Green homes that offer energy efficiency and power production follow the value path

They can pay for themselves and a sagging market provides a unique opportunity for that message, says JOHN F WASIK

Will green homes perk up the punch-drunk US housing market? When there are more than four million unsold houses, builders and sellers cut prices or add value. Green homes that offer energy efficiency and power production follow the value path. Yet, properties that produce their own power and save energy will never make economic sense until they pay for themselves and are marketed as ways to lower ownership expenses and to build equity in declining markets.

Not only do green homes save people money over time by reducing power and heating bills, they can reduce water usage, improve indoor-air quality and give owners a competitive edge when they need to sell their houses.

Even though it’s still a tiny part of the overall market, green homebuilding has risen 50 per cent since 2004, according to the National Association of Home Builders, a Washington-based trade group.

More than 97,000 such homes have been built since the mid-1990s. The association says about 35,000 will be built this year out of a projected 1.5 million total housing starts. This niche will be significant if it grows at an annual rate of 5-10 per cent by 2010, as the trade group predicts. New-home construction may not return to the 2006 level of more than two million units until 2011, it says.

Power-producing properties are starting to take hold in California, where electricity rates are high relative to the rest of the country. In Danville, California, where I visited Lennar Corp’s Milano development, the new Mediterranean-style homes that are being built in this dry, verdant valley east of San Francisco will all have solar-power panels. Lennar plans to build 375 solar homes in the San Francisco Bay area.

Lennar solar installations partially pay for themselves since local power rates range from 8.7 cents per kilowatt hour during off-peak periods to an exorbitant 29 cents at peak times during the hottest part of the day.

‘If there is excess electricity during peak times, the residents will be credited at peak rates,’ says Les Lifter, vice-president of marketing for Lennar. On an annual basis, the home can cut electricity bills in half, he adds.

Green power in an upscale home will cost you dearly in Danville. For US$1.4 million, Lennar can build you a 3,800 square-foot, two-storey home with five bedrooms, 41/2 bathrooms, an office and a ‘technology’ area with a two-car garage. The house also includes a security system, intercom, high-speed Internet, home theatre, energy-efficient windows, high-efficiency air conditioning and in-wall pest control. The median home price in the area is about US$750,000.

Can green building be both energy-conscious and affordable? The area around Sacramento, California’s capital, may be the prime place to watch.

Premier Homes Properties Inc, of Roseville, California, based in an area where summer heat often exceeds 100 degrees Fahrenheit, sells zero-energy homes equipped with solar panels, tankless water heaters and additional insulation. While their homes cost US$40,000 to US$90,000 more than other houses in the area, the builder says Premier’s properties offer utility bills that are 60 per cent less than conventional homes. Its prices range from US$250,000 to US$450,000.

Just like many owners of houses with home-energy-producing technology, Premier customers also benefit from a US$2,000 federal-tax credit for solar appliances. There are also several incentives from the Sacramento Municipal Utility District, the public electrical company. In an area where monthly summer electrical bills of US$500 are possible, the chance for saving on power is attracting buyers in a lacklustre market, the builder says.

If you are paying a premium for a green home, you will need to know the payback period for environmental features and how much it will enhance your resale value, if at all.

You can gain satisfaction from a green home knowing that energy doesn’t appear to be falling in price. Green buildings save an estimated 30-50 per cent on energy costs with an average payback period of 12-24 months, according to the US Green Building Council, a Washington-based non-profit group.

Most builders, based on the small number of green homes being built, are ignoring pent-up demand for energy-saving houses.

While more than 85 per cent of owners surveyed say they would buy one home over another to ensure energy efficiency, some 78 per cent of recent purchasers say builders didn’t even mention such cost savings during the buying process, according to Shelton Group, a market-research firm based in Knoxville, Tennessee.

The US government has also missed the point on conserving energy, pouring billions into ethanol and other specious subsidies. Some 30 per cent of annual energy usage is consumed by buildings alone. As Congress prepares to craft new legislation, it needs to provide greater incentives and mandates for homebuilders to incorporate energy-saving features. There’s no reason why solar appliances can’t be standard equipment in new homes, the way dishwashers and microwaves are today. Green homes can pay for themselves. A sagging market provides a unique opportunity for that message.

John F Wasik, author of The Merchant of Power, is a Bloomberg News columnist. The opinions expressed are his own

Source: The Business Times, 19 June 2007