Returns on “Green” Building

It’s a disconcerting time for investors, with the financial markets in almost constant turmoil. Stocks are on a roller coaster, and interest rates on safer investments are near historic lows. But instead of stuffing money in a mattress, perhaps the safest bet is to put it into your walls, windows, and appliances.

While the real estate market may be sluggish generally, investments in energy efficiency can have excellent rates of return, at least for those planning to stay in their homes for a few years. Energy efficiency and other “green” attributes could also help those trying to sell their homes.

Economists have long noted the hard time people have grasping the simple idea that, in Ben Franklin’s words, “a penny saved is a penny earned.” In real terms, $100 saved each month on an energy bill is the same as receiving a check for $100 from any other investment, though even savvy CEOs sometimes have a difficult time understanding this. The point is that a steady stream of energy savings pays back the initial investment. And if the home-owner accumulates those savings long enough, or can recoup the costs when selling, then the investment is a winner.

John Abrams of South Mountain Company, the Vineyard’s most well-known eco-friendly building firm, says that investments in energy efficiency are especially intelligent in a bear market, and he doesn’t have much problem convincing his generally high-end clients of this: “We don’t even talk about it [energy efficiency] much....There’s just no point in doing anything else.”

But those looking to build a home on a more modest budget may be tempted to skimp on energy efficiency to save in the short run. Don’t, says Bill Potter of Squash Meadow Construction. “My business model is affordable green efficient, greener, healthier homes for prices comparable to a conventional house,” says Bill, who was accredited as a U.S. Green Building Council’s LEED (Leadership in Energy and Environmental Design) builder in 2008.

Squash Meadow primarily constructs modular homes designed to include green features, built to its specifications by Westchester Modular Homes. Westchester was the only modular construction firm willing to work with Squash Meadow to achieve various green certifications, such as the LEED standards and the U.S. Environmental Protection Agency’s Energy Star Homes program. These certifications require Squash Meadow to do some additional work to have the home verified as meeting the standards, but Bill says the effort “adds an element of excitement to my daily grind.”

Bill says, “It’s difficult to say how much someone can save” in exact dollar figures, because the homeowners’ habits have a lot to do with energy savings. The results of a year’s worth of intense metering data at Eliakim’s Way, an affordable housing development of eight homes by South Mountain (see page 40), reinforces this: The houses are identical and built to be “zero-energy” (i.e., produce as much energy as they consume), but some have much higher energy use than others. “There are no zero-energy houses, only zero-energy families,” summarizes a report by South Mountain. Bill says that he can’t build “net-zero” homes affordably (the houses at Eliakim’s Way were heavily subsidized), but he builds homes that are 35 percent more energy-efficient than code – a figure Bill calls “an honest barometer” for savings.

To achieve the energy efficiency required, a home must be extremely well insulated (yet well ventilated), feature low-emissivity energy-saving windows, and use efficient heating/cooling systems, appliances, and lighting. In addition to energy efficiency, other aspects of green building can include features like locally sourced wood or Forest Stewardship Council–certified wood, engineered wood products that conserve resources, renewable-energy generation systems (like solar or geothermal), low-VOC paints with reduced toxic fumes, native landscaping, even permeable driveways and walkways to prevent water runoff. In fact, modular construction itself is considered greener than homes built on-site, since the company can better control the construction materials and waste.

While the financial incentives of energy efficiency should be clear, homeowners who go the green route get other benefits, according to Bill: “There’s more than the financial impact....There are also things like health advantages, lower environmental impact.” Bill claims indoor air quality is vastly improved in a well-ventilated, energy-efficient home. “I live in one – it’s night and day.”

Of building green affordably, Bill says with pride, “It’s no longer theory; it’s fact. We’re doing it every day.”

Q: Can building green have a positive financial impact on a construction company?

A: Bill Potter of Squash Meadow Construction: “That’s a big yes. It’s added a new element that differentiates us from others. And even in these down times for builders, business is up for us.”

But he doesn’t see other Vineyard construction firms following suit. “I don’t know why other [builders] aren’t hopping on board....At green-building conferences, it’s just me and the guys from South Mountain as far as Island builders....It’s what we need here. It’s the future.”