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Business Advisor

Will Certified Green Homes Ever Serve Middle America?

Affordable green homes are nothing new. But there aren't any for the middle-class home buyer.

Custom high-performance certified green homes? Been there, done that.

If you already build a decent custom home that is anywhere near Energy Star certified, getting it green should be reasonably easy to do and cost you less than $1 per square foot. It’s not really breaking new ground in most communities anymore to build a nationally certified custom green home, unless it’s a freakishly designed emerald- or platinum-level zero-energy home. In short, the custom market in housing, like the custom segment in many industries, is leading the way when it comes to integrating green design details, products, materials, and construction methodologies that will ultimately become mainstream.

Now, logically, these practices should be trickling down to semicustom and high-end production homes for the middle class, right? And as they become more widespread and costs drop, the final frontier will be starter homes, workforce housing and government-subsidized housing, correct? Well, my experience shows that the middle market is being left behind as low-income housing jumps to the front of the race to build nationally certified green homes.

In the last year alone, we have priced out 200 LEED-certified Section 8 townhouses that came in at less than $70 per square foot, including a gross profit of approximately 12%. We are currently working on the pricing of 95 single-family homes considered LEED/NGBS-certified workforce housing, and they are coming in very close to the same cost and gross profit return. How is this possible?

The home-size adjuster in each program is what makes it possible. In essence, there is a sliding scale that compensates for the effect of home size on resource consumption. All else being equal, a larger home consumes more materials and energy than a smaller home over its life cycle, so both programs adjust their awards threshold points in each category based on the size of the home. Thus, smaller-than-average homes require fewer points to reach a given award threshold than larger-than-average homes.

The average home sizes for the LEED program are 1900 square feet with three bedrooms, 2600 square feet with four bedrooms, and 2850 square feet with five bedrooms. The NGBS also applies bonus points to the scoring for smaller-than-average homes. The bottom line is that the ratio of a small home to a large number of bedrooms has a much easier time reaching any given point threshold in either program than does the ratio of a large home to a small number of bedrooms.

And that’s the key to how we are making green affordable in the workforce housing and/or low-income market. These houses are smaller and they have lots of bedrooms. That makes them a lot easier to certify. A 1700-sq.-ft. townhouse with four bedrooms gets a 10-point credit and only needs 35 points to be certified. At that point, it becomes a footrace to the least expensive way to get those points. But does that make it greener? That’s the topic of my next blog!

9 Comments

  1. ROY HARMON | | #1

    Michael
    What does LEED stand for?

  2. User avater GBA Editor
    Martin Holladay | | #2

    Response to Roy
    Roy,
    LEED = Leadership in Energy and Environmental Design.

    Read more here:
    LEED for Homes

  3. Anonymous | | #3

    What's LEED? What's NGBS?
    Thanks Martin! Like the NGBS (National Green Building Standard) of the NAHB (National Association of Home Builders) LEED is nationally recognized green building program that enables building owners, designers and builders to work together towards common green building goals within their budget parameters on a given project.

    Depending on whether it is a LEED project or a NGBS project it may be the renovation or new construction of a home, commercial building, school, warehouse, neighborhood, hospital etc... to name a few of the many building types. For mor einformation on the NGBS go to http://www.nahbgreen.org

  4. TC Feick | | #4

    home size penalty
    Michael- I agree; shrinking home size helps certification efforts, however, LEED is really the only program where it substantially matters. NGBS penalizes larger homes at about 10% of what LEED for Homes does. The points are about the same, but the scale is much, much different between the two programs. In fact, NGBS has no scale for number of bedrooms, and the below grade portion of any building is not included, so finished basements get a free pass in SF calculations. I think LEED definitely has the right approach here.

  5. Jay Waterman, LEED AP BD&C/HOMES | | #5

    Article missing the point
    Michael, thanks for the article. I think you are missing some key reasons why affordable housing is being built green these days. 1) Virtually all 50 states now have green building requirements, if not LEED certification requirements, in their main production programs for subsidized rental housing; 2) affordable housing has numerous funding sources that are available for the production of housing that middle income housing does not have; 3) many municipalities are requiring projects that receive local state or federal funding (affordable) to meet LEED or some other green standard; 4)Many affordable developers are non-profits who see part of their mission to provide sustainable, healthy housing to a vulnerable population that has historically spent 30% of their income on utilities alone, has lived in unhealthy housing in locations that are often environmentally contaminated.

    Middle income housing (for households earning 80-120% of the area median income) has few of the above carrots or sticks pushing the developers toward green practices. For this huge, middle sector to build more sustainably, we will need more incentives as well as mandates for better built homes across the spectrum of all housing: long overdue.

  6. User avater
    Michael Strong, LEED Associate, CGP | | #6

    Finding the Missing Points
    Nice addition to the blog Jay. All the points you made are on target and certainly are making the difference for affordable housing to lead the middle market in going green and I appreciate you adding them to the discussion. That said I believe were it not for the home size adjuster many of the affordable homes being certified green for the reasons you mentioned would in fact not get certified because the additional points required would stress the budgets too much. I think your four reasons get the projects to the starting line but the home size adjsuter is what enables them to take off!

    I am trying to get the high end custom green builder to think outside the box they are working in and see what other market segments are going green. With the affordable market segment as strong as it is I think they need to see if they cannot leverage their green expertise to win some of these projects. I have found our middle income market flat this year and am looking at the affordable segment in the year ahead for any growth. If other green builders do not realize the home size adjuster makes it easier (and less expensive) to get the home certified they may not look twice at the opportunity they present.

  7. Jay Hersh | | #7

    Green Building, is there really a cost benefit?
    OK, this is going to sound somewhat controversial but I've been in the process of designing a new home to be built in northern VT. Martin Holladay and others have been very helpful in giving me advice.

    I had previously thought I would build a passive solar house with triple pane windows and polyiso SIP R-40 walls and R-50 roof over a timber frame. That was until I recently downloaded REM/Design and started plugging in numbers.

    The windows I've been most closely looking at are from Inline because unlike most American manufacturers they offer windows which appear to balance the U and SHGC to maximize passive heat gain. I also looked at Thermotecs but the price/performance ratio is better for those from Inline as best I can tell. For my house design it looks like triple panes will run around $5000 more than double panes. At current energy prices REM/Design calculates the savings for this at $170/yr. That's a 30 year payback.

    For a building with the same type of windows I compared EPS SIP (R-26 wall, R-33 roof) heating costs to Polyiso (R-40 wall, R-50 roof). Because the design isn't finalized I went off of the per sf price quotes I'd gotten for these options and calculated the area by hand using the same dimensions I put into REM/Design. As best as I can tell there is around a $10,000 cost difference between these. REM/Design shows annual heating cost savings of $226/year. That's over 40 years for payback.

    Combining these and comparing a home with double pane windows and EPS SIPs to the triple pane windows and Polyiso SIPs shows a 37+ year payback.

    Now this assumes fuel costs don't go up. But it also assumes I don't do anything with the cost savings. I checked the 20 year history of propane prices in New England and they appear to have an average annual increase of 5% for that time frame. So I applied assumptions of 5% and 10% average annual price increases for the next 20 years and then took the total additional heating costs under those scenarios and back calculated what yield I would have to get on the $15,000 I would save going with a less well insulated building.

    For the 5% average annual fuel price increase I would need to earn a 3.5% return on the $15,000 to keep up. For the 10% average annual fuel price increase I would need to earn a 5% return on the $15,000 to keep up. Both of these are lower than the 20 year average returns of stocks. The lower one is better than the 20 year average yield on bonds.

    So am I bad at math, crazy, or woefully misguided?
    Or is there really a good deal of diminishing returns in trying to build to a higher level of efficiency?

    My feeling is the latter because otherwise I'd think that a lot more people would be building to the type of higher standard I was initially considering and I'm guessing I may not be smarter than everyone else...

    What's the consensus on this?

  8. User avater GBA Editor
    Martin Holladay | | #8

    Response to Jay Hersh
    Jay,
    Although I haven't double-checked your math, the payback periods you cite sound about right.

    You've hit the nail on the head: until fuel prices take a big jump -- something different from the 5% or 10% annual price increases you are talking about -- a lot of superinsulation measures don't make economic sense.

    The people who are building superinsulated houses today are NOT interested in saving money. Their reasons for investing in a superinsulated house vary, but here are a few:

    - Some people worry that a future energy crisis will make fossil fuel hard to get or prohibitively expensive.

    - Some people want to prepare for a future economic collapse.

    - Some people want to reduce their carbon footprint to be good environmental stewards.

    - Some people are willing to pay thousands of dollars for improved comfort. (Trust me -- those triple-glazed windows are nice. When it's -20°F outside, you can sit right next to one and not feel cold.)

    Others -- perhaps like you -- may wonder whether Americans are investing too much in their houses, and wonder whether all this foam and all these fancy windows are a good use of the world's resources. Good questions!

  9. Jay Hersh | | #9

    Thanks for the sanity check
    Thanks for the sanity check Martin. It's good to hear I haven't forgotten all my basic engineering skills and totally munged the math.

    We may indeed end up falling into the category of those who spend the extra $ but I thought it was a good idea to at least make sure I understood the cost benefit trade-offs we were making if we go that route. We're definitely going to price out both approaches for the final plan so we really have a good grip on the price premium but we may end up deciding to put that $ elsewhere.

    I haven't posted it yet, but I also did a cost comparison based on three different heating system approaches stemming from our discussions in your article about heating a tight, well insulated home (https://www.greenbuildingadvisor.com/blogs/dept/musings/heating-tight-well-insulated-house?page=1#comment-21281) . It is somewhat long. I'll post it over in that topic (since it's off topic here) since some folks may be interested in what I learned.

    thanks

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