The real estate listing for the $1.25 million Mediterranean Revival home in a leafy Berkeley neighborhood touts the property’s electric heat pumps, solar panels, induction range and an updated electrical panel that’s “EV ready.” The sellers aren’t just green-bragging, they’re showing buyers they’ve complied with a new city ordinance requiring such climate-friendly features.
The Bay Area university town of 120,000 is the first in the U.S. to require sellers and buyers of single-family homes to replace fossil-fuel appliances or make other green upgrades as a condition of sale. It’s one of several cities leveraging real estate transactions to achieve carbon-emissions reduction targets as the Trump administration eliminates climate action. Austin, Minneapolis and Portland, Oregon, are among municipalities that require home sellers to obtain and disclose the results of energy audits to encourage voluntary efficiency improvements.
Berkeley, though, is mandating that such upgrades happen. “What Berkeley is doing holds a lot of promise in terms of being a very effective way to increase the rate of retrofits as homes are sold and turn over to new owners,” said David Ribeiro, director of local policy for the American Council for an Energy-Efficient Economy, a nonprofit research organization.
The city has long pioneered environmental policies that have later been adopted across the country, from curbside recycling in the 1970s to a ban on polystyrene-foam takeout food containers in the 1980s. Berkeley voters in 2006 set a target of reducing greenhouse gas emissions 80% by 2050 and buildings are the city’s second-largest source of carbon pollution after transportation, according to Ammon Reagan, the sustainability program coordinator for the city’s energy office.
“Natural gas is the biggest source of building emissions and the biggest emission savings are from heat pumps,” he said.
A 2024 report from RMI found that single-family homes account for 58% of U.S. building emissions. “The evidence that we have is that just energy disclosure requirements prompt some behavioral change,” said Erin Sherman, a buildings policy expert at nonprofit RMI, which promotes decarbonization.
Berkeley’s Building Emissions Saving Ordinance took effect in January and gives credits for a home’s low-carbon systems with a minimum score of six credits needed. Home sellers must disclose their score and make any needed changes before a sale or the buyer must do so within two years.
A heat pump is worth six credits, as is upgrading a home’s electrical system to make it heat-pump ready. Solar panels and batteries achieve three credits a piece if they’ve been installed within five years. An EV charger, induction stove and heat pump clothes dryer score two credits each. Homeowners also must also obtain and disclose an energy audit and a high score from the assessment gets two credits.
Electric-powered heat pumps don’t burn fuel to warm a home. Instead, they extract heat from the outside air and then circulate it through the home. They cool homes by reversing the process, removing hot air from inside the house and venting it outside.
While they’re highly efficient, they aren’t cheap. Replacing a gas furnace with a heat pump in the Bay Area can run about $25,000. A heat pump water heater costs around $7,500. And rewiring an older house and upgrading the electrical panel so heat pumps can be installed can set homeowners back more than $40,000.
Sellers can opt to defer such work to the buyer and each party puts $2,500 in a city escrow account to be used by the purchaser to come into compliance. If upgrades aren’t made in two years, the deposit is forfeited.
Reagan said that since January the city has received 80 escrow deposits, while 57 homeowners certified their prior compliance with the “BESO” ordinance. Only nine applications for certification were for heat pumps installed this year in preparation of a sale.
Brokers said the emissions mandate is starting to change the dynamics of the market as BESO scores appear on listings.
“Homes that are already electrified will be perceived as more move-in ready,” Berkeley broker Megan Micco said in an email. “Homes that defer everything effectively carry a hidden cost that informed buyers will factor into their offers.”
Micco listed the $1.25 million Mediterranean Revival whose upgrades let her highlight the house as “fully BESO compliant.” A mile away, agents recently held an open house at another 1930s Mediterranean bungalow, a smaller dwelling with a low BESO score priced at $898,000.
“Sellers typically aren’t going to do anything on that BESO list unless it’s related to being able to get insurance as they’re thinking about aesthetic improvements,” said broker Jen Wolan as she stood in the foyer of the home. “BESO is well-intentioned, but the people it affects the most are the people with the least amount of money.”
She noted that potential purchasers of her nearly million-dollar listing would be “one of the more budget buyers in Berkeley” and unlikely to have extra funds to electrify the house. So the sellers are considering spending as much as $9,000 to replace some older wiring to increase the home’s BESO score.
“We’re really excited any time we get listings that already have these upgrades because then we do advertise that,” she said.
Woody writes for Bloomberg.