Each of us probably has a slightly different interpretation of being ‘Green.’ For some, it is simply being more responsible about recycling. For others, it can mean driving a hybrid, eating foods sourced locally and conserving at every opportunity.
Building Green and Lending Green are often at odds.
In home building, being ‘green’ can mean building homes with materials which are green, installing equipment which is more efficient as well as building homes with better air quality and with tighter envelopes to reduced consumption of precious resources. Regardless of the builder’s approach, any efforts to conserve or be responsible are admirable.
So if we all collectively agree that being ‘Green’ is better, then why not be as Green as possible? The issue is this, in far too many cases, we are given incentive to do the opposite.
Please explain…
Instant hot water heaters are more efficient and will lower utility bills but are more expensive to install than the old tank-based hot water heaters.
Responsible harvesting of forests for flooring and framing materials is more expensive than clear-cutting a forest and that drives the cost of lumber up. Low VOC paints are more expensive. Additional insulation and HVAC units with higher SEER ratings are more expensive.
You get the picture.
Generally speaking, for a home to be certified as ‘Green’ by one of the agencies which certifies homes (EarthCraft of VA is one such agency), a builder will generally spend 3-5% more on the home during the construction phase. On a $300,000 home, the increased costs translates to anywhere from $10,000 to 15,000 more. Will the buying public accept these costs? Sometimes they will, but they are not the only one who has to.
When a home is purchased and a mortgage is used, an appraisal is required. If the appraiser gives no credit in the value computation to the ‘Green’ elements of the home, then the deal gets far more complex and either the interest rate is increased or the buyer needs to come to the closing table with additional cash to make up the value difference. This is a problem.
Effectively, until building ‘Green’ is a mandate, builders will have incentive to NOT build ‘Green’ as ‘Lending Green’ is more expensive despite the obvious benefits. It is another classic case of mortgage lending being directly at odds with the marketplace and policy makers.