Connect the Dots

Originally posted 2014-02-14 09:00:44. Republished by Blog Post Promoter

Green Builder CoalitionFor this week’s Guest Post Friday here at Musings, we welcome back Mike Collignon. Mike is a co-founder of the Green Builder Coalition. The Green Builder® Coalition is working to improve the sustainable attributes of new and existing buildings through education, information and advocacy.

There are a number of decisions that were made in 2013 that I feel point the residential homebuilding industry in a clear direction towards sustainability. Better still, some of these decisions will reinforce the importance of sustainability to homebuyers and homeowners. I’ll break this down into three categories:

Regulation

As we previously reported, building officials voted in favor of adding an ERI compliance path to the 2015 IECC. This is significant on a number of levels, some of which we didn’t delve into until now. Given the flexibility of an ERI, I believe we’ll see many builders choose this option, when states start adopting the 2015 IECC in 2-4 years. It requires strong performance levels, so the average builder will have to step up in order to comply. Meanwhile, the above-code builders will retain their market advantage by continuing to market their outstanding ERI scores. Also, they will face little to no disruption to their day-to-day business, and could face the very real possibility of expansion.

The use of an ERI as a code compliance path is nothing new. New Mexico has been utilizing it since 2009. Other jurisdictions, including several around New York City, have started to adopt it as well.

Arkansas is looking at a very different approach. The state energy office has proposed a plan that would require a HERS rating and a home label. If this passes, the home label component could set a precedent for other states and finally bring real transparency to the homebuying process.

Market-Driven Incentives

The Green MLS continues to appear in many parts of the U.S. Some MLS’ are adding a field for a HERS score, regardless of their move to formal green status. This accomplishes two things. It brings green features to the attention of appraisers and realtors, which historically have been an audience slow to tout green characteristics. (There are exceptions: green appraisers and EcoBrokers.) It also calls green features to the attention of the homebuying public. While some may be aware of their benefits, for others it may spark questions. In a new home situation, this opens the door for the homebuilder (or their sales staff) to expand their marketing message.

One market tool that can bolster a local Green MLS is the Residential Green and Energy Efficient Addendum. Developed by The Appraisal Institute (AI), it “is the first residential green and energy efficient appraisal report addendum developed by appraisers” and “provides items of high performance house features for consideration by appraisers”.[1] AI released an updated version of this document in March 2013.

RESNET, with assistance from the Department of Energy, took it one step further and integrated the Green Addendum into accredited Home Energy Rating Software Programs. This will enable the software user (typically a HERS rater) to generate the Green Addendum and auto-populate it from the data collected in the home energy rating. This integration is a natural fit and a streamlining of two processes that only have room for growth. Look for this software add-on by the end of Q1 2014.

The Green Builder® Coalition created a resource for the industry and interested homebuyers when we launched The Green Building Administrator. This web-based software allows the user to compare the 3 major national green building programs (Energy Star ver. 3, LEED for Homes and the National Green Building Standard). It separates the credits into common categories for easier navigation. This tool was designed to assist architects, designers, builders, consultants and involved homebuyers in their evaluation of the most appropriate voluntary program for their project. In 2014, we plan to add the 2009 and 2012 IECCs and CALGreen, so people can compare what they have to do with what they could do.

Looking at larger market forces, there are a number of states creating renewable energy portfolios. These call for a certain percentage of the power sourcing to come from renewable sources by a certain date. The percentage can be anywhere from 10% to as much as 33%. The dates vary as well, from 2018 to 2030 (or beyond). The larger point is that these REPs will help further the solar manufacturing market, which will in turn drive down equipment prices. We’re already seeing precipitous drops, and projections state we’ll continue to see them in the near-term. At some point, the decreases will slow, if not stop. But the price of PV-sourced power will soon fall below the price of fossil fuel-sourced power (if it hasn’t happened already), and solar consumers will continue to benefit.

Speaking of solar, there are still federal tax credits available for PV systems. Until the end of 2016, the system owner is eligible for a 30% tax credit. There may also be incentives, in the form of either rebates or tax credits, at the state-level. Visit www.dsireusa.org for complete information in your state.

Financial Institutions

We’ve been persistent in our call for Congress to pass the SAVE Act. There is no logical reason why this hasn’t passed yet! Legislatively, they dropped the ball in 2013. The administration might act on its own, either through the Council on Environmental Quality or directly with HUD. Still, we encourage you to keep in touch with your elected official regarding the importance of energy efficiency and the positive cash flow it can generate.

Fortunately, Genworth Mortgage Insurance is looking to reward homeowners with energy-efficient homes. In Canada, they already offer a 10% premium reduction and more flexibility in the debt-to-income calculations. This is similar to the short-lived energy efficient mortgages (EEMs) of the mid-‘90s and early 2000s. Hopefully, this practice will spread to the U.S. market. If it does, it may spurn their competitors to follow suit.

Additionally, reinsurance companies are starting to put their foot down when it comes to rebuilding in high-risk areas. They’ve studied the sea level and storm surge data thoroughly, and have concluded they’re not going to financially support structures periodically exposed to flooding. It’s just not a good business practice for them. Love them or hate them, insurance companies are a business, not a charity. They are looking to make a profit, and they’ve been burned too many times, by such events as Katrina, Irene and Sandy.

The National Flood Insurance Program is the only vehicle of protection for some homeowners. There is inherent risk relying on that, since the flood pool can dry up pretty quickly (pun intended). As a result, some homeowners are accepting buyouts for their land and moving to a safer location. There are also concerns about the program’s solvency, as it is already $24 billion in the red. The Biggert-Waters Flood Insurance Reform Act was passed in July 2012, and it required the program to set premiums relative to actual flood risks. However, the Homeowner Flood Insurance Affordability Act of 2013 recently passed the Senate, and it is poised to delay certain provisions of B-W, including rate corrections, by as many as 4 years.

There’s a multi-faceted convergence happening. For some, it may have taken too long, while for others it might be occurring too fast. Regardless of where you stand, it’s happening, with great momentum.

As always, Mike and I welcome your comments below. Please subscribe to keep up with this and other Guest Post Fridays at Construction Law Musings.
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About Musings

I am a construction lawyer in Richmond, Virginia, a LEED AP, and have been nominated by my peers to Virginia's Legal Elite in Construction Law on multiple occasions. I provide advice and assistance with mechanic's liens, contract review and consulting, occupational safety issues (VOSH and OSHA), and risk management for construction professionals.

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