Homeowners opt to renovate for various reasons, from improving the home’s functionality and market value to adding custom and modern features. In addition, eco-conscious homeowners can reap the benefits of energy-efficient upgrades designed to maximize their return on investment. Green renovations with the highest ROI blend cost savings and an increased market appeal to serve homeowners in the short and long term.
The research team at This Old House analyzed data from the U.S. Department of Energy, the National Association of Home Builders (NAHB), the National Association of Realtors (NAR), Zillow, Energy Star, and the Journal of Light Construction (JLC) to discover eco-friendly home renovation projects with the highest return on investment. We also consulted with industry experts to share their opinions on green renovations homeowners can undertake to increase their home’s value and appeal.
Renovating your home with the environment—and your wallet—in mind often begins with pinpointing energy leaks and finding the right experts to help you solve them. Over time, high utility bills can far outweigh the upfront cost of energy-efficient windows, especially considering the cost savings they offer post-installation. In addition, the best solar companies can show you how much energy and money switching to alternative energy could save you.
Key Takeaways
- Americans could be wasting 10%–20% of their annual energy spend if their home is not energy efficient, according to the Department of Energy.
- Tax credits and rebates are offered for homeowners who invest in eco-friendly projects.
- Solar panels added an average of 4.1% to the resale value of homes, according to a Zillow study, and have an average payback period of 6–10 years.
- Energy-efficient windows and doors can save homeowners 13% on heating and cooling costs, according to Energy Star. Replacing your front door with an energy-efficient steel door has an 188% ROI, according to the Journal of Light Construction.
- Smart home automation devices—such as smart thermostats and smart lighting—can help a home sell faster and add up to 5% of the property’s resale value, according to Innovation Opportunity Investment.
Benefits of Going Green in the Home
“Anything that any of us can do to limit the amount of energy we waste and the greenhouse gases we expend is a good thing for the planet and therefore ourselves,” says Aidan Charron, associate director of Global Earth Day at EARTHDAY.org. In fact, Americans could be wasting 10%–20% (up to $400) of their average $2,000 annual utility bill if their homes are not energy efficient, according to the Department of Energy.
Making your home more energy-efficient also reduces some of the costs associated with homeownership. The following energy-related home improvements can help homeowners save a substantial amount on utility bills:
- Sealing air leaks can save you up to 30% annually
- Installing energy-efficient windows, doors, and skylights can reduce heat loss by up to 50%
- You could be losing up to 60% of heated air before it reaches the register if your ducts aren’t insulated
- New lighting technologies can reduce your lighting energy usage by up to 75%
Homeowners who want to reduce their energy use can also take advantage of tax credits and rebates through several home energy efficiency incentive programs. Residential Clean Energy Credits enable homeowners to claim up to 30% of the cost of purchasing and installing energy-efficient systems in their homes. The Energy Efficient Home Improvement Credit allows homeowners to claim up to $3,200 annually, according to the NAHB.
While tax credits can lead to cost savings down the road, rebates can lower the upfront costs of increasing your home’s energy efficiency. Most home energy-efficiency rebates are handled at the state level, requiring homeowners to review their eligibility and submit applications, complete with detailed records, through the respective energy department or an approved contractor.
Improving your home’s energy efficiency can also pay dividends when you list it for sale. More than half of realtors have observed that prospective buyers find energy-efficient information appealing in property listings, according to a NAR study. Energy-efficient homes can also command a 3%–5% higher sales price than similar, less-efficient homes, per Freddie Mac.
Sustainable Home Improvement Projects
From installing solar panels to adding insulation, sustainable home improvement projects enhance efficiency while often qualifying for rebates or tax incentives. Many eco-friendly upgrades, such as energy-efficient windows and smart home energy systems, also improve comfort and convenience. Explore projects below that could provide long-term savings and environmental benefits.
Installing Solar Panels
“If you want to install solar panels so you can stop using fossil fuels, it will have an initial upfront cost, but if you add a battery storage option to your system, you can effectively unplug [from] the fossil fuel industrial complex and really make a difference,” says Charron.
Installing solar energy systems can increase home values by an average of 4.1%—the equivalent of a $9,274 increase for a median-valued home—according to Zillow. Prospective buyers likely recognize the value of future energy cost savings, as the average solar payback period ranges from 6–10 years, and most solar energy systems come with 25-year warranties.
Solar energy accounted for two-thirds (66%) of all new electricity-generating capacity added to the U.S. grid in 2024, according to the Solar Energy Industries Association (SEIA). Texas, California, and Florida were the top three states where the most new solar capacity was installed. The top five states that offer the biggest solar savings are listed below:
| State | Installation Costs (After Savings) | Payback Period | Rate of Return |
|---|---|---|---|
| Massachusetts | $9,480.50 | 5.13 years | 19.5% |
| California | $10,668 | 4.14 years | 24.16% |
| New York | $6,519 | 4.2 years | 23.8% |
| Arizona | $7,809.92 | 4.92 years | 20.31% |
| Connecticut | $7,335.21 | 4.19 years | 23.89% |
As a baseline, an 11-kilowatt solar panel system for an average home ranges in price from $17,238 to $23,235 after the federal tax credit has been applied, according to EnergySage. The final cost of installing solar panels incorporates the following factors:
- Solar panel type, inverter quality, and mounting system
- Roof angle, condition, and accessibility
- Home’s geographical location
- Permit fees
- Tree removal
- Interest (if you opt for financing a solar loan)
- Tax credits and rebates
Federal, state, and local solar tax credits and rebates can lower the cost of installing solar panels by up to 40%–70%. Equipment and installation expenses qualify for a 30% federal savings, and homeowners can receive credit for sending power back to the grid in states that use Solar Renewable Energy Certificates and net metering programs. Local solar incentives can further reduce costs by up to 20% via community initiatives or through installation rebates.
Installing Energy-Efficient Windows and Doors
Homeowners who upgrade from single-pane to energy-efficient windows can save up to 13% on their household energy bills, according to Energy Star. Storm windows can reduce heat loss by up to 50%, according to the Department of Energy. Most new windows last 10–50 years.
Energy-efficient windows offer several benefits, including minimizing heat transfer, lowering your energy bill, and prolonging your HVAC system’s life. The average cost of an energy-efficient window is $2,450. However, depending on the type and size of the window, the type of glass, and the materials used, the price can range from $287 to $4,614, according to Fixr.
New wood and steel doors also start at around $150 per door. Fiberglass-composite doors start at around $200 but can cost up to $4,000 for a fully loaded entry system. Aluminum doors begin at around $300 per door.
Replacing old windows with new vinyl and wood variants results in a 67% and 63% cost recovery, respectively, according to the JLC. Homeowners who opt to replace their front door with a steel variant tend to see a 188% cost recovery. Upgrading to a fiberglass grand entrance upscale results in a 97% cost recovery.
Adding Insulation to Basements, Attics, and Crawl Spaces
“Of course, sealing windows and doors improves insulation and reduces energy bills, too,” says Charron. However, nine out of 10 homes in America are under-insulated, according to Energy Star. Installing insulation in the attic, crawl spaces, and basement also reduces the amount of noise, dust, pests, and pollen that penetrates your home’s interior.
Insulating your home and sealing air leaks can save you up to 10% annually on your energy bills. Upgrading your home’s insulation results in 100% cost recovery, according to the NAR. Additional benefits include increasing your home’s comfort and durability, reducing energy costs, and creating a healthier indoor environment, according to the Department of Energy.
Installing Smart Home Energy Systems
Installing smart home energy systems that incorporate Internet of Things (IoT) devices—including smart thermostats and smart lighting—can help homes sell faster and for up to 5% more, according to Innovation Opportunity Investment. “Homes with certifications like LEED or Energy Star often see higher resale values due to their proven sustainability benefits,” says Michelle Pearson, associate professor and interior design program director at Texas Tech University.
In addition to learning your personal preferences and schedule, smart thermostats provide the following benefits, per Energy Star:
- Monitor energy consumption
- Recommend energy-saving actions for future cost savings
- Reduce energy costs via automatic actions
Energy Star-approved smart thermostats can save homeowners up to 8% on their utilities, according to Energy Star. Initial costs range from around $140 to $300, while professional installation can cost up to $150 per hour, depending on who you hire to install the smart thermostat.
Smart lighting boosts energy and cost savings by turning off lights in rooms not in use, dimming lights to replicate natural light, and reducing energy use without impacting comfort and convenience. LED lighting can help homeowners consume 75% less energy for lighting, according to the Department of Energy. LED bulbs also tend to last 25 times longer than their incandescent counterparts.
Installing Reclaimed Wood Floors
Homeowners can increase their homes’ sustainability by replacing existing floors with reclaimed wood. At $10–$20 per board foot, reclaimed wood is twice the cost of new wood, but the results are often well worth it. Investing in new wood flooring results in a 118% cost recovery, according to the NAR.
Reclaimed wood also limits further deforestation, reduces carbon emissions and landfill waste, and prevents chemical pollution from processing treatments, according to Vintage Wood and Forged Iron. Homeowners can source reclaimed wood from older homes, industrial buildings, and farming structures. Pricing depends on the type of wood you’re sourcing, its condition, and any necessary processing required before use.
Replacing Your Water Heater With a Tankless One
Tankless water heaters can save the average American family $95 annually, or more than $1,800 over the 20-year expected lifetime, according to Energy Star. This type of water heater is 24%–34% more energy efficient than tank water heaters that see moderate use and 8%–14% more energy efficient than those used frequently, according to the Department of Energy. The average cost of installing a tankless water heater is $500 more than that of a tank water heater ($2,100), but the tankless version lasts between five and 10 years longer.
Final costs depend on the tankless water heater’s size, capacity, intended location, fuel type, efficiency ratings, and technological features. When used with additional energy-saving techniques, tankless water heaters can reduce related utility costs that account for nearly a fifth (18%) of a home’s energy use, according to the Department of Energy.
“By using construction and operation techniques that reduce inefficient use of energy and water, an eco-friendly home saves money today and leaves more of our natural environment undisturbed for future generations,” says Paul Crovella, associate professor at the State University of New York College.
How Can Your Home Benefit From Eco-Friendly Renovations?
Home renovation trends indicate a common thread among homeowners who want to reap the environmental and cost-saving benefits of going green. “Several factors are driving this shift, including heightened consumer awareness of climate change, rising energy costs, and government incentives for green building practices. Additionally, advances in technology have made sustainable solutions more accessible and cost-effective,” says Pearson.
Owning a green home often begins with optimizing your heating and cooling systems or integrating solar and alternative energy. Smart homes offer homeowners convenience and customized recommendations regarding their energy use, unlocking further savings through continued monitoring.
“Almost every home maintenance and renovation project can be completed with an eco-friendly component for little additional cost if there is a plan in place,” says Crovella. For example, installing a solar-powered water heater can help minimize your carbon footprint and reduce your energy bills as you shower, prepare meals, or wash your clothes. Using graywater in your toilet tanks requires recycling water from other household activities to flush waste. Even cleaning your dryer vent more often can make your home more energy efficient.
