Turning Green Into Gold

The demand for green building practices is on the rise

 Tom Larson  |    September 15, 2008

In today’s housing market, green building and energy-efficient homes are becoming more popular. Home buyers and commercial investors are increasingly demanding green building practices, and many experts agree that the environmentally-friendly building approach is here to stay. A recent McGraw-Hill SmartMarket Report projects that by the year 2010, green homes will account for 10 percent of new homes built annually, compared to only 2 percent in 2006.

Green building, however, is not just for new construction. Many existing homes and office buildings are also getting green makeovers.

To better serve consumers interested in this growing market, REALTORS® should understand the concept of green building and how to market it.

What is Green Building? 

“Green building” is a term used to describe a new way of designing and constructing buildings to increase energy efficiency, protect the environment, and enhance the health and experience of people who live, work and play in these structures. The term is often used synonymously with others such as “sustainable design” and “eco-friendly homes.”

While the real estate industry has not yet adopted a single, uniform set of standards to define whether a building is green, a green building generally will have one or more of the following characteristics:

  • Saves energy or water
  • Protects the natural features of the site
  • Maximizes the longevity and durability of the building
  • Makes the building healthier
  • Reduces material use
  • Uses low-impact materials
  • Minimizes waste
  • Recycles existing building materials

Nationally, two different green building standards have become prominent. The United States Green Building Council has created a building certification system called the Leadership in Engineering and Environmental Design (LEED), which provides universal benchmarks and standards for planners, architects and engineers to use when designing or renovating a green building. The National Association of Home Building also has adopted its own green building initiative, called the National Green Building Standard (NGBS). While the specific requirements are different, the basic mechanics of both programs, which are voluntary, are similar.

At the local level, some states and communities have created their own green building standards and programs. For example, the Green Built Home™ program is an initiative in Wisconsin that reviews and certifies new homes and remodeling projects to ensure that they meet various sustainable building and energy standards. 

REALTORS® should be aware of the various green building programs and inform consumers that a uniform industry standard for green building has not yet been established.

Because “green building” is a vague term that does not yet have clearly identifiable standards, REALTORS® and their customers are often confused about whether a home or structure is truly “green.” Here are several key green building features to look for when determining whether a home or structure is truly eco-friendly:

Insulation and Building:Effective insulation, high performance windows, high-efficiency lighting, steel and concrete framing, recycled building materials.

Appliances:Low flow shower heads, low flush or composting toilets, energy saving washers and dryers.

Bamboo, cork, concrete, old fashioned linoleum, which is actually made from linen and other natural fibers.

Paint and Other Materials:
Milk-based paints, kitchen and bath tiles made from recycled glass, countertops made with recycled materials.

Little or no lawns, native vegetation, limited irrigation or “graywater” systems, which uses recycled water from dishwashers and washing machines to water the lawn or wash the car.

Neighborhood:Compact development, access to public transportation, bike paths, conservation of natural features, community gardens.

New Regulations on the Horizon 

In response to this growing consumer demand for more energy-efficient homes and buildings, some states and communities have introduced legislation that would require additional inspections or disclosures related to energy efficiency at the time of sale or lease. For example, legislation was introduced in California that would require the California Energy Commission to develop requirements for time-of-sale energy-efficiency audits for residential and commercial buildings. Portland, Oregon, is considering a similar measure that would require an energy-performance evaluation on all commercial and residential buildings, either at the time of sale or lease, or by a specific future date. In Wisconsin, a special task force on global warming has recently recommended the creation of a legislative study group to examine whether the state should require buildings to be retrofitted with more energy-efficient materials and systems (HVAC, windows, etc.) at the time of sale.

While such proposals are well-intentioned, the financial impact upon property owners would be significant, with very little impact on the overall energy efficiency problem. Because these proposals would only impose the audit requirements at the time of a sale, anyone not selling a home would not be required to have an energy-efficiency audit or make "energy efficiency investments." Research shows that very few of the properties most in need of energy-efficiency retrofits, (22 percent) will actually be sold by 2020. On the other hand, the mandatory audit and retrofit requirements could add thousands of dollars to every transaction. National studies have shown that every $1,000 increase in the price of a home disqualifies over 25,000 families from owning their own home.

Incentive programs that encourage consumers to make their homes more energy efficient have proven to be a more effective solution. The state of New York, for example, is working on legislation that will encourage the construction of new homes and the renovation of homes to meet “green building” standards. Some communities, like Anaheim, California, provide rebates to consumers who switch to water- and energy-efficient appliances and cooling equipment, and install approved high-efficiency household conservation measures.

Why Green Building is Important for REALTORS® 

While some have dismissed it as just a fad, green building is proving to be a growing trend in both residential and commercial real estate. As energy prices continue to rise, consumer demand for more energy-efficient building is increasing each year. A recent National Association of REALTORS® survey of REALTORS® who practice residential real estate showed there is high demand among potential home buyers for green features. Nearly nine out of 10 REALTORS® said their clients are most interested in the energy efficient features of green homes and their potential cost savings. Nearly half of those surveyed said they frequently discuss green building practices with their clients and nearly 90 percent agreed there will be even more interest in green building a year from now.

An informal survey of REALTORS® who practice commercial real estate showed similar findings. One-third of those surveyed said green building is important to their clients and more than half frequently discuss green building practices with their clients. Nine out of 10 agreed that a year from now there will be even more interest in environmentally friendly building.

Furthermore, green building is gaining popularity among environmental groups and regulators looking to reduce the impact of development on the environment. According to the U.S. Environmental Protection Agency, residential and commercial buildings account for more than one-third of the nation’s total energy use, 12 percent of water use, 68 percent of electricity consumption and 38 percent of carbon dioxide emissions. As an alternative to onerous development restrictions that seek to limit or even stop new development, green building is often considered a win-win approach that both protects the environment and promotes economic development. 

By knowing more about green building, REALTORS® will be better prepared to meet a growing consumer demand and play a role in helping communities adopt more balanced land-use and development policies.

Green Resources for REALTORS® 

The following Web sites provide additional information about green building.

Green Built Home – www.greenbuilthome.com

Energy Star – www.energystar.gov

Green Building Resource Guide – www.greenguide.com

Leadership in Energy and Environmental Design (LEED) – www.leedbuilding.com

For more information on green building, please contact Tom Larson (tlarson@wra.org) at 608-240-8254.

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