Fourth in a series of Annual Reports on the Green Building Movement, “Green Buildings and the Bottom Line” is published as the 2006 Building Design+Construction White Paper.
Under the banner “The ‘New Realty’ of Green Building, From Environmental Cause to Financial Opportunity,” for the most part the white paper examines the bottom-lines issues of green commercial, industrial, governmental and school buildings. But one chapter focuses on the green home market, and that chapter appears here.
Two thousand seven could be a turning point for the green home market. The growth in green home building should ramp up 30% over the 2006 level, with more than two-thirds of residential builders constructing green homes, according to a study by McGraw-Hill, produced in conjunction with the National Association of Home Builders.
In 2007, 66% of small builders (fewer than 10 units a year) and 59% of larger builders (10 or more units a year) will make green homes account for at least 15% of their projects. Already 90% of builders report participating in some green-building activities. Fifty local home builder association (HBA) programs are active throughout the country.
Also in 2007, LEED for Homes will join the NAHB Model Green Home Building Guidelines as a national certification program for green homes.
All of this comes in response to growing demand from consumers for homes that are more efficient and provide healthier living environments. In coming years, builders that deliver such homes will be better positioned to succeed in a soft housing market.
Homebuyers and the cost of green
According to the NAHB, the home-buying public has an unprecedented level of awareness of environmental issues; thus, forward-thinking builders and developers can use the public’s awareness to their advantage.
The majority of buildings (56%) report that buyers are willing to pay more for a green home, but 79% say they still worry about a buyer’s reluctance to pay more. As many as 82% of builders cite higher first costs as an obstacle to building greener homes (chart 7.1).
With the current downturn in the housing market, builders are even more concerned about adding costs that might not be absorbed by the home buyer. Many are wondering if now is the time to go green. While the survey of homebuilders reports that, on average, the cost of green home construction was perceived to be 8.7% higher than traditional home construction costs, 37% of respondents said green construction would add 5% or less. Another 33% cite a green premium in the 6-10% range.
However, the NAHB cautions its members against short-term thinking in this department. By 2010, the homebuilder organization states, green construction should account for 5-10% of all new homes. For the residential market, that translates to $19-$38 billion worth of construction.
One of the largest sustainable residential projects in the country is Noisette, a 3,000-acre development in North Charleston, S.C., with 4,000 new homes, 5,000 rehabbed homes, and five million sq. ft. of retail, industrial and commercial space.
John L. Knott, Jr., president and CEO of Noisette Company, says that building sustainable and green homes need not cost more in terms of total development budget. Additional costs in the design and planning stages may add 1% to the total budget, but that cost can usually be offset by significant reductions in site and infrastructure costs, often leading to superior building performance, efficiency and durability. Knott also says that homes designed from the outset with an eye toward sustainability can realize operating and maintenance cost reductions of 50% or more.
Homebuyers may not necessarily understand or care about “sustainability,” or “green” homes, says Knott, but they do appreciate long-term durability, a healthier living environment and reduced energy costs. (The EPA says the average American family spends $1,291 a year on home energy; the NAHB says it’s more like $1,600.)
In fact, consumer demand is viewed as the most important reason (55%) why the residential market is getting so much greener (chart 7.2). Of those surveyed builders who are working on green homes, 88% said they are being pushed to do so by consumers seeking out more efficient, healthier homes.
Builders in the survey cited energy efficiency (82%) and indoor air quality (66%) as the two areas home seekers value most. To maximize profit from green homes, builders need to consider upgrading insulation, HVAC systems, windows and doors in their projects (and also specify energy-efficient, Energy Star appliances).
One note of caution: Buyer preference for different green elements varies based on geographic differences. The best tactic seems to be to offer a basic, appealing, well-constructed home (homes perceived as weird or too
complex will repel buyers) and allow buyers to add green options as their interests and budgets allow.
That’s the tack taken by McStain Neighborhoods of Denver, which puts up about 400 homes a year. The firm follows guidelines established by the Built Green Colorado program. All of its homes start off green but can be made even greener with buyer options, including reclaimed flooring, solar electric systems and recirculating hot water.
Company president/CEO Eric Wittenberg says McStain green homes have a resale value about 4-11% higher than traditional homes. To maximize resale value, the builder provides owners with a “green kit” that helps them explain the benefits of their green homes to potential buyers.
NAHB’s Green Home Guidelines
Local homebuilder associations are reporting significantly increased builder interest in green homes driven, they say, by consumer demand. In 2005, the NAHB, which represents more than 225,000 residential construction members, including nearly 75,000 home builders, released its Model Green Home Building Guidelines (www.nahbrc.org/greenguidelines) for HBAs that don’t yet have their own programs but are looking to create them.
The guidelines borrow heavily from established homebuilder programs, such as Built Green Colorado, EarthCraft Home (Atlanta) and Green Building Program (Frisco, Texas) and were developed by a group of more than 60 stakeholders—not only builders, but also environmentalists and government officials. The guidelines are still under review, with a final checklist available in early 2007.
Local HBAs manage the programs and can tailor them to local conditions and market demand. Points are awarded in seven categories: lot design, preparation, and development; resource efficiency; energy efficiency; water efficiency; IEQ; operations, maintenance, and home-owner education; global impact; and site planning and land development (chart 7.4). There are three certification levels: Bronze, Silver and Gold (chart 7.3).
Emily English, the NAHB’s green building program manager, says she has some anecdotal evidence that builders adhering to the guidelines are experiencing fast-track permitting, lower permitting fees, insurance breaks and access to land and building sites they wouldn’t have had access to without having committed to using the green guidelines.
The NAHB Model Green Home Building Guidelines program is national in scope, but is applied at the local level and is aimed at the mainstream building market, according to English. HBA programs do not require third-party certification.
LEED for Homes gets a trial run
Following the LEED-NC model, LEED for Homes (www.usgbc.org/leed/homes) theoretically is targeted at the top 25% of the residential market—the market leaders, innovators and risk takers—including multifamily properties. (Multifamily buildings of more than three stories may also qualify for LEED-NC certification.) Currently, LEED for Homes involves 85 custom builders, 15 affordable homebuilders, 10 production builders. Still in its pilot phase, LEED for Homes should emerge as a fully chartered program in 2007.
That so many custom builders are involved in the LEED for Homes pilot program is a strong indication that high-end consumers are willing to pay for green benefits. Custom builders (and their clients) are also less likely to be put off by LEED certification costs, ranging from $500 to $2,000 per home, according to the USGBC. Those costs could deter many production builders from seeking LEED certification, especially if homebuyers don’t recognize the LEED name and therefore aren’t willing to absorb its costs.
In addition to the homebuilders themselves, 11 LEED for Homes providers (see end of article for list) were selected for the pilot program based on their record of assisting builders to go green. These 11 providers will work with builders to deliver LEED homes during the pilot phase; they will also arrange for performance tests and, once points are verified, will issue ratings certificates.
LEED for Homes awards points in seven categories: Location and Linkages (LL), Sustainable Sites (SS), Water Efficiency (WE), Indoor Environmental Quality (IEQ), Materials and Resources (MR), Energy and Atmosphere (EA), Homeowner Awareness (HA), Innovation and Design Process (ID).
LEED homes can be rated at four levels (chart 7.7): Certified (30-49 points), Silver (50-69), Gold (70-89) and Platinum (90-108). So far, 180 single-family homes and 400 multifamily units have earned LEED ratings, according to the USGBC.
When it comes to third-party endorsements, buyers tend to put more value on locally recognized programs (generally those associated with local homebuilding associations) rather than LEED. McStain’s Wittenberg advises other builders to choose a program that consumers value. His company is participating in the LEED pilot, but Wittenberg says he is reserving judgment on whether to move ahead with LEED certification because homebuyers don’t recognize the LEED name yet.
Building affordable green housing
In the affordable green rental housing market, the driving forces have been socially motivated community groups and builders.
New York City-based Jonathan Rose Companies, in partnership with the nonprofit Harlem Congregations for Community Improvement Inc., is developing the 80,000-sq. ft., 85-unit David and Joyce Dickens Garden project in Harlem, N.Y., to be a model of green affordable housing.
The firm set two main goals: design a building that operates for at least 25% less than a typical multifamily building, to keep O&M costs in line for the long run; and focus on IAQ, because residents in affordable housing tend to have high levels of asthma, along with other illness, according Paul Freitag, director of the development studio at Jonathan Rose.
To do this within a tight $19 million budget, the firm sought out grant money to be able to perform energy modeling and add certain green “extras”—a green roof and a rainwater collection system. The Home Depot Foundation and the Enterprise Foundation each ponied up $50,000. (The Enterprise Foundation, along with the Natural Resources Defense Council, Global Green USA, the AIA, the American Planning Association, and other corporate, financial, and philanthropic institutions, has created a partnership called Green Communities (www.greencommunitiesonline.com), a $555 million initiative to create more than 8,500 affordable homes by 2010.)
The building’s energy efficiency was dramatically increased by right-sizing the boilers and placing them on the roof; this eliminates the stack effect, where air is drawn up through the chimney, further reducing efficiency.
Individually ventilated apartments significantly improved the building’s IAQ and energy efficiency at almost no
additional cost, thanks to the use of precast concrete plank construction for the floors and roof. These planks have voids to reduce their weight; in this case, the voids were used for the ventilation and exhaust system without requiring additional ductwork.
LEED for Homes providers
Arizona (Scottsdale, Metro Phoenix)
City of Scottsdale Green Building Program
Anthony Floyd, 480-312-4202
Davis Energy Group Inc.
Mary Westcott, 530-753-1100, ext. 11
Florida Solar Energy Center/University of Central Florida
Eric Martin, 321-638-1450
Georgia (Statewide, Ala., S.C., Va.)
Southface Energy Institute
Laura Uhde, 404-872-3549, ext. 129
Michigan (Central, western)
The Alliance for Environmental Sustainability
Michael Holcomb, 616-241-5537
New Jersey (Statewide, parts of Eastern Pa.)
Rebecca Lynch, 856-813-1474
Northeast Team (Conn., Mass., Maine, N.H., N.Y., R.I., Vt.)
Vermont Energy Investment Corporation
Richard Faesy, 802-453-5100, ext. 19
Oklahoma (Central U.S.)
Guaranteed Watt Saver Systems Inc.
Donney Dorton, 405-946-0206
Oregon (Statewide, southern Wash.)
Earth Advantage Inc.
Randy Hansell, 503-968-7160, ext. 16
Pennsylvania (Parts of Eastern Pa., Del.)
Energy Coordinating Agency of Philadelphia
Liz Robinson, 215-988-0929
Contects-Consultants & Architects
Chip Henderson, 210-824-8758
Partnership for Energy
L. Michael Lopez, 210-224-7278
Reprinted with special permission from the November 2006 issue of Building Design+Construction. Copyright© 2006 Reed Business Information. All rights reserved.