by: Guest blogger
Let’s start with some facts: On average, incorporating green building practices into a new building will increase upfront costs by 2%. Green building practices are shown conservatively to yield savings 10x the amount of the initial investment assuming a 20 year building lifecycle. See 134 page report The Cost and Financial Benefits of Green Buildings.
Now for some math: If you build a $300,000 home, you could make it green for an initial investment of $6,000. $6,000 x 10 = $60,000 over 20 years. $60,000/20 = $3,000 in the first year. That’s 1/2 the initial investment.
Some notes about the above numbers: Those figures do not include other proven correlated effects such as comfort, health, and productivity benefits. Some of you financial whizzes out there may also say “What about the discount rate? What is the Net Present Value of that $60,000?” Unlike future cash flows you might see in an annuity, these figures are based on monthly savings on water, energy, waste, etc. I have made the reasonable assumption that theses costs will grow at minimum by our inflation rate though I think it more likely that energy costs will outpace inflation possibly yielding more than a $60,000 saving. The initial study was conducted in California in 2003.
Now for the commentary: Green building practices don’t care where you fall on political spectrum; they are simply more efficient with your resources. Despite the obvious benefits only 17% of new homes built in 2007 were even energy star compliant according to USA Today. So the real question is why aren’t more people building green? Hoffman and Henn proposed that “presumed associations” and the “mythical fixed-pie” are to blame and I would tend to agree with them. Moreover these issues extend beyond homebuyers to all people involved the homebuilding process from real estate agents to contractors.
Presumed associations are a proven tendency among people to recall likely events more than unlikely events. Simply put, people remember the hippie movement in the 1970s with the ugly homes with weird building materials and naturally assume that the green alternative is similar and undesirable.
The mythical fixed-pie is another proven tendency among people to believe that because something is better it automatically must have a disadvantage to accompany it. Essentially, people think that because green is desirable and better for the environment that they will bear the cost of that benefit. As shown above that clearly isn’t the case.
So what do we do? People in general and people involved in the homebuilding process especially have a responsibility to educate themselves on the green (sustainable) building practices. This post isn’t meant to be a manifesto for world change but at the very least it should challenge some of the preconceived notions that we have when it comes to home buying , building, and improving.
Michael Little is an MBA, CFA, CDPE and real estate agent in the Minneapolis area and owner of the Michael Little Housing Group a group dedicated to honesty and integrity in real estate. You can visit his website to learn more at Minneapolis homes for sale.