Here’s the good news: 37% of all new homes sold in 2010 were HERS rated--a substantial jump from a mere 12.2% in 2008. Of course, there are a lot fewer homes being built these days, but as Cliff Majersik at the Institute for Market Transformation (IMT) points out, the figures still represent a “win” for green builders. “What is really happening is that the non-energy-efficient home product is falling very quickly, while energy-efficient home production is staying the same or falling much more slowly,” he explains.
However, that doesn’t mean the green building market is anywhere near where it should be. As Majersik will tell you, there is still a lot to be done before sustainable home building jumps from what he calls “the bleeding edge” into the mainstream. And that is something we should all want, by the way.
“To me, market penetration is about taking this from the bleeding edge--thinkers that are beyond the mainstream--and bringing it into the lives of millions, billions of people around the world,” Majersik says. “If you care about people’s lives, if you care about preventing climate change and protecting the environment, then that has to happen. If it’s just the province of the converted-- a small number that really believe in this--it’s not really having a very big impact.”
Majersik cites several market failures that have kept the practices and products of this market from really taking off, starting with the ever-frustrating force of inertia. “People keep doing the things that they have been doing, and they are slow to look at changes and new innovation,” Majersik says. “That’s especially true in a very fragmented market like construction. There is limited incentive for [builders] to invest in training their subs on new innovative practices or the use of new technologies, and that exacerbates the inertia.”
That brings up another huge issue--split-incentives. Why invest in a truly sustainable technology or practice--one that will provide long-term benefits--if you are never going to reap the rewards from those benefits? The challenge is to get consumers and the industry to shift their focus from short-term benefits (i.e., granite countertops) to long-term benefits (i.e., air sealing).
“Innovations that produce lasting benefits that don’t immediately meet the eye are much harder to get people to focus on, to invest the time to understand, and incorporate into their practices,” Majersik says. “What you get is very little innovation unto the extent that you have innovation.”
One answer, Majersik believes, is educating every part of the value chain about the benefits of sustainable building practices and products--from builders and home inspectors to appraisers and lenders. “There needs to be a lot more education, and folks like myself need to spend less time preaching to the converted and more time talking to people who don’t encounter this on a regular basis,” he says.
One link in the chain that has largely ignored the benefits of sustainable building is financing. However, thanks to a new bill introduced in the Senate, that is hopefully about to change. Called the Save Act (S. 1737), the bipartisan bill calls for underwriters to include energy costs to their calculations, essentially giving homeowners financial incentive to build sustainably or to improve their existing homes. “Because they are going to be spending less on energy bills, they will be able to afford to spend more on their mortgage,” Majersik says.
The legislation calls for the lenders and appraisers to add the net present value of the energy savings to the appraised value for the purpose of calculating the loan-to-value ratio--a huge plus for builders. In addition, instead of relying on unsecured loans for home renovations, homeowners could opt to refinance their mortgage with energy-efficient improvements and have access to much lower interest rates.
What’s even more encouraging is that this bill actually has a good chance of passing, according to Majersik. Folks from all ends of the spectrum are supporting it, from environmental groups like the USGBC and the Natural Resources Defense Council to more surprising supporters like the U.S. Chamber of Commerce and the Appraisal Institute. If you aren’t already supporting this bill, Majersik says there is no time like the present. “If there was a ground swell of support from home builders, remodeling, and sales industries, I think that legislation has an excellent chance of passing,” he says.
At the same time, the industry is seeing some legislative setbacks, such as the expiration of the New Energy Efficient Home Tax Credit (45L) and Existing Home Retrofit Tax Credit (25C). Although Congress has been known to retroactively extend these types of credits, it hasn’t happened yet.
According to Majersik, money awarded to states for the Weatherization Assistance Program under the American Recovery and Reinvestment Act of 2009 is also starting to run out. That, of course, is not only bad news for low-income homes that could benefit from more energy-efficient weatherization, but it is bad for the suppliers that have been contributing to the projects.
There are some other positive developments happening. Majersik says technological advancements in areas such as lighting and HVAC systems are helping consumers gain a better understanding of the value of energy-efficient homes. He also feels communication tools such as smart phones will not only help the construction industry operate in a less fragmented manner, but encourage innovation through the sharing of best practices.
As for the future, Majersik expects building codes to focus more on energy efficiency--a trend he feels is important to moving the industry forward, even if it puts more pressure on builders. “It is a boon to homeowners who get lower utility bills, and it is a boon for national security since we don’t have to import as much energy,” he says.
In fact, Majersik’s team is currently working on research that shows that code compliance not only saves energy, but also reduces air pollution and creates jobs. His research also shows that the Save Act could create 83,000 net new jobs at no cost to taxpayers and save $1.1 billion a year on energy costs.
“We have a real possibility here to have an America with more jobs, better paying jobs, less money spent on coal and electricity, less money spent importing energy, and a healthier population living in higher-quality, more comfortable, healthier homes,” Majersik says.
Is there a lot of work to be done before green building enters the mainstream? Absolutely. But we are definitely headed in the right direction, and, with the proper tools and perspective, the destination may just be within reach. Our hope is that this blog—and the Vision 2020 initiative—will help us get that much closer.