Solar Panels Increase Home Value

Solar panels are a long-term investment, often coming with 25-year manufacturer warranties. As solar becomes more common, homeowners frequently ask how these systems, like other home improvements, affect property values.
Researchers have found that purchased home solar panels increase property values. Here’s what the research shows.

How much do solar panels increase home value?

A few studies have looked at the increase in home value adding solar panels can provide. These studies focus on purchased solar panels. Solar leases and power purchase agreements won’t have the same effect, since you don’t own the panels. More on that below.

• Homes with solar panels sold for 4.1% more on average than comparable homes without solar power. This translates to a $9,274 increase in the sale price for the median-valued US home, according to a Zillow study published in 2019.
• Solar power systems added $3.78 per watt to the value of a home on average, according to independent appraisers that evaluated home sales in California, Oregon, Florida, Maryland, North Carolina, and Pennsylvania as part of a 2015 study (PDF) by the Lawrence Berkeley National Laboratory.
• An average-sized solar array can increase the value of your home by approximately $15,000, according to data assembled by the Office of Energy Efficiency and Renewable Energy (EERE). The actual increase will depend on several factors including location, electricity rates, and system size, but it’s no surprise that 47% of homeowners have installed or are considering installing solar panels, according to a 2022 Pew Research Center survey.
• Energy efficiency measures can add an incremental home value of about $10-$25 for every $1 reduction in annual energy bills, according to a study (PDF) by The Appraisal Journal. This study was completed in 1999, showing that lower bills leading to higher home values isn’t a new trend.
• Home listings with solar power are on the market for 13.3% less time and are 24.7% more likely to sell for over the asking price when compared to non-solar homes, according to data from Rocket Homes.

These studies all demonstrate solar panels can have a significant return on investment in addition to the monthly savings they can provide.

How solar panels increase your home value

Solar panels might make your home more valuable in a few key ways.

• Lower monthly energy costs
• Reduced carbon footprint
• Increased energy independence

Factors influencing your home value with solar

There are four key factors to consider when evaluating how much solar panels can increase the value of your home.

Location

Value increases can depend on the location of the home, as shown by the Zillow study. For example, homeowners in Riverside, California, enjoyed an average price premium of $9,274, while those in Orlando, Florida, saw a boost of $10,994. Hot markets such as Los Angeles and New York City experienced double the value increase at $23,295 and $23,989, respectively. At the high end of the market, those in San Francisco enjoyed a value increase of $41,658, or a 5.4% premium over non-solar homes.

Savings potential

Homeowners can use solar energy to lower their monthly energy bills by offsetting some of their electricity needs with the power generated by their solar array. Given the research showing increased value due to energy bill savings, it’s possible that the greater savings solar provides, the greater boost to property values.

Installation costs

The research cited above doesn’t cite buyer motivations that drive them to higher prices, but it’s possible they’re jumping at the chance to get solar without having to go through the purchase and installation process themselves.

Environmental values

Homeowners may also be motivated by the opportunity to have their new home reflect their environmental values, reducing their carbon footprint and their contributions to climate change.

Will solar panels increase my property taxes?

Purchased solar systems can increase property values, and when property values increase, so do property taxes. Solar property tax exemptions in some states and localities mean that when solar panels raise your property values, they won’t raise your taxes.

Here’s a rundown of states where solar property tax exemptions have been reported, though you should confirm your state’s policies with a tax professional.

Note: The details of property tax exemptions may vary by state and over time. Ensure you know how your state's exemption works and consult your own legal and tax advisors.

Leased solar panels and property values

Solar panels you own can raise the value of your home. But what effect do solar leases and power purchase agreements, when a third party owns the panels on your roof, have on property values?

While less research into the effect on property values of third-party owned solar panels, the existing research says that leased solar panels do not increase property values. In fact, the Federal National Mortgage Association, also known as Fannie Mae, says that third-party owned solar panels “ cannot be included in the appraised value of the property.”

Before you lease solar panels for a house you plan to sell before the term is up, be sure you understand the requirements for selling your house with leased panels.

Solar and home value FAQs

How much value do solar panels add to your home?
Data shows home value usually increases when homeowners add purchased solar panels to their homes, though the full effect varies by home and region. A number of states provide property tax exemptions and other incentives or credits for installing a solar system, so these programs help the short- and long-term value of going solar.

Is it harder to sell a home with solar panels?
Again, while there is no one-size-fits-all answer, studies show it is easier to sell a home with an owned solar energy system, with a higher sale value on average.

How long will it take for solar panels to pay for themselves?
While you may see lower electricity bills in the short term, it will take time to break even and see the full return on your investment for purchased solar panels. You can read our guide on estimating the solar panel payback period. A common estimate of the average payback period for solar panels is 6-10 years. For leased solar panels, which don’t require the large upfront payment of a purchase, you could start saving in your first month.

Disclaimer: This content is for educational purposes only. Palmetto does not provide tax, legal, or accounting advice. Please consult your own tax, legal, and accounting advisors.