How do solar panels impact house prices? This question has come up many times so we thought we give our two cents on the topic. We are only discussing Ontario market, however these concepts may apply to most solar markets with similar rules.
There are essentially two ways a solar system is installed in Ontario: Self Financed or Third party financed.
Homeowner Financed
When a system is installed on a rooftop under the MicroFIT program, homeowners earn $200-$300/month on average from the electricity sold to the grid at premium rates. All electricity is sold to the grid under the MicroFIT program. This scenario would increase the value of house as a solar system acts similar to a basement apartment. Revenue from a house means mortgage payment is partially offset so a potential client is willing to pay more to purchase this house. This is a no brainier even if a homeowner uses a line of credit or other loan. House prices will increase.
Third Party Financed
Since the up front cost of a system is roughly $20-25,000, many homeowners were not able or willing to participate. Some solar companies took advantage of the opportunity and created their own “Solar Programs” that were “free” to the homeowners to combine with MicroFIT. Solar companies partnered up with financing companies and offered to install solar panels for free and benefit from the MicroFIT program and pay the homeowner “rent” for the use of the roof. In many cases these payments are a meager $20-$50/month for a 20 year contract. Some homeowners were (or still being offered) a one time incentive of around $2000-$4000 and nothing else for 20 years. Solar companies also have very strong provisions regarding the use of roof eg. they can cut down trees on the property if they are causing shade on the panels.
.
So homeowners that have “rented” their rooftop for a small amount of money do have a disadvantage in the housing market. Not only the rent is low, homeowners have also given up their roof or part of it for 20 years. This may count as an asset to a prospective buyer and potentially lower the price of the house or not increase it at all or the increase may be negligible.
.
Bottom line is if a solar system is installed on the home and it is generating electricity that benefits the homeowner directly then it would increase the house price. Key is to find out who the main beneficiary is, the homeowner or a third party.
Other Factors to Consider
- Size of the solar system
- Exposure to sunlight
- Grid Connection or Off Grid
- Location of the house