It's Not Easy Being Green: Market For Energy-Efficient Homes Is Growing, But Costs Make It Tough
PHOTO/Matt VOLPINI
Steven Gallo, president of Gallo Home Builders in Holden, stands outside one of the company's homes in Auburn that's under construction. Gallo, who builds energy-efficient homes, said he's concerned that stricter state energy codes slated to take effect in January will add a “tremendous cost” to new construction.
PHOTO/COURTESY
Matt Beaton, co-owner of Beaton Kane Construction in Shrewsbury (and a state representative), doesn’t believe there will be major growth in the “green homes” market unless energy prices soar.
PHOTO/Matt VOLPINI
A home under construction in Auburn by Gallo Home Builders of Holden. Steven Gallo, the company’s president, says growth in the green-home construction market seems slow.
As homebuyers become more aware of how energy efficiency can save them money, more developers and homeowners are applying it to their properties, creating a fledgling market for green homes.
"People are much more energy-conscious than they were five years, ago but to me, it seems like it's been a very slow process," said Steven Gallo, president of Gallo Home Builders in Holden.
Matt Beaton, co-owner of Beaton Kane Construction in Shrewsbury (and a state representative), said he doesn't think there will be major growth for these homes unless energy prices soar.
And homes that are energy efficient often cost more to build because construction materials are more expensive; or more of a material, like insulation, is needed. Beaton said that can be another challenge for the market because people don't buy homes and live in them for decades anymore. So, when people spend more to build a green home, they might not necessarily live in it long enough to see a full return on their investment.
"At the end of the day, this all boils down to money," Beaton said.
Greg Kamedulski, group president for national home-building giant Toll Brothers, said buyers don't typically ask for more efficient options because they don't want to pay for them.
For example, he said a good geothermal heating system, which doesn't use oil or gas, can cost $25,000, more than twice that of oil or gas systems, which run less than $10,000.
"It sounds exotic and sexy, but we found nobody wants to pay for it," Kamedulski said.
But there is indeed a market. According to a study published earlier this year by Craig Foley, chief of energy solutions for RE/MAX Leading Edge and managing partner of inCharge Energy of Somerville, there were 50 sales of green-certified condominiums and 61 sales of single-family homes in 2012. Of those, 10 were in Worcester County and 11 were in Middlesex County. That's according to Multiple Listing Service Property Information Network data that offers "green" information such as energy efficiency and certifications from Energy Star and Leadership in Energy and Environmental Design (LEED). The "green" information fields were added in 2009. Last year was the first in which MLS noted any green home sales, although homes with the green designations are not new.
Despite the fact that buyers aren't asking for high levels of efficiency, standard features of Toll Brothers homes have been greener for the past five years, Kamedulski said, in an effort to add value to homes and make them more appealing. Those features include blown-in attic insulation that fills spaces more completely; windows that reduce heat loss and the transmission of ultraviolet light through the glass; and a house wrap that goes underneath the exterior siding, sealing the home from moisture and helping the insulation be more effective.
Gallo said that while the public is getting more educated on efficiency, they also know that building codes that dictate efficiency are in place and new homes are generally being built with more efficient materials.
Waiting For The Payback
Yet, people may see value in adding efficiency later. Beaton said most of his business is not new construction but retrofitting homes with efficiency upgrades such as sealing an attic to prevent airflow and adding insulation to walls where it's missing.
On the other end of the spectrum are the homes with green certifications, the highest standard being a "passive home." According to the Passive House Institute US (PHIUS), a passive home is a well-insulated, virtually air-tight structure, and the need for traditional heating and cooling systems is eliminated. Meanwhile, an energy recovery ventilator
gives the home a constant supply of fresh air.
Passive homes have a 90-percent lower energy demand than an average, comparable house by retaining as much heat as possible.
Beaton's own home in Shrewsbury was the first such home in the state; another in Falmouth followed. According to PHIUS, there are 57 passive homes across the country. To meet the passive home standard, PHIUS said 10 percent is typically added to construction costs.
Beaton feels his investment is worth it because of the high level of energy efficiency these homes achieve. "I don't see a reason why someone wouldn't want to do it other than cost," he said, adding that the money saved on energy could be applied to the higher construction cost associated with passive homes.
Seeing clients aim for a passive home is more worth it to Beaton than achieving LEED or Energy Star certification. "(LEED) is moving things in the right direction, but it's a lot of extra money and it's a lot of extra work just to get a certificate," he said.
Beaton's sentiment is common among homebuilders. For example, Gallo said he hasn't noticed difficulty with reporting compliance and paperwork, but that obtaining an Energy Star rating can cost $5,000 to $7,000.
"Quite frankly, the benefit doesn't justify the cost," he said.
Gallo said the difference between getting that certification and not can come down to basement insulation. "If the house has a small basement and it's not going to cost me that much to insulate it, then I'll do it," he said. But for a large basement that's unlikely to be used a lot, the cost isn't worth it.
There are financial incentives to assist with efficiency upgrades, such as those through Mass Save, an initiative by utility companies that work with the Massachusetts Department of Energy Resources to offer rebates and other incentives on things like heating and water heating equipment.
Buyer Awareness?
As the market moves ahead slowly, there are regulatory pushes to make homes more energy efficient and for homebuyers to be aware of how a home rates.
In 2011, former state senator Steven A. Tolman introduced a bill that would have required a homeowner to fill out a home energy evaluation form for a buyer before completing the sale. But the Massachusetts Association of Realtors (MAR) fought the bill, and it died when the last legislative session ended.
Michael McDonagh, MAR's government affairs director and general counsel, said the bill raised questions about when a buyer can withdraw from the deal and what would happen if a seller didn't have the information. "We took a position against that bill last session mainly because we feel that the process in place right now works perfectly fine." He said a buyer can already request a home's energy information from the seller.
"That ... itself is not really going to show you a whole lot about efficiency; it's going to show how much electricity was used and how much was paid," he said, adding that electricity bills vary depending on how an individual uses energy. For example, he said one person may keep his home warmer or colder than another.
There are still other pushes toward efficiency in Massachusetts. In 2009, the state adopted a "stretch" energy code that allowed municipalities to opt into stricter building standards than what the state required. In the cities and towns that have adopted stretch codes, the efficiency of new construction must be about 20 percent better than what the state requires. As of last June, 121 municipalities adopted stretch codes, including Worcester, Auburn, Gardner, Natick and Marlborough.
And in January 2014, the building code will be updated according to the 2012 International Energy Conservation Code statewide, placing stricter guidelines on ductwork, airtightness, lighting and ventilation, among other things.
"It has some very stringent requirements that, quite frankly, I'm not even sure how I'm going to meet," Gallo said. "We pride ourselves on building energy-efficient homes, but … I think (the new codes are) going to add a tremendous cost to a new home and I really don't see a huge benefit." He said building codes have traditionally changed at a slower pace than they do now.
"These are happening at light speed," he said. "Especially when it comes to energy."
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