possible renovations.

A 2017 National Renewable Energy Laboratory report states that the cost of a residential solar system is less than half its price in 2010.¹⁰ Following this trend, as solar technology becomes more efficient to install, there may be a smaller premium on property values. 

However, the lower installation price, and likely higher electricity costs, will accelerate return on investment with reduced electricity bills from buying a new residential solar energy system. 

Should You Buy or Lease?

Your financial goals are likely a primary factor in choosing to go solar and may impact whether you buy or lease an installation. If you purchase a new home solar system, future proceeds from an increased sale price will go directly to you. 

To secure a higher sale price, its most advantageous to buy a solar energy system for your home.¹¹ However, if you decide that a lease or Power Purchasing Agreement (PPA) is more appropriate, there will be less recouped from the home sale. 

Appraisers and  lenders consider that if a homeowner installs a residential solar system through a lease or PPA, it is essentially the asset of a third-party owner. This requires the third-party to be involved in the property transfer.¹² 

A solar installation can only be included in a property assessment if it is owned by the homeowner and is an asset that can be transferred without obligation. The system’s warranties and performance guarantees generally transfer with the sale.^12,13 

Regional Markets and Electricity Costs 

The largest price increases on solar properties are typically found in regions with high electricity rates and strong solar incentives. High energy costs make homes with solar installations more attractive to homebuyers. Plus, state governments are increasingly seeing the long-term community and infrastructure benefits of implementing solar incentives.¹²    

For instance, Long Island’s high electricity rates have been a boon for the local residential solar market. The area boasts nearly 40% of all solar systems in New York state. Increasingly across the U.S., higher energy costs can translate into higher appraisals for solar homes. Low cost solar power is simply a smart investment.¹²

In 2015, the Department of Energy said the average homeowner adding a solar energy system could net $15,000 more at the time of sale than a comparable home without solar power.¹⁴  

A new study suggests that the increase is even more significant in the Northeast’s emerging solar markets. The study was conducted by national realty company, Redfin, and Sun Number, which has developed an automated system to make it easier for homeowners and buyers to determine the actual solar potential of properties.¹⁴  

Solar Value by State

Solar is not just increasing in popularity. In many states, it’s become much more common. Solar energy offers households cost-savings, improved grid reliability and a healthier neighborhood. In fact, California recently mandated solar on all new residential construction starting in 2020.¹⁵

Home resale values in Arizona, California and Massachusetts do increase with solar, according to the 2017 U.S. Solar Market Value Report – 1st Edition: Further Evidence that Solar Adds Value to Real Estate by Sandia National Laboratories. Adding that solar installations offer reduced electricity costs that accrue over the system’s lifespan so that increasing a property’s underlying value well beyond the price of equipment and installation. 

While most studies are limited in scope to where solar has grown the most, experience in those real estate markets demonstrates the likelihood of what will occur in other states as people become familiar with modern solar installations.⁶

States are increasingly implementing initiatives to build a clean, affordable and reliable energy future for the whole nation. Currently, higher values for solar installations are most commonly found in states with higher-than-average residential solar adoption. Homeowners in less solar-friendly states may see a smaller impact on property values.⁶

A comprehensive nationwide study presents current information impacting solar home values. To support understanding among homeowners, homebuyers and the solar industry, The 2019 State Solar Power Rankings Report by Solar Power Rocks offers a detailed view of policies, incentives and investment returns on residential solar installations for each state.¹⁶ The overall grade for each state is based on three categories: policy, incentives and outcomes that include 12 factors.¹⁶ Each factor, such as electricity prices, tax credits and rate of return, has its own ranking. 

States Where Home Values Increase the Most From Solar

When it comes to sustainable solar energy, nearly everyone thinks of California as being the leading state. While California is implementing some of the most influential policies and incentives for advancing residential solar in the country, other states have been solar-friendly for years or have recently instituted major programs to rapidly foster the development of home solar installations, battery storage and increasing property values.  

7 Leading Solar States

1. California
2. Colorado
3. Massachusetts
4. New Jersey
5. New Mexico
6. New York
7. Oregon

If you’d like to know more about solar incentives available in your area, check out the Database of State Incentives for Renewables & Efficiency.¹⁷

Rising Appraisals

The Appraisal Journal has stated that a home's value increases roughly $20 for every $1 decrease in energy costs. If solar panels save a household $600 a year in electricity bills, that home's value may increase by $12,000.¹⁸

In addition, Fannie Mae has recognized the proliferation of residential solar energy systems. It has implemented a guideline specifying that if a household owns a solar energy system, the appraiser should assess it’s added value.¹⁹

One issue influencing properly appraising the added value of a home solar installation, however, is the lack of standardized information.⁶ Recognizing that solar panels add property value, the real estate industry has  created methods and tools to accurately determine market value of solar homes.¹³ 

In addition, the Solar Energy Industry Association’s (SEIA) report, How Owning a Solar System Impacts My Home Value: A Guide to Valuing Residential Solar Energy Systems, explains evaluation methods for solar property values. The research also confirms that rooftop solar adds value to properties in a growing number of cases.⁶

The value methodology and an appraiser familiar with solar technology are important in getting an accurate figure for your real estate market. SEIA notes that, in general, the best way to value property with rooftop solar is the income approach.⁶

The three possible methodologies to value residential solar are the income approach, cost approach, and cost comparison approach. Overall, the income approach is recommended because it estimates the forward-looking value of the energy cost benefit.⁴ 

Or, expressed differently, the income approach bases added value on the projected income that a solar installation will generate for the homeowner over the system’s expected lifespan. Appraising a solar home on this basis most closely aligns the seller’s and home buyer’s perspective.⁶

In California, which has a relatively mature residential solar market, real estate agents, lenders and appraisers have a stronger understanding of the economic benefits and value of solar installations. Plus, there are numerous comparable home sales to guide accurate pricing decisions. In other regions, real estate professionals are still learning as their residential solar market grows.⁸

Solar Panels Add Home Value

Installing residential solar panels is a sound investment. Whether you’re upgrading your home for a future sale or making it your forever home, your property value will significantly increase. This added value makes payback periods less of a concern.⁷ You can recoup your investment at a later sale and come out ahead.

Put the sun to work for you. Adding Sunrun solar panels and a Brightbox home battery to your home may not only raise your property value, it will give you control over your electricity usage, protect you from power outages, and help the environment.

Both homeowner and homebuyer will enjoy reduced electric bills. And the financial advantages of solar energy will rise proportionately if electricity prices  increase. At Sunrun, we know there is a better way to power our lives. 

Solar is as reliable as the sun. Buying a solar energy system for your home is a wise real estate investment for your financial future and peace of mind. Sunrun’s BrightBuy solar purchase program gives you energy independence. Join the solar revolution. Put Sunrun solar panels on your rooftop and the added value in your pocket.