Business often is equated to card games like poker, where minimum bets are required so a player can keep a seat at the table. With all of the pro forma work that goes into a new residential project these days—from feasibility studies to market analyses—only the most solid projects get a green light. But risk is only minimized, not eliminated.
Until recently, builders were free to focus only on codes for their guidance on the energy efficiency of the homes they build. But increasingly, new homes with third-party certifications of efficiency and greenness have gained an edge in many markets. From Jagoe Homes in Owensboro, Ky., which is among many builders that only sell homes with Energy Star certifications, to giant David Weekley Homes with its Environments for Living certifications, some form of green building is now table stakes for all builders.
This stands to reason. Studies have shown that buyers in today’s resurgent housing market are more apt to factor in cost-of-ownership in their decision-making. The good news is that builders who are not already offering green certifications on their homes will find a clearer playing field of certification options. This year’s Professional Builder Show Village at IBS features two homes that have been built to the National Green Building Standard, a voluntary certification that was developed by the NAHB and the International Code Council in 2009 and has been ANSI approved. More information about NGBS and Show Village is available in this article from our January issue
Over the last five years, nearly 30,000 new homes have been NGBS certified and there are another 2,000 homes in the pipeline. The program is non-prescriptive, which means that taking short cuts is hard and perhaps explains why it is the only green certification accredited by ANSI.
There are at least a dozen competing standards, all with their proponents, all with their benefits. Depending on your competitive landscape locally, you will want to be familiar with each of these standards and choose one go-to program that offers a point of differentiation from the competition.
The coming year will be noteworthy to builders for several reasons. Primarily, the housing recovery will begin to be more firmly rooted among all segments of buyers. In 2013, there was a tremendous lift in the market from investors, whose group purchases of properties helped dry up supply and drive up prices. In 2014, it is expected that more move-up and entry-level buyers will emerge. And we will learn more about the buying preferences of new cohorts, namely Millennials, age 18 to 32. Many in this group will have waited years to get into the market. You should expect them to have spent much of that extra time learning about new products and new ways to make their homes more comfortable and less expensive to operate.
There is plenty of evidence, including our own research, that shows buyers in some cases are willing to pay slightly more for energy-efficient certifications. But more often than not, energy efficiency is the cost of doing business today. The coming year will be stronger for builders, but among the risks inherent in the business now is the risk of not offering energy efficiency.