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Realizing the Net-Zero Opportunity

Social equity and affordability are key elements for long-term success

This three-bedroom, two-bathroom house in Richmond, California, is one of 50 homes the city hopes to refurbish to net-zero energy standards with the proceeds of a $3 million bond. Once renovations are complete, the houses will be sold.
Image Credits: Rosalind Welch / Richmond Community Foundation

Think of a net-zero energy (NZE) home, and it’s likely that you imagine a single-family house in a well-to-do neighborhood, with a roof covered in solar panels and an electric car parked in the driveway. This is a pleasant picture, but it highlights two underlying assumptions many of us have: that NZE homes are available only to the wealthy, and that new-build, single-family homes in nonurban settings are best suited for NZE.

A panel of experts who convened at the 2018 Getting to Zero National Forum, April 17–19 in Pittsburgh, posited that NZE residences can — and should — create the greatest benefits to the populations who we perceive can afford them the least. And, if the NZE industry is going to be successful in the long run, social equity needs to be central to how municipalities, planners, designers, engineers, and financiers develop solutions that enable underserved populations to access NZE residences.

Why social equity is important

Consider these statistics: Low- and fixed-income families bear an undue energy burden, with electricity costs accounting for up to 20% of their household incomes. Disadvantaged populations are also more likely to suffer from the health effects of bad indoor air quality, such as worsened asthma or allergy symptoms. Poor housing conditions are making poor families sick, and high energy costs are perpetuating cycles of poverty.

Meanwhile, in the U.S. and globally, we’re experiencing two demographic shifts. First, people are urbanizing at an unprecedented rate. More than 70% of the world’s population will live in cities by 2050. Second, populations are aging. For example, the number of Americans aged 65 and older is projected to more than double from 46 million today to over 98 million by 2060. The need for more housing in city centers for people who have unique needs for walkability, transportation access, and proximity to health services is making big changes to the density and livability of our cities.

So, what does this all have to do with NZE? Net-zero energy residences — panelists agreed — can uniquely deliver affordable and healthy housing solutions given their low cost of ownership (owners or tenants have little to no utility bills) and their high quality of construction. Yet in order to deliver on the benefits of NZE for all, not just for some, three key issues must be prioritized:

  • Addressing the loss of affordable housing that continues to accelerate in urban centers, and addressing the implications for social equity in people’s access to high-quality, healthy housing.
  • Scaling financing and technology solutions that enable NZE to be more rapidly developed (in both existing and new buildings) and therefore accessible in these markets.
  • Inspiring communities to adopt an NZE approach even if it seems unconventional and cost-prohibitive at first.

Erica Dunn, executive director at Green Hammer; Barry Hooper, green building and environment senior coordinator for the San Francisco Department of the Environment; Brett Webster, project manager at Energy Solutions; and Katrin Klingenberg, executive director of Passive House Institute US (PHIUS) spoke to real-world examples of methods and programs that have addressed these key issues, and serve as inspirational models for how NZE can hit the triple bottom line: people, planet, and profit.

Addressing affordable housing in Portland, Oregon

Green Hammer’s efforts in Portland serve as an example of how to harness the trends of increased urbanization and an aging population to provide socially and environmentally beneficial housing options. In the greater Portland area — as in many urban centers in the U.S. — affordable housing developments are dense four- to five-story buildings designed with the idea that quantity should trump quality.

Such buildings lead to conflict and pushback in neighborhoods where this scale of development is not characteristic (e.g., a city block that is otherwise dominated by two-story historic buildings). Meanwhile, these buildings are inappropriate for aging residents, who may have trouble climbing multiple flights of stairs or face other mobility issues.

This prompted Green Hammer to ask the question, “How can we densify our cities to create affordable and accessible solutions for underserved populations?” The answer was what they call “missing middle housing” — housing options that carry the benefits of multiunit/multifamily housing but are built on a smaller footprint, are elder-friendly, foster a sense of community while respecting the current urban form, facilitate transit, and are affordable thanks to NZE strategies.

So far, Green Hammer has worked on three missing middle projects, one of which is the Oaks at Rose Villa, a full NZE senior community. To get units to net-zero energy (or “zero”) efficiently and affordably, they use three strategies: first, they set a goal and design-build to zero from the outset, using building energy modeling to monitor the effect of design changes on energy consumption throughout the process. Second, they use Passive House strategies, prioritizing a tight and well-insulated building envelope and high-efficiency systems to keep energy use down. Third, they have a strong feedback loop between the design and construction teams for evaluating cost-effectiveness and energy use.

Green Hammer also recommends code policies that enable the subdivision of existing single-family parcels or auxiliary unit development on these parcels. Green Hammer alluded to a study that found that, if just one single-family residence per residential block in San Francisco developed an auxiliary dwelling unit on-site, the amount of housing developed would far exceed that zoned for affordable housing developments in the city.

Scaling financing and technology solutions

A program in Richmond, California, provides a unique example of how innovative financing solutions can solve a community-wide problem and encourage NZE. The City of Richmond faced a big challenge — 7% of its housing stock is abandoned and dilapidated, due to the impacts of the financial crisis, deceased owners, or delinquent taxes. This creates issues for the city and neighborhoods like increased crime, lower home values, and lost tax revenues.

To address this, the city launched a program in partnership with a local nonprofit, and issued a $3 million social impact bond for retrofitting abandoned homes to NZE standards, with the goal of preparing 50 single-family homes for resale. Issuing these bonds is an emerging strategy that blends private investments with projects that generate positive social impact. A competitive bidding process resulted in a local bank (Mechanics Bank) buying the entire bond at 0% interest, providing the program with the up-front capital it needed.

The Richmond Community Foundation facilitates the program from acquisition to sale of the properties. Homes are fully rehabilitated and retrofitted to NZE and then sold at an affordable price to first-time homebuyers who are graduates from SparkPoint Contra Costa, a program focused on providing opportunities for low-income families, including preparing them to be responsible first-time home buyers.

According to Webster of Energy Solutions, the program’s well-documented social, environmental, and economic impacts allowed them to attract the widest possible array of partners and funding opportunities, ones that wouldn’t have come to the table if affordability and equity weren’t core to the program.

Inspiring communities to adopt NZE

A mere 18 miles from Richmond, another Northern California city is serving as an inspirational leader in NZE but faces a much different challenge. The San Francisco metro area is one of the most competitive and expensive housing markets in the country. Yet the San Francisco Department of the Environment is embarking on an innovative program in partnership with Rocky Mountain Institute, the Association for Energy Affordability, the California Housing Partnership, and others to launch REALIZE. REALIZE will pilot and scale a groundbreaking new approach to retrofit the city’s affordable housing stock to NZE at no up-front cost to homeowners.

California has set aggressive goals for the building sector, calling on all new residences to be NZE by 2020, and energy efficiency in existing buildings to double by 2030. So far, more than 3,800 NZE housing units have been completed and documented statewide, of which only 40 are retrofits of existing buildings. This total is only 0.8% of California’s building stock, leaving big opportunities on the table. To address this, the City of San Francisco and its partners looked to a program based in the Netherlands — Energiesprong — as a model that can simultaneously meet social equity goals (comfort, safety, and affordability) and the city’s and state’s ambitious climate targets and mandates.

Energiesprong approaches NZE retrofits in a fundamentally different way. Selling retrofits as a product (instead of in the traditional and complicated service-plus-product approach) required Energiesprong to look at how anything sold at a high volume could be attractive, minimally disruptive, and affordable, and have its performance guaranteed.

According to Hooper of the San Francisco Department of the Environment, the guarantee presents the most significant barrier in delivering NZE retrofits at scale, as this is fundamental in financing energy savings. Traditionally, lenders have not been able to trust performance guarantees, contractors don’t want to provide guarantees, and construction timelines are variable. “Offering volume is a great way to reverse all of these conditions,” said Hooper. “If we can aggregate demand and put forward a guaranteed volume of sales and performance level, lenders can trust revenue streams coming in, and occupants can get a guarantee of affordability.”

The team now hopes to begin to identify affordable multifamily housing throughout the state that can be aggregated and presented to an organized network of designers and engineers, manufacturers, and contractors who would deliver predesigned, partially prefabricated NZE retrofits. The team will also work with the financial services industry to identify funding solutions that support the model.

While this model is truly groundbreaking, it does promise to offer a unique, affordable, and high-quality product to homeowners, opening up the potential for NZE to markets that would have never otherwise considered it — and providing a replicable model for other cities, counties, or states across the country.

The importance of performance standards

These examples represent those pushing the envelope in affordable NZE programs, but the panel agreed that any city leader could start along the path toward affordable NZE housing by setting a minimum performance standard. Several cities have already begun to do so. And so far 14 housing finance agencies have included Passive House standards in their quality assurance provisions. According to Klingenberg of PHIUS, the incremental cost for meeting Passive House standards on a new building is hitting close to zero, making this type of policy requirement easier to swallow for developers and builders.

Klingenberg also announced at the conference that PHIUS has developed the country’s only climate-specific passive building standard for both new construction and retrofits, supporting rigorous climate goals while making passive building more rational and cost-effective. It relies on prescriptive requirements, based on on three pillars: limits on heating/cooling loads (both peak and annual), limits on overall source energy use, and airtightness and other prescriptive requirements.

Passive House standards based on building size and occupant density drive cost-effective NZE by allowing teams to properly invest in climate-appropriate, passive strategies to reduce the energy use of their projects first, before considering the on-site energy supply. It is therefore no surprise — as Klingenberg pointed out — that the nation’s largest PHIUS-certified project is an affordable housing project.

© 2018 Rocky Mountain Institute. Published with permission. Originally posted on RMI Outlet.

4 Comments

  1. Andy Kosick | | #1

    ...because somebody needs to commment on this
    It's not as gripping as arguing about BIG houses, but this is what really counts. How will we make our existing housing stock sustainable and affordable?

  2. User avater
    Peter Engle | | #2

    Thanks Andy
    Andy,

    Thanks for starting the conversation. It is interesting that asking wealthy people to restrain themselves just a little evokes so much interest, but providing market-driven services to improve the lives of low and middle income people while still providing attractive returns for investors earns nothing but silence.

    My thought when reading the article was mostly about the difficulty of providing volume-scale, "predesigned, partial prefabricated" retrofits. With each building being substantially different and requiring individual customized attention at all levels of the process, I think i don't have the vision to see how a predesigned and prefabricated solution is likely to work.

    Certainly this has been one of the biggest challenges to retrofitting at any level of energy efficiency. Applying economies of scale to a custom process is not a simple task, and never has been. Doing it on a volume basis to reliably reach NZE is a daunting task.

    I certainly wish them the best of luck.

  3. Andy Kosick | | #3

    been a while but wanted to follow up...
    I agree that the "predesigned, partial prefabricated" seems difficult to apply in my area as well but I should try to find information on the details of this process. A more likely solution around here would look like a comprehensive but adaptable system that's tested to high performance standards. The system would show repeatable results but wouldn't be prefabricated. The big difficultly I see is that it would require well trained crews with detailed knowledge of whole house performance and that's a leap from where we're at right now. It could be done though.

  4. Malcolm Taylor | | #4

    Great conversation
    Andy's comment about the necessity for well-trained crews brings up a larger point. I hear this in every field. The demand for educated workers has increased, and I wonder whether as a society we will be able to provide the number of smart, skilled people the new economy demands?

    If so great. It opens up the possibility for more sophisticated approaches to the problems we face. If not, then maybe the solutions we propose have to take into account the realities of the workforce, and be tailored to their skill levels and understanding.

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