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Government agencies say the benefits of energy-saving construction are recognized by private lenders, but builders say otherwise.
Last week, HUD Secretary Shaun Donovan and U.S. Department of Energy Secretary Steven Chu met at an energy auditing company on Long Island to announce the launch of the FHA’s new PowerSaver pilot program.
Working with 18 lenders across the country, the program will allow homeowners to borrow up to $25,000 to finance energy improvements in an existing home, including improvements to insulation, duct sealing, replacement doors and windows, HVAC systems, water heaters, solar panels, and geothermal systems. Terms can go up to 20 years, and rates will be lower than standard. The FHA will guarantee up to 90% of the loan.
The idea is to generate interest in the private sector, which Donovan is hoping will get on board by providing these types of loans more readily.
Fannie Mae recently came out with a similar offering, a new Energy Improvement feature for mortgage loans. Fannie had already stopped offering its Energy Efficient Mortgage feature, which could have been used to finance the purchase of a new energy-efficient home. The replacement program can only be used to make energy improvements to an existing home.
The financing will cover energy improvements deemed cost-effective by a RESNET home energy rating, and amounts can go up to 10% of the post-improvement appraisal.
Unlike Fannie, the FHA still has a program for buyers of energy-efficient new homes intact. Its Energy Efficient Mortgage program can be used to help home buyers finance energy-efficient features in a new home as part of an FHA insured mortgage.
However, the increasing shift in emphasis toward improving the energy efficiency of existing homes rather than new homes is symptomatic of the disconnect between what government entities see as the market reality and what builders are seeing in the field.
According to a Fannie Mae spokesperson, the company feels that private lenders are meeting the needs of buyers of energy-efficient homes, suggesting that lenders will value energy-efficient features appropriately.
Shaun Donovan agrees. When Builder questioned Donovan after the PowerSaver announcement about why the government seemed to be moving its focus to existing homes, Donovan emphasized that the benefits of energy-efficient building are being recognized by private sector lenders and appraisers.
“We’ve seen greater progress in the new-home market through local building codes,” Donovan told Builder. “What we’ve seen more and more are appraisers and Realtors who see the value in [energy-efficient construction], and lenders are recognizing that.”
But that’s not what builders are saying.
About two years ago, Meritage Homes decided to go all-in with energy efficiency. “We took the approach that we were going to start over and change the way we build,” C.R. Herro, vice president of environmental affairs at Meritage, told Builder. “We frame different. We build different. We use different appliances and features.”
As a result, Herro reports that Meritage can build a home that uses half the energy and half the water of a traditional home with only a 10% increase in the cost of construction. The energy-saving upgrades Meritage includes can save the homeowner between $1,200 and $3,600 a year in utility bills, depending on the home (some of Meritage’s homes achieve net-zero energy efficiency).
But when asked if appraisers and banks recognize the value of the energy-efficiency benefits Meritage includes, Herro replied emphatically, “Absolutely not! We’re building a lot of significant improvements into our homes. We’re doing net zero. We’re doing solar. And we’re struggling to get a penny out of it.”
“Conventional construction is leaky,” Herro said. “A traditional home will have to recondition all of the air in the entire house 70 times a day. When you rebuild [to high energy-efficiency standards], you can cut that down to five.” According to Herro, such a reduction would cut heating and air-conditioning costs down by 60%.
The trouble, Herro said, is that the people consumers look to when trying to gauge the value of a home—appraisers and lenders—are failing to recognize the value in the energy-efficiency upgrades the homes include, and as a result, the builder is forced to absorb that additional cost.
Despite these challenges, Meritage has been able to make energy-efficient building work as a business model, largely because of customer awareness that sees the value in it. Also, as one of the largest builders in the country, Meritage is able to achieve economies of scale by building all of its homes to energy-efficient standards. “But the average builder is incentivized to build a less energy-efficient home,” Herro said. “It’s ridiculous that you can build to [a high] level of efficiency, but it has a negative effect on your income statement.”
In an effort to remedy the problem, Herro is promoting the Sensible Accounting to Value Energy (SAVE) Act, a proposal supported by Sen. Michael Bennet (D-Colo.) that would require federal loan agencies to take into account the expected energy costs of a home when assessing a mortgage loan application.
“Homeowners who spend less on energy will have more money to make mortgage payments and to maintain and repair their homes,” SAVE Act press materials say. “A person will be less likely to have to choose between paying the utility company or his or her lender.”
The materials also point out that the average U.S. household will spend more than $2,300 in energy costs over the course of a year, “more than the average cost of property taxes or homeowners insurance, two expenses that are routinely underwritten in a mortgage loan. Energy costs are not accounted for in this process.”
“If you take all the things out of a home that waste resources and money, that innovation costs a little bit more,” Herro said. “The problem is that building better, until the average consumer recognizes the benefits, is disincentivized by the establishment.”
Claire Easley is senior editor, online, at Builder.
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Builders Fight for Value Recognition for Energy-Efficient Homes
The Healthiest Markets for 2011 (Austin is #2 in the Country)
2. Austin-Round Rock, TX
Market Health Indicator: 86.5
2011 Building Permit Forecast: 11,079
Percent Change in Building Permits: 57%
Though Austin was knocked from the top spot on this year’s list, its housing fundamentals continued to show solid improvement. The metro area enjoys some of the strongest job growth in the nation. Employment accelerated last year with the addition of 18,700 more jobs, most of them in service industries, lowering the unemployment rate to 7%. Google recently fanned the employment flames by announcing it wants to open a division there dedicated to location-based marketing and mobile recommendations.
Austin has grown to become the 15th largest city in the nation, according to the U.S. Census Bureau. Its strong fundamentals have attracted the interest of apartment owners and developers: MPF Research forecasts that it will be the second best apartment performer this year.
Median incomes rose 3% last year. Median home prices in Austin rose right through the economic recession, eking out a 1% gain last year to $195,000.
From Builder Magazine Posted on: March 3, 2011
What does it cost to build Green?
How much more does it cost to build to the Gold standard of the NAHBGreen rating system than to Silver or Bronze certification? What specs would have to be upgraded to escalate a home’s rating?
A builder north of New Orleans built 3 identical 1912 Square foot homes to compare the costs of upgrading to the different levels of green construction. He found that upgrading to the Silver level (from Bronze) incurred a $7,455 premium , and that going to Gold cost another $15734.00 above that. This does not include any federal or stat rebates.
The additional costs came from across a spectrum of upgrades. The air-conditioning systems, for instance, were scaled from a 14.5-SEER unit for the Bronze- and Silver-level homes to a geothermal, water-cooled heat pump for the Gold-level home that achieves a seasonal energy-efficiency ratio well over 20.
The builder also improved the thermal shell. The Bronze baseline features 2×4 stud walls at 16 inches on-center with R-30 batt insulation, OSB sheathing, and housewrap, while the Silver version upgrades to a spray-applied, R-15 rockwool insulation, with foam panels over the OSB to create a thermal bridge. The Gold-level house is advanced-framed with 2×6 walls at 24 inches on-center and R-24 blown-in-blanket insulation. Windows went from a baseline U-factor of .35 to .29 to .24.
from 11-2010 Builder Magazine
Survey shows that homes will likely be 10 percent smaller
Builders expect that homes will be both smaller and greener in 2015, a survey by the National Association of Home Builders revealed.
The homebuilders surveyed estimated that the average new home in 2015 will measure 2,152 square feet, 10 percent smaller than the average home in 2010. They said the average new home in 2015 will include a great room, a master bedroom and bathroom on this first floor with a walk-in closet, a laundry room, ceiling fans and a two-car garage.
Most builders believed they would save the most square footage in the living room. Fifty-two percent said the living room would merge with other spaces, while 30 percent said it would disappear completely. They also said the relative size of the dining room and foyer would shrink.
The family room is the only space that is expected to grow—54 percent of builders said the size of this space would increase.
The survey also showed that homebuilders expect homes to be more environmentally friendly in 2015, with more green features and technologies and an EnergyStar rating for the entire home.
Rent or Buy
To determine whether it makes more sound financial sense to rent or buy, economists generally use a rule of thumb: They divide the purchase price of a home by the annual rent of a similar property. Anything over a 15, and you should rent because it will cost you less over a period of time. Below 15? Start looking for homes.
This buy-rent ratio is a rough gauge with many other factors entering into the buying decisions of individual home seekers, including their income, property taxes and whether home values are likely to rise. Still, it is a good starting point for those in the market for a new home.
New Hot Water Technology
Conventional gas tank water heaters also are getting more efficient. In September, Energy Star upped its energy rating requirements for gas tank units from 0.62 EF to 0.67 EF. To meet those levels, manufacturers have to add power to their units, which is why most high-efficiency models are power vented or power direct vented. While these units are easily installed in new homes, they do require additional work in remodeling because the venting system needs to be replaced with PVC. There are a few innovative atmospheric models on the market that are Energy Star rated, but keep in mind that most standard atmospheric models are unable to reach anything above 0.63 EF. Even so, 40-gallon gas tank units with an EF of 0.61 or above will still provide one LEED point, and 60-gallon and 80-gallon models only need to reach 0.57 EF and 0.53 EF, respectively, to earn one LEED point.
Another detail to look for on gas water heaters is emissions. While only California has ultra-low NOx requirements (emission levels of less than or equal to 10 nanograms of nitrogen oxides per joule of heat output), some manufacturers are finding a cost benefit in manufacturing several of their units at low NOx rates. There are also several propane-fueled (LP) models available for builders who don’t have access to natural gas. The Propane Education & Research Council claims that LP water heaters are a greener option compared to electric water heaters. “Even though there aren’t any emissions from an electric water heater at the home site, there is a lot of coal being burned to make that electricity,” says Tom Jaenicke, energy advisor to the council.
While tank-style units have certainly come a long way, they do have their limitations. When not in use, they produce standby losses, and, of course, they can run out of hot water. Tankless models address both of those issues, but they offer their own set of drawbacks. Tankless units have a longer payback period (15 to 20 years), and they don’t have stored capacity for high-demand periods. They also have minimum and maximum flow rates, which is especially challenging as more green homes adopt low-flow faucets and shower fixtures.
With shortcomings on both sides, it’s easy to see why manufacturers are now starting to come out with a new form of hybrid: tankless units with small storage tanks. They operate like a tankless unit, but a small buffer tank allows them to overcome some of the negative attributes normally associated with tankless models like minimum flow rates or “cold water sandwiches.” By capitalizing on the strengths of both tankless and storage water heaters, these units can reach efficiencies of up to 90%. However, because they represent a new water heater category, they do not yet qualify for Energy Star, LEED, or NGBS points.
Needless to say, this is an exciting time for the water heater industry. Innovation is at its peak and doesn’t show signs of leveling off anytime soon. A new federal rulemaking has required that as of April 16, 2015, newly built electric tank models with volumes of 55 gallons or greater achieve an EF of 2.05—an efficiency level that isn’t possible without heat-pump technology. Similarly, the ruling calls for gas tank models with volumes of 55 gallons or greater to have an EF of 0.8012, which requires gas-condensing technology. “The 2015 standards will change the way people look at large water heaters above 55 gallons,” notes Tommy Olsen, a senior product manager at Rheem.
While meeting the new standards will certainly require a lot of work on behalf of manufacturers, it’s good news for contractors. With a vast array of greener water heating options—including solar thermal—specifiers no longer have to rely on trends, but instead can choose a high-efficiency model that truly fits their needs.
Solar goes Hyper in the U.S.
HyperSolar magnifying film can increase solar panel efficiency by up to 300%, making solar competitive with fossil fuels.
Image courtesy of HyperSolar- Physorg.com: 100 percent renewables by 2030
- WWF: 100 percent renewables (no nuclear) by 2050
- AWEA: Wind cost-competitive with gas
Smog-eating roofs
Tiles contain chemical that naturally breaks down nitrogen oxide
By Todd Loesch, Housing Zone Contributing Editor
February 4, 2011
Obama’s mortgage-market reform plan calls for winding down Fannie Mae, Freddie Mac
Administration proposes three options for replacing the struggle agencies
By David Barista, Editor-in-Chief, Professional Builder
February 11, 2011
How Tight is Too Tight?
As houses get tighter, they becaome less able to ‘breathe’ on their own — they need mechanical ventilation. Put another way, energy efficient houses deserve healthy indoor air.
Sucking air out is one way to clean up indoor air With an exhaust-only system, make-up air comes from air leaks in the building envelope. This drawing also shows passive air inlets in the walls.
The first question I usually get when I start talking about insulating and buttoning-up houses is, “Won’t my house be too tight?” It’s a very logical question.
Tight houses need fresh air
As we make houses tighter, less air flows through them. With less circulation, pollutants in the house can build up. These pollutants can include carbon dioxide from our breathing, smoke from burning our toast, volatile organic compounds (VOCs) from cleaning materials and furnishings, moisture (which isn’t a pollutant itself, but causes mold and other problems), and, yes, even bathroom deodorizers that often contain harmful chemicals. Without as much fresh air getting in to dilute those pollutants and replenish the oxygen we need, aren’t we going to suffocate? Shouldn’t the house be left leaky?
The concern is right on—that a tight house without enough fresh air is a bad thing. But the solution—to keep the house leaky—is wrong.
There are several problems with the idea of relying on a leaky building envelope to ensure adequate fresh air in a house.
Leaky houses costs you money and waste energy
In a typical house, air leakage can account for 25-40% of the total heat loss of the house. If we increase insulation levels and put in better windows but leave the house leaky, the fraction of total heat loss coming from air leakage increases. Cold air leaking in means dollars leaking out. To make matters worse, the rate of air leakage is highest when the energy impact of that leakage is the greatest—when it’s very cold or very windy.
Air leaks can cause moisture problems
When warm air leaks out through cracks and gaps in your building envelope during the winter, that air cools off and may reach the “dew point.” This is the temperature at which water vapor (a constituent of all air) can condense into liquid water.
The dew point depends on the temperature as well as the relative humidity—the higher the relative humidity the higher the temperature at which the dew point will be reached. When condensation occurs within your walls or ceiling, stuff gets wet.
Mold can grow—potentially making you sick—and cellulosic materials like wood can rot.
You can’t rely on air leaks to be reliable
The strategy of keeping your house intentionally leaky can’t even be relied on to provide fresh air. Air movement through a building envelope depends not only on the envelope leakiness, but also on the “pressure differential” across the envelope. When it’s windy, there’s a pressure differential—on the upwind side fresh air is pushed in through those gaps in the house, and on the downwind side stale house air is sucked out. And when it’s really cold outside, the “stack effect” pushes warm air out through the envelope high in the house and sucks in outside air near ground level.
The problem is that there isn’t always one of these situations to create that pressure differential we need for fresh air. On a day without much wind during the spring and fall months, when it’s not that much colder outside than in, the differences in pressure won’t be enough to cause much air exchange—even with a quite leaky envelope, so you won’t be ensuring fresh air.
Tighter houses are better houses
My answer to the question of how tight we should make our houses is “really, really tight.” But we also need to provide mechanical ventilation. With a ventilation system—which can be as simple as the continuous or intermittent operation of quiet bathroom fans with intentional air inlets, to a whole-house ventilation system—you will be sure of getting the fresh air you need. With an extremely airtight envelope and a mechanical ventilation system that controls exactly where and how much air is brought in and exhausted, you get the quantity of fresh air you need, you deliver that fresh air where it’s needed, and you get it consistently, whether it’s windy or not and no matter the outside temperature.
“Whole-house” ventilation is most effective because the fresh air is delivered exactly where it’s intended (bedrooms and living room, for example) and stale air is exhausted from the places pollutants are most likely to be produced (typically bathrooms and kitchens).
With whole-house ventilation, you can also capture heat from the outgoing air stream and transfer it to the incoming fresh air. This is accomplished with a “heat-recovery ventilator” or “air-to-air heat exchanger.” This strategy makes a great deal of sense in cold climates, such as ours, though it does increase cost.