To Go Green, or Not To Go Green

Credit: Ideal Homes

Ideal: Built by Ideal Homes in Norman, Okla., this $165,000, 1,650-square-foot home is 44 percent more efficient than code.

Builders in Colorado have seen and felt the excitement of green building before, back in the late 1970s and early 1980s when incorporating passive solar into homes was spurred by federal tax credits.

Though that wave of home building environmentalism petered out as the tax rebates dried up in 1985, another and more nationally vibrant green movement is alive and kicking today. Even builders not based in California, Colorado, Austin, Texas, and other green building hot spots are finding their customers asking about energy efficiency or homes that are built more sustainably.

But something is different this time around, says Tom Sattler, owner and president of Sattler Homes, based in Greenwood Village, Colo. Sattler is a custom builder who has designed a line of energy-efficient production homes. He soon will be building all his homes to at least that standard, if not to Colorado’s Built Green standard, which requires that homes be at least 50 percent more efficient than code.

The difference in the environmental movements then versus now, Sattler thinks, is momentum.

“It is getting very, very strong,” Sattler says. Green building is projected to grow as a share of the overall residential construction market from just 2 percent in 2005 to between 12 percent and 20 percent in 2012, according to research presented at the National Green Building Conference in New Orleans by Harvey Bernstein, vice president of Industry Analytics, Alliances and Strategic Initiatives for McGraw Hill. In dollar terms, that’s an increase in business from $7 billion in 2005 to between $40 billion and $70 billion in 2012.

But the surge in interest is coming not only from environmentalists, but also from regular families trying to save money on their energy bills.

“With our buyers, it all boils down to dollars and cents,” says Vernon McKown, president of sales for Ideal Homes, a Norman, Okla.–based builder of energy-efficient entry-level homes, and one of Builder’s America’s Best Builders in 2007. “It’s got to save them money.”

A GREEN PERCEPTION

That’s because Ideal, which faces price cutting in its market from competitors such as D.R. Horton, passes all of the costs—roughly $3,000 more than it would cost to build conventionally—on to the consumer with a promise of low monthly energy bills.

And while there is no hard statistical proof yet that consumers will pay more for green, Ideal ranks as the No. 2 builder in Oklahoma City with a 5.5 percent market share, outselling its competitors using energy efficiency as a key differentiator.

“That’s a significant amount of money, $3,000,” says McKown, for homes that range from $109,000 to the low $300,000s. “But $24 a month, in our typical house, is the guaranteed utility cost. Our buyers’ homes are running cheaper than our competitors by $60 to $100 per month.”

Every year, Ideal examines how much extra it spends building homes to be energy efficient and determines if that cost to compete is still worth it, McKown says. It is as long as consumers are willing to pay. That’s the bottom line; currently, consumers are driving green building, and with energy prices the way they are, it’s a push that is unlikely to lose momentum.

“Builders will change based on what homeowners say,” says Carlos Martin, the NAHB’s assistant staff vice president for construction codes and standards. “Right now, the business case is, there’s potential. The studies aren’t there yet to know if they are selling more because they are green builders. But there is a perception, and a lot of our builders see that perception.”

Sattler finds most of his customers ask whether his homes are green or energy efficient, they listen to the sales pitch, then mentally check a box in their head, and that’s as much as they think about it, he says. But Sattler’s customers are different from McKown’s; they are people who are far more likely to care that radiant heat is more comfortable than whether it is more efficient.

WHAT CONSUMERS WANT

Some builders, Sattler included, are frustrated by green standards that confuse the idea of what green is, as well as by builders who do a few things, but then market their companies as green.

Other builders are frustrated by logistics; land they bought may not offer the best sites for building green houses, says the NAHB’s Martin.

And builders in general do not like being dictated to, which Sattler feels is happening in the case of green building.

Where is the pressure coming from? “The movement, first and foremost, possibly followed by energy costs. When I say the movement, I mean the ‘Save the Polar Bears’ people, all of that,” says Sattler of those who are pushing green building, adding that pressure from environmentalists eventually leads to government mandates.

“If we do take the responsibility [and build green], maybe we can fend some of that off. You’ve got to look at the science and study it,” says Sattler. “You’ve got to figure out what the consumer wants, and you’ve got to be willing to change and react.”

The mandates are coming, some argue, because, according to the U.S. Energy Information Administration, residential and commercial buildings account for 48 percent of all energy consumption in the U.S., and green home building has the potential to lower energy expenditures by 50 percent, according to Bernstein.

Not all mandates are necessarily bad, say some builders. One that would be easy to accommodate, says McKown, would be on a window standard.

“If we know that high-performance windows can reduce the cooling load on a house by 50 percent, and if we can reduce the cooling load by 50 percent and your air conditioner is 25 percent of the total electric consumption of the house, then why wouldn’t we do that? That ought to be required. And that’s just the windows,” McKown says.

But whether builders want to go green or not, it seems they will have to in order to remain competitive. Even Sattler, who still argues that most consumers are not willing to pay for green features, thinks home building is on the cusp of major advances.

“In 25 years, we’re going to look back at this period much like we looked back at the race to the moon, at the technology that was created because of that effort, and we’ll say, ‘Look at what we did to create more fuel-efficient cars. Look at what we did to create zero-energy homes,’” Sattler says. “There will be positives that come out of it. But sometimes it’s frustrating to those of us who don’t want to see it mandated or shoved down our throats when the consumer doesn’t want it. But at the end of the day, there will be clear benefits and advantages.”