How investing in a ‘green’ or net-zero home can be one of the best investments you can make when it comes to buying or building a new house.
One of the prevailing trains of thought regarding sustainable homes and dwellings is the idea that going green costs green from your wallet. That is absolutely true – part of the definition of building green is the idea of investing more upfront in order to realize savings in the long term. However, what most people are not aware of is how affordable going green actually is, and the fact that building with sustainability in mind can often provide a number of immediate financial boons. Here’s how.
Green Costs A Little Extra, But Only a Little
The biggest excuse homeowners and homebuyers alike make, when it comes to investing in sustainability, is that building and buying green sure costs a lot more money. When asked in a recent survey about their perceptions on green building, most respondents guestimated a premium of 10 percent or more. In today’s moribund economy, adding 10 percent to any budget, let alone the budget of a home or multi-million dollar building project would be a budget breaker. Most people assume that they simply cannot justify installing relatively pricey renewable systems and waiting decades to recoup their initial investments.
There are three critical mistakes in this line of thinking:
How Much More Really?
The first key mistake most people make is the assumption that investing in sustainability is inherently uneconomical. Nothing could be further from the truth. Provided that a green strategy or a system is well-planned, tailored to key needs and site considerations, and then intelligently implemented, going green can be both incredibly cost saving and incredibly affordable. In fact, research shows that on average, building green only adds 1 to 2 percent to a building’s budget depending on how rigorously sustainable objectives are pursued – not 10 percent or more as many respondents assumed. The overall “green premium,” as it turns out, is considerably smaller than what many people may perceive.
Of course, project premiums will vary significantly based on building features, rigor of certification, and other circumstances. Likewise, much of the value sustainability can add is very difficult to quantify. For example, green building places heavy emphasis on employing materials that are both much more durable than traditional building materials, and contribute to cleaner, healthier indoor air quality by avoiding Volatile Organic Compounds (VOC) and other toxins common in traditional-built homes. Improved durability results in not only less waste in landfills, but also less maintenance and repair costs for owners. Likewise, VOC-free air is difficult to ascribe monetary value to. How much is your health worth to you? Many people assume that building green is good for the environment, provided that you care about your carbon footprint. In reality, green building is about building to last, building for occupants, and yes, building with an eye towards minimizing unnecessary damage to the natural environment.
Glamour Tech Versus Pragmatic Sustainability
The second misconception is the idea that active renewable technologies, especially solar, wind, or geothermal, are the mainstays of a green home or edifice. This is resoundingly false. While solar photovoltaics, residential wind turbines, and geothermal heat pumps are a key aspect of green and net-zero buildings and dwellings, they must be implemented within a larger, holistic sustainability strategy. Since these glamorous cleantech applications are typically also relatively expensive components, there is a tendency for homeowners and builders alike to focus on these features.
In reality, much of any building’s energy performance and overall friendliness towards the environment, is more or less decided during schematic design through site selection, envelope design, and the actual building orientation. In fact, these preliminary steps are by far the most effective way to guarantee good energy performance. Basic design consideration, such as providing adequate shading for windows and ensuring good cross-ventilation in temperate climates, can make or break a home. In the same vein, other low tech strategies, such as investing in appropriate insulation and multi-paned windows can be extremely cost-effective.
Time Frames
The final error many Americans take at face value is the idea that financial payback times from sustainable investments stretch into the decades. In reality, even today’s high-tech renewable systems, such as rooftop solar arrays, have payback times as low as a 2 years depending on climate and which cell technology is employed. Low-tech sustainable strategies, such as simply installing better insulation, can have even faster payback periods. With all things considered, the payback time thanks to reduced energy and maintenance costs alone, lies somewhere between 4 to 8 years, depending of course on the size and scope of a building project. For residential homes, payback time could be even sooner, or when home equity is considered, instantaneous.
It is important to keep in mind two important realities:
1. Effective Rate of Return (ERoR): This is the rate of return investors use when determining if something is a good investment. Less savvy investors get caught up in the payback duration of an investment. An un-rebated solar installation, for example, may have a 12year ROI duration, but a 6% ERoR – which is pretty good compared to other investments which commonly have broker commissions and tax implications associated with them.
2. Total Cost of Ownership (CoO): This is how much it costs on a monthly basis to live in an energy efficient, or net zero energy home. Taking the net zero energy home example, a homeowner will roll in the cost of high efficiency construction components, geothermal, and solar into their mortgage payment at a certain interest rate. By isolating themselves from rising energy rates, they are “locked in” for 30 yrs with a total cost of ownership payment – mortgage plus utilities. They are financing their energy. The total cost for living in a net zero energy home compared to a conventional home (which is cheaper on the mortgage side, but increasingly heavy on the energy side), becomes cheaper at about year 5.
The Green House Value Bump
Most homeowners understand the idea of delayed gratification. They invest in a home in order to build wealth. They invest in green features in order to realize savings over time and, with patience, potentially realize a small profit. However, recent studies show that investing in green immediately adds a significant bump to home equity, which translates up to a 9 percent increase in a home’s potential resale premium. In an era of collapsing home prices, and of lost wealth as a result, building with sustainability in mind can be an effective strategy to safeguard both home equity and financial wealth.
In many ways, installing rooftop solar is a far better investment of time and money than installing a set of new granite countertops. In fact, as America’s attitude towards buildings shifts in a more environmentalist direction, perceptions of the value of green upgrades will continue to increase. Savvy homebuyers will tell you that they are looking for a home to “invest” in, something that will act as a solid financial foundation, something that will grow in value over time. In other words, they want a house that gives back.
Make your home a green house that gives back.