Green building doesn’t just make sense for the environment. It makes sense for your bottom line, as well.
That was the message at the Builder-to-Builder Green Forum, a day-long, information-packed session attended by more than 100 building professionals June 24 at the Pacific Coast Builders Conference (PCBC) in San Francisco. Experts from a variety of disciplines, including builders, marketers, banking experts, researchers, and developers, went beyond the environmental benefits to make a persuasive business case for green building.
Energy-efficient homes, for example, sell faster because of their lower operating costs and higher value over time, said Mark Fischer, senior vice president of Stockton, Calif.-based Grupe Construction Co. “We think it’s a financial thing right now. Most buyers are not buying these homes just to be green. They’re doing it for the financial benefits.”
Grupe’s Carsten Crossings is a 144-unit community in which each home uses 50% less energy than a standard house through energy-efficient products and features such as a SunPower Sun Tile solar electric system; high-efficiency windows, furnaces, and air conditioning systems; tankless water heaters; and more.
Each home costs about $18,000 more, equating to about $1,391 more in annual mortgage payments. But they provide about $1,400 in annual energy savings. With a $2,000 tax rebate in the first year, homeowners are “cash-flow positive on day one,” Fischer said. He added that studies show that the homes also increase in value by up to 20 times their annual energy savings each year.
If the homes make sense for the buyer, what about the builder? “This project outsold almost all its competitors almost two to one” in the community in which it was built, Fischer said. If the dwellings sold at the competitors’ rate, it would have taken 37 additional months to sell them. Fischer estimated his company saved $11.5 million by going green because it would have cost $311,000 per month to carry the unsold homes.
But he added that the financial benefits to the consumer were more important to them than the green message.“If it didn’t save them money, I don’t think it would have been as powerful of a sales feature,” he said.
Big and Green
National production builders also can make green a business strategy. “We decided we would make it a choice,” said Lisa Kalmbach, senior vice president of KB Home, and allow the buyers to choose how green they want to be.
The builder’s “My Home, My Earth” program introduces earth-friendly products to the consumer and educates home buyers on making choices that reduce their impact on the environment. In its home studios, the builder labels green products with a “My Home, My Earth” logo and explains the benefits for the environment and the buyer.
“We are trying to sell them on the fact that if they have $10,000 to spend, they really should start choosing earth-friendly options,” she said. The company also includes some green products standard—it now builds exclusively with Energy Star-qualified appliances, for instance.
The program has boosted both customer satisfaction and the number of options going into the homes, she added. Energy Star-rated washing machines and refrigerators sales have grown 126% and 161%, respectively, year-over-year, and “My Home, My Earth” options make up more than $2,000 per home.
Builders can even secure better financing with green projects, noted Peter Liu, founder and vice chairman of San Francisco-based New Resource Bank, which offers lower fees and pricing for sustainable projects. The bank can offer more favorable terms because investors around the world take their money to his bank because of its sustainable focus, Liu said.
Market the Benefits
Marketing and research experts also lent perspective on how builders can go beyond focusing on the environmental benefits in marketing green homes. In fact, home buyers may not be as concerned about the environment as builders think, explained J. Walker Smith, president of research firm Yankelovich Partners.
“American consumers are relatively insulated from environmental impacts and environmental benefits,” he said. “They’re saying, ‘It doesn’t resonate with me in a personally relevant way.’”
Builders must lead, not follow, consumer preferences by changing their behaviors, he added. Offer incentives to go green, or focus on the personal benefits, he suggested. “Talk about saving me money. Don’t talk about green.”
Not only should green builders focus on the personal benefits, they should incorporate them into their brand, said Amy Levi, principal of marketing firm Strada Advertising. “When you do go out to market with a brand of sustainability, make it human,” she said.
She offered this example: Hoping to help consumers understand the tradeoff between small yards and large open spaces in the Daybreak community near Salt Lake City, developer Kennecott Land ran a radio spot on making salsa, explaining the lifestyle effects of the neighborhood’s community gardens.
“You didn’t hear us say sustainable, eco-friendly, or LEED,” she said.
Building green homes may be good for the environment, and it may be the right thing to do. But as the panelists noted, building green is just a smart business move.
Jeffrey Lee is associate editor of Building Products magazine and ebuild.com, and a regular contributor to EcoHome.