During a question and answer session at a recent industry conference, a home builder asked Moody’s Analytics chief economist Mark Zandi for his thoughts about the labor
The Case for Going Green
Green building is proving to be a viable and profitable option for many custom builders. Could it be for you?
There are many myths about sustainable, ecologically friendly building construction. Green building has historically been viewed as appealing to only a limited, fringe customer or requiring restrictive practices that would severely alter a builder's operations and cost a lot of money.
But in recent years, the buzz over green building has increased, and many myths have been debunked by custom builders who have successfully built and marketed green to mainstream buyers. The reason: green construction is, in essence, high-quality, durable, low-maintenance, energy-efficient, healthy building construction. That's not a hard sell. As many custom builders have learned, having a reputation for building green can be very good for business. And contrary to popular belief, green building doesn't have to break a custom home's budget.
AndersonSargent's zero energy home, designed and engineered by Barley & Pfeiffer Architects, generates as much energy as it uses, resulting in a zero net cost to heat and cool. It's also noted for its attractive design, proving green can be beautiful.
Photo courtesy of AndersonSargent
Green building is proving to be a viable and profitable option for many custom builders. Could it be for you?
"Even though green building has been a lot more prevalent in the press, people are still kind of confused about what it actually entails," says Margo Thompson, senior research associate at the NAHB Research Center. 'Oh yeah, green building. That's a good thing. But what is it? Well, I don't know.'"
Green building encompasses many things working together for the best possible effect on the home, its occupants and the environment.
Most green building guidelines include three basic tenets: energy efficiency, resource conservation and indoor air quality.
"Green building really stresses a whole-systems approach," says Thompson, "starting at the design phase if not at lot procurement and taking green building into consideration all the way through design, construction and the homeowner living in and occupying the home."
Green building is, by definition, good for the environment, but it also benefits homeowners' health and pocketbooks.
"We had such an abundance of oil in the '80s and early '90s that energy ceased to be an issue," says David Johnston, president of What's Working, a green building design and consulting firm in Boulder, Colo. "We got lulled to sleep. Here we are 25 years later. Had we started building the way we knew how to build in 1980 in the Department of Energy programs I was working on ... the building industry could have saved in aggregate the equivalent of the amount of oil we import from the Far East today."
Homes once affordable monthly two years ago are not today, Johnston notes. "There's something wrong with the overarching equation of how do we build a safe, affordable, comfortable home and yet do it in a much more appropriate energy-efficient way that is anticipating the future, because energy will certainly not get cheaper in our lifetime."
With the loss of incentives such as tax credits for solar power that ended in 1985, Johnson says he wants builders to see that energy efficient, green building is just good business sense.
"It's what our customers want anyway. If you put it in terms of benefits — not I-joists or cotton insulations, but comfort, affordability, health, durability, and less maintenance — that's what people assume they are getting when they buy a house."
If you don't know where to start, there are approximately 30 local and regional residential green building programs across the country to chose from. The NAHB has national Model Green Home Building Guidelines.
"The NAHB Checklist and User Guide in particular go a long way in helping builders," says Thompson, "because it gives more or less concrete examples in the different categories of green building about actual materials and technologies — and the user guide then gives some explanation."
The United States Green Building Council is in the pilot stage of its LEED for Homes program, a national residential green building certification program.
"LEED-H has very specifically positioned itself to recognize and reward the top 25 percent of builders in the country in terms of environmental stewardship," says Jay Hall, acting program manager for LEED for Homes.
Hall says the NAHB acknowledges its guidelines are best suited to builders who haven't yet looked into Energy Star for Homes, while LEED-H is appropriate for builders looking to go beyond Energy Star.
"So there are a lot of builders out there who are just thinking about going green, and quite frankly I think LEED-H would be a fairly big leap for them."
The various green programs are different in their approach. Custom builders should investigate which program best suits their needs and the green strategy they would like to incorporate.
Dennis McConnell, a custom builder and president of McConnell Homes in Atlanta, went through several local green building programs before settling on Atlanta's EarthCraft Homes program.
"EarthCraft isn't concentrated on just one thing," McConnell says. "It allows you choices. It's a lot easier to manipulate to get a good rating. The rating system is done in points, and as long as you get 150 points, you qualify."
McConnell says he prefers that type of system to what could happen: "'Gee, you don't qualify because you forgot to put in one extra fluorescent light,' which has happened to me in previous programs. This way, you plan accordingly, design your house the way you want to, and then you start looking for elements that make it fit. That makes, from a builder's perspective, for a much easier program to participate in."
Some diligent custom builders — the mavericks — have built green in accordance with their own research and self education.
Jim Sargent, partner at AndersonSargent Custom Builder in Waxahachie, Texas, started monitoring the energy efficiency of every home he built from 1985 to 2000.
"One year I built 40 homes," says Sargent, "so I had a lot of data on what worked and what didn't work. It didn't take me long to figure out how to build a 2,500-square-foot home that would heat and cool for less than a dollar a day in the Dallas area.
The screened patio of AndersonSargent / Barley & Pfeiffer zero energy home invites the homeowner to interact with neighbors as they pass by. Windows in the home were sized and placed for maximum cross ventilation.
Photo courtesy of AndersonSargent
"You first have to understand how a house operates and where energy is being used and not used," adds Sargent. "We refer to that as building science. I went to as many classes as I could. You get to understand the building science behind the structure, and then you decide what strategies you use."
Sargent's company has won awards and worldwide attention for its zero energy home, valued at nearly $1 million, just outside of Dallas. The home was designed and engineered by Peter Pfeiffer, AIA, and a principal with Barley & Pfeiffer Architects in Austin. In addition to a gold award and recognition as Builder of the Year from the NAHB Research Center's EnergyValue Housing Awards for 2006, he won an award for Best Single Family Concept Home at the NAHB Green Building Conference in Albuquerque, N.M., in March.
The home was featured in the 2004 Dallas Parade of Homes and won recognition for Best Overall Favorite and Best Interior Design.
"I wanted to prove that you could build a zero energy home in an upscale Dallas neighborhood that would not look out of place," says Sargent. "I can say that we accomplished that."
The answer to that question is yes — and no.
"The fact that I'm retroactively certifying homes to a certain level is a testimony that it doesn't cost any more," says Grey Lundberg, president of CMI Homes in Bellevue, Wash.
But custom home clients often request upgrades for comfort and convenience features that would add to the costs of their home anyway.
"We put in a lot of radiant flooring," says Lundberg. "That is an energy-efficient, clean way to heat your home, so it's a green building technique, but it's something that costs more. You can't say it costs more to build green with that feature.
"When you analyze green building from a cost standpoint, you have to look at those things apples to apples," Lundberg continues. "Do all built-green recycled tiles cost more than regular manufactured tiles? Absolutely not. You can find ones out there that have a ton of recycled content in them that are not anymore expensive than something else. It's an item-by-item analysis."
"Depending on the baseline from where a builder is starting from," says John Kurowski, president of Denver's Kurowski Development and the first to build an energy conserving passive/active solar home in 1974, "if somebody is building a 2,500-square-foot house with what I call the average expectation of components, the cost to get their home into what I call a green building defined specification might be roughly in the area of $2,500 to $3,000."
The initial cost increase is often offset by the monthly savings on a customer's utility bills over time.
"Typically our mortgage payment is principal, interest, taxes and insurance — PITI," says Johnston. "In the green building world our equation is PITI plus EW — energy and water utility bills. If you look at that as what's affordable, then even a photovoltaic system in California can start to show a reduced monthly payment if the system is rolled into the mortgage from year one.
"People are willing to pay for comfort and quality," adds Johnston. "If we can show that way of thinking from the get go, then the sale is really easy because people want reduced monthly payments more than they want a less expensive first cost."
"I think a lot of builders are surprised that many of the things they already use are considered environmentally responsible or preferable," says Thompson. "Engineered lumber, OSB sheathing, roof trusses, TJIs — those are all examples of wood products that use fewer materials to achieve the same function, or materials that ordinarily would have been thrown away. There are a number of energy efficiency measures — high performance windows, upgraded insulation. Many builders are already building to Energy Star or a similar energy program level."
The kitchen in the AndersonSargent zero energy home. The home uses 90 percent fluorescent lighting, which saves electricity and helps keep it cool and comforatable.
Photo Courtesy of AndersonSargent
Lundberg simply hired a green building verifier and retroactively certified his homes.
"This is not completely changing the way I'm doing stuff," Lundberg adds. "This is just quality building. It's not restricting me."
But for many builders, the most drastic change will be in how closely they manage their sites.
"Understanding the science, deciding on the strategies — that's the easy part," says Sargent. "The hard part is paying attention to the details during construction to see that the building science [gets applied]. You've got three months — on a big house maybe a year or two. That means you're going to have 150 to 300 guys show up on the construction site over that period of time under varying weather conditions, and you've got to be sure that everybody pays attention to the details and does it right."
"Our code requires us to basically glue the mastic together on our heating systems," says McConnell. "But if you get the average contractor to do that, without some kind of performance test, without somebody looking over the shoulder to see whether or not he in fact glued the bottom side of a pipe, it doesn't get done. And you don't meet your performance standard when you do a duct test."
If current subs aren't up to the challenge, a change may be in order.
"Your existing insulation contractor may not be the guy you want to work with," says Johnston, "because he's gotten fat and sloppy over the last 20 years. To get a fiberglass insulation installer to pay attention to the details that fiberglass requires, he may not have the supervision that is capable of doing that. That's often a stopping point in the conversation: 'I've' been working with this guy for 20 years.'"
Customers may agree that green building is good, but that doesn't mean that they are willing to buy one for that reason alone. The byproducts of green building, however, are very marketable.
"I can't say, 'I'm an EarthCraft builder. Let me charge you an extra two percent,'" says McConnell. "You have to be able to take the virtues of what you incorporate and show it as benefits and features that are valuable to a customer. 'I can prove to you that we'll heat and cool this 4,000 square foot house for $60 a month.' That has a value.
"My houses have no bugs," McConnell continues. "In this market, we have a lot of animal life that creeps into a house. But if you have a bug inside the house, it came through the door because there's literally no other way that it could come in. And there's no dust, because there is no ambient air. The outside air that we filter comes through the media filters that we use ... so the air is clean.
Johnson calls the successful marketing of green homes "applied common sense." For example, particle board, fiber glass insulation, and many paints, finishes and carpets all use urea formaldehyde — a volatile organic compound, which means it off gasses and can contaminate the indoor air quality of a home.
"Some in the public health industry say there is a direct correlation between the air that children breathe today and the crisis we're having in our schools with attention deficit disorder. And California has defined formaldehyde as a carcinogen. So what we start getting into is not an affordability conversation, but a MasterCard commercial. What's the cost of a kitchen cabinet upgrade? $275. What's the cost of low VOC paint? $12. What the cost of formaldehyde-free fiberglass? Nothing. What's the cost of preventing your children from suffering from learning disorders? Priceless."
"We've always built beyond code," says Johnston. "We've always built more energy-efficient houses than we needed to. We always talked to our customers about what we were doing, and as a result, we rarely had to bid on jobs. People came to us and were wiling to wait a year or two until we could get to them. And that's where you want to be in this business. "
AndersonSargent has a similarly long waiting list.
"We quit advertising 15 years ago," says Sargent. "Basically the question is, 'Do you have time to build me a house?' It's a really great place to be."
"There's a mindset that says, 'How little can we do to pass inspection?' And that needs to change to 'How much can we afford to provide for our customers?' The builders who have asked the latter question, as opposed to how little we can get away with, have tended to rise to the surface in being leaders in their respective markets all over the country."