News

Green Home Building Reaching Tipping Point

Anthony C. Floyd, AIA, LEED-AP
Scottsdale Green Building Program
August 25, 2006

A newly released SmartMarket Report on residential green building published by McGraw-Hill Construction provides a positive outlook for the residential green building marketplace. 

There are a number of indicators that residential green building will escalate in the next year at a significant rate, making what is considered a green home today the industry standard in the future.  The study analyzed a representative sample of more than 75,000 builders with that indicate green building will reach its “tipping point” in late 2006 / early 2007.  Harvey Bernstein, Vice president, Industry Analytics & Alliances for McGraw-Hill Construction reports that as any industry crosses from being “less involved” to “more involved,” the rest of the industry will be forced to follow, and the green homes of today will become the standard homes of tomorrow.

In 2006, the growth in green home building is expected to rise by 20% over 2005, and in 2007, there is a projected a growth of 30% over 2006 numbers.  The result will be more than two-thirds of builders will be building green homes (more than 15% of their projects), with only one-third not yet engaged in the marketplace.  Beyond 2007, the sheer number of participants in the green home building market will pull the rest of the market up to green standards in order to remain competitive.

Green Home Market Indicators:

• Home builders are adopting green practices at a faster rate compared to their counterparts in commercial construction
• More builders are becoming involved in voluntary green building programs at the local and national levels
• 90% of the home builder community report some level of participation in green building activities
• The most important motivators for builders when considering building green homes are “doing the right thing” and “lowering lifecycle costs”
• Most cited triggers to increased residential green building
• Rising energy costs
• Increasing consumer demand
• Superior building performance
• Codes and regulations (depending on local jurisdiction)
• Competitive advantage
• Most cited obstacles to increased residential green building
• Higher perceived first costs
• Consumer willingness to pay
• Lack of consumer education on green building
• Codes and regulations (depending on local jurisdiction)
• Lack of awareness about products
• Top green building practices
• Energy efficient techniques top the list of important methods to integrate into a new home at 82%
• Indoor air quality is the second most important green building practice at 66%
• Water conservation ranks third at 59% (vary by region)
• Green site (minimizing site disturbance, preserving open spaces, natural water drainage, pedestrian-oriented communities) ranks fourth at 58%
• Materials and resources ranks at 57%
• Customer Willingness to pay
• More than half of the surveyed builders claim buyers are willing to pay more for green building elements
• Perceptions of increased costs for green building vary from 2% to 11% among builders (attributed to different home baselines and lack of accurate information)
• Green Home Certification
• Strong builder interest in voluntary green building certification programs (80% of small builders and 71% of medium to large builders)
• Emergence of local green home certification programs accelerate adoption of green building practices due to local community connections
• National Association of Home Builders (NAHB) produced its Model Green Home Building Guidelines as a response to the growing number of builders around the country adopting green building practices.

Recommendations
With green building as an established, emerging market with rapid growth, McGraw-Hill Construction proposes the following recommendations to the industry to be successful in this marketplace:

• For builders to gain competitive advantage, they should become familiar with use of green building practices in the next two years.
• The homebuyer and homeowner will continue to demand more green homes.  As a result, builders should be able to speak to homeowners about the advantages of a green home – not merely from a cost basis, but also by highlighting increased performance and health benefits.
• Voluntary green building programs, particularly at the local levels will speed up green building adoption, so it is critical that builders participate in the formation of these programs to make them workable and ultimately successful.
• For manufacturers to compete against established brands, they must establish credibility of products as “green” and market them appropriately.
• Builders should work with suppliers and product manufacturers to encourage adoption of new technologies to meet future demand.
• Green home building supporters should work with realtors, appraisers and other financing institutions to accelerate market penetration of green homes.
• Builders and policy makers should work together to establish common-sense ways to build sustainable communities.

For complete copy of the Residential Green Building SmartMarket Report, please visit McGraw-Hill Construction at www.construction.com