Green Homebuilding Slowed by Costs

New York, NY, March 8, 2007--Green building as a cause has united disparate parties, from environmental groups to big business to policymakers, but one key industry has struggled to react to the change in public sentiment.

The major homebuilders, who account for 80 percent of all homebuilding activity in the nation, face a unique challenge in implementing green building on a widespread scale. Many have added energy-saving features and experimented with environmentally friendly materials but have not yet been able to sign on a critical mass of buyers willing to pay more for them.

The National Association of Home Builders and McGraw-Hill Construction predict a rise in green building to 10 percent of homes by 2010 from 2 percent today, but experts say the large-scale residential builders have been slower to respond because of the extra costs and availability of materials.

"The residential market as I see it is the last one to take off," said Mary Ann Lazarus, sustainable-design director of the architectural firm HOK.

Homebuilders are crucial to reducing greenhouse-gas emissions believed to cause global warming, according to Ed Mazria, founder of environmental-activist group Architecture 2030. He estimates buildings - their construction and operation - contribute 48 percent of overall emissions while transportation adds 27 percent and industrial activity 25 percent.

Certainly, there has been frustration among some of the largest homebuilders about finding the right cost formula. Estimates vary widely for how much green building can add to the final price, with the lower estimates at 3 to 5 percent versus higher predictions of 10 to 15 percent.

Ara Hovnanian, head of one of the nation's biggest homebuilders, said all other things being equal, consumers would choose green. But, he said, all is not equal.

"Consumers have not been willing to make the investment," said the CEO and president of Hovnanian Enterprises Inc.

Hovnanian was one of 10 homebuilders that developed an all-green community called Terramor in Orange County, south of Los Angeles. He said the results of that venture were frustrating; consumers were unwilling to pay extra for green features such as solar panels to generate electricity.

"The disappointing thing is we were all hoping consumers would embrace it and at least be willing to pay a substantial part of the premium," he said. "I can't say we were overwhelmed by the results financially."

Recouping that premium is more of a problem for developers who build properties for sale, as opposed to those who can benefit later from lower electricity bills or being able to charge higher rents. Investing in green features ultimately benefits the home buyer, so if the consumer is unwilling to pay more, the cost-benefit formula makes no sense, in Hovnanian's view.

Bill Valentine, chairman of architecture firm HOK, said the main goal for architects who support green building is to get sustainability into the common consumer's budget.

"The real action is in suburbia, in reconstructing suburbia," he said.

Mazria of Architecture 2030 and others say that's about to happen.

"I think we're just seeing the beginning of a total transformation of the building sector," Mazria said.

Mazria said a number of different parties are working on proposals to extend the tax benefits in the Energy Policy Act of 2005, which could encourage growth in green building. He said two New Mexico Democrats, Rep. Tom Udall and Sen. Jeff Bingaman, are working on one version that could extend the act to 2013, and in some cases double the level of tax credits allowed for energy-saving measures such as using solar or photovoltaic panels.

"It is a very small price to pay for mitigating the potential impact of climate change," Mazria said.

To date, 11 federal agencies, 17 states and 53 municipalities require buildings to meet either local green standards or those set by the U.S. Green Building Council, a nonprofit group.

Among the early adopters are two smaller homebuilders, Los Angeles-based Pardee Homes and Florida-based WCI Communities Inc. Thouth they are much smaller than homebuilders such as Hovnanian, KB Home and others, they also build mainly where consumers have been more receptive to green building practices.

Pardee Marketing Vice President Joyce Mason said one-third of about 10,000 homes it has built since 2001 are in its Living Smart line of homes, which come with carpet made from recycled soda bottles and wood from managed forests. She said consumers had always appreciated the green features, but buyers have started specifically asking for them in recent months.

"We saw it first happen in hybrid cars," Mason said. "I think it's probably going to shift over to houses."

Karen Childress, environmental stewardship manager for WCI, said it first built a green-home prototype in 2001 to explore energy efficiency, and has experimented with a growing list of features since then. Its latest project is working with the Florida Solar Energy Center to design a home that generates enough of its own energy to be self-sustaining - the holy grail of green building.

Researchers are developing energy-saving methods to move toward that ideal.

James Sweeney, director of the Precourt Institute on Energy Efficiency at Stanford University, is organizing a research effort to develop strategies that could be used in the home, such as ways to encourage consumers to use less energy at peak times, and building-design changes. The research ultimately will include ways of encouraging changes in behavior that will save energy, said Sweeney.

"There may be no silver bullet, but there may be some silver buckshot," he said.