Is Green Building Cost Prohibitive? Spoiler: It’s Not.
Climate skepticism has been decreasing over the past five years. Now we must address the second roadblock in our path to decarbonization, solution skepticism. Technological advancements have led to large levels of growth in efficiency and have brought costs down significantly, making our keystone solutions like green buildings viable. However, cynicism on both sides of the aisle prevails.
A disconnect remains between the perceived and actual upfront costs of a high-performance home. Respondents in surveys give a wide range of estimates regarding the additional cost of green building, but few believe the efficiency measures are within their budget.
It is understandable why solutions are met with skepticism. While green building isn’t new, it remains a niche practice. In 2013 roughly 300 homes were certified as zero energy ready. While this has grown by over 400% reaching 1,600 homes in 2017, it is important to remember that there are 1 million housing starts each year. With zero energy ready homes contributing to 0.16% of the new building stock, the chances that people are interfacing with builders, neighbors, and friends that have gone through the process of building a high-performance house is low.
This lack of conversation lends itself to misconceptions that remain unchecked and solidify over time. 45% of people don’t have an idea of the costs associated with green building or believe costs add more than 10% to upfront home costs according to a 2017 National Association of Home Builders survey.
This turns out to be false. The Rocky Mountain Institute recently published the report The Economics of Zero-Energy Homes, which analyzed the upfront costs and payback periods for houses across the 50 largest cities in the U.S. The report broke high-performance homes into two tiers: Zero energy and zero energy ready. Zero energy homes are super-insulated, high performing homes that are fashioned with solar and produce as much energy as they consume. Zero energy ready homes are built with all the same efficiency measures but aren’t equipped with solar. The costs of the two home efficiency configurations were compared to the price of a home built at the state building code baseline standard.
Using price and energy modeling, the report finds that zero energy homes have an increased upfront cost of 7.3% and zero energy ready homes have an upfront cost of only 1.8% compared to a new baseline home. While green homes can’t be considered cost competitive upfront, this analysis has enormous implications. Although only 9% of homeowners believe that high-performance homes cost between 1-4%, 51% of consumers are willing to pay a 4% premium for a green home.
To reiterate, over half of Americans are willing to pay well over the upfront cost of building a high performing home. Why aren’t we screaming this from our poorly insulated rooftops?
Beyond upfront costs, the report reveals faster than expected payback periods across various thresholds. By the 12 year mark, which is the average length of home ownership, owners of zero energy ready homes recoup their money and save an additional several thousand dollars in reduced operational costs. Furthermore, those who commit to 30-year mortgages will see savings between $8,000 and $18,000. Not too shabby.
Zero energy houses, those built with all the same efficiency measures plus solar, teeter on the line of affordability. Solar is the luxury system of green building, increasing upfront costs by 7.3%. As you can imagine, payback periods do take longer, but once achieved, operational savings is modeled to be between $11,00 and $30,000 for homeowners who commit to 30-year mortgages.
Furthermore, solar costs are plummeting. Projections show that zero energy houses will soon hover around the upfront cost premium that most Americans are willing to pay. By 2030, zero energy homes will only cost 3.1% - 5.5% more.
While zero energy homes may require another decade for costs to come down, zero energy ready houses are viable now and reaching this step is far more crucial. Integrating solar is easy. Comprehensively retrofitting a building to increase insulation and airtightness is far more invasive.
Between now and 2030, 12 million houses will be built and should be built correctly the first time. Green building is not restricted to elite environmentalists. It is time we debunk the economic misconceptions surrounding green building embrace this cost effective decarbonization strategy.
