Heads of State

Peter Drucker, the management theorist and business guru, once called innovation “the specific instrument of entrepreneurship.” Modern builders who take that message to heart—who are willing to look at their products, markets, and customers in new ways and adapt accordingly—give their companies a much better shot at attracting reluctant buyers who need a compelling reason to purchase a house.

The following pages give a shout out to just a few of those who seem to see beyond a dismal present to a future of possibilities. In an industry too often accused of gazing into its rearview mirror for trends and ideas, these companies and people have been willing to risk offering something different to a public that can be indifferent, even hostile, to newness. But legends always begin somewhere, so why not with these housing innovators?

Meritage Homes Puts Energy Efficiency on Center Stage

As much as any production builder, Meritage Homes has made energy efficiency the sun around which its marketing revolves. “We’re approaching energy efficiency and sustainability as ways of extending the life of the house,” explains C.R. Herro, Meritage’s vice president of environmental affairs, about his company’s “Meritage Green” products, which promise up to 50 percent reductions in homeowners’ energy bills. Speaking at Builder’s Housing Leadership Summit earlier this year, Herro noted that Meritage’s 400-home Lyons Gate community in Gilbert, Ariz., where houses come with an array of energy-saving standard features, had produced three times the traffic count and was closing buyers at three times the rate of other communities in that market. Herro added that the “absolute linchpin” of Meritage’s green construction has been working with its trade partners on everything from variances to installing right-sized mechanicals. The one missing ingredient so far has been consistent profit: Meritage made money in 2010, but it reported losses through the first nine months of 2011.

Passive House Institute US Makes an Imprint

Let’s face it: How many Americans knew what a “passive home” was three years ago? Even the most eco-aware home buyer had a hard time wrapping his or her mind around the concept of a house designed to be airtight enough to stay toasty in frigid temperatures without relying on a furnace. But since it started certifying residential design and construction toits rigorous performance standards in 2008, the Passive House Institute US, based in Urbana, Ill., has been gaining followers among buyers (particularly in the Pacific Northwest), architects, and even builders who are attracted to the idea of marketing a product that consumes 90 percent less energy than a conventional stick-built house. Maybe more manufacturers will sign on, too, now that Passive House Institute US has joined forces with the U.S. Green Building Council—after severing ties with Germany-based Passivhaus Institut in August—to craft a certification for the domestic market.

Trumark Homes Goes Where Customers Are and Homes Aren’t

Since launching four years ago, Trumark Homes’ infill strategy has focused on acquiring distressed land in markets with scarce new-home inventory. That strategy registered with buyers in Upland, Calif.—part of the state’s depressed Inland Empire—where, through August, Trumark’s Wyeth Cove community sold 33 of its 39 homes in 17 months. Last spring, Trumark worked with Resmark Equity Partners to redevelop an eight-acre commercial property in Santa Clara, Calif., into a 183-unit community, and to develop a 4.3-acre lot in San Jose, Calif., for 94 three-story townhouses. Trumark is also one of the industry’s savvier marketers, and part of its strategy has been to create a social media persona for its communities and brand to lure prospects. Michael Maples, a principal at Trumark Cos., tells Builder that in Northern California’s tech-oriented Silicon Valley, his company targets younger buyers who are researching homes online at all hours of the day or night. “So we do Facebook, we do websites, and we try to track our response rates … and how many actually buy.”

LGI Homes Pitches Ownership to Renters

From July through September of this year, Texas-based LGI Homes closed an eye-popping 224 homes. Not bad for a company that builds in only four markets, and a testament to LGI’s deceptively simple sales formula: Woo renters with basic houses whose no-payment-down mortgages are comparable to or less than what they’re currently paying in rent. The company’s business model has proven to be exportable, which is a good thing because LGI’s success depends on volume, according to its CEO Eric Lipar. Having expanded into Austin, Texas, and Phoenix in 2011, the builder continues its hunt for new markets to enter.

Woodley Architectural Group Goes Micro in Portland, Ore.

Woodley Architectural Group in Colorado has long been on the cutting edge of innovative house design. Recently, it rose to the occasion again when, in collaboration with builder D.R. Horton, it came up with plans for Division 43, an infill project of 29 minuscule condos built on a 15,000-square-foot lot in southeast Portland, Ore. That’s the equivalent density of 86 homes per acre. The living spaces range from an almost impossibly tiny 364-square-foot studio to a still-compact, 687-square-foot unit that includes two bedrooms and two-and-a-half baths. The project appealed to the city because it promotes an autoless lifestyle. In fact, Woodley’s design includes racks to accommodate 1.5 bikes per housing unit. Michael Woodley, president of the architectural firm, notes that each unit sits on a 14-foot-by-26-foot foundation, comes with the same size kitchen, and uses only one window size. Contractors framed the first house in one day. While a change in divisional management reportedly has cooled Horton’s enthusiasm for this project, Woodley says he’s getting inquiries from other builders interested in market-specific ideas. “When the market is bored with traditional solutions, that’s when you need to come up with innovations.”

Ferrier Custom Homes Undaunted by New Products

In early October, Don Ferrier led a convoy of delivery trucks hauling autoclaved aerated concrete blocks to the jobsite of one of Ferrier’s clients who had requested them. Ferrier had never worked with these blocks, which are commonly used in Scandinavia and Germany. But that didn’t deter the builder, whom one magazine dubbed Texas’ “Godfather of Green.” Ferrier has gained a reputation for meeting customers’ demands and, in the process, walking on the wild side of products and construction techniques. He has been a pioneer since the early 1980s when he specialized in building energy-efficient underground “earth shelter” houses. He claims to have been the first builder in Texas to install tankless water heaters and solar water systems. And he built the state’s first LEED Platinum house. “That’s why people come to me; they want something different.” And Ferrier isn’t resting on his laurels, either: He recently drew up plans for a net-zero–energy house using Dow’s Powerhouse solar shingles that would cost $100 to $120 per square foot to build.

Architect Dennis Wedlick Keeps It Practical

When he started out 25 years ago, architect Dennis Wedlick focused on “how small we could make homes that still felt modern and bright and spacious.” Over the years, he’s never lost confidence in the power of architecture to make buildings more efficient. His approach, though, has been “more pragmatic than bells and whistles,” and his ideas often come from grassroots sources such as builders and homeowners. He also gets inspiration from “prototype stuff,” which represents about a quarter of his work, where his company partners with manufacturers, other designers, and government agencies. From these collaborations emerged such signature projects as the LIFE Dream House and the Hudson Passive Project. Now Wedlick is advancing the notion that architects’ talents can be useful even when far fewer projects are being built. “People don’t realize that architects are creative project managers. We’re like chess players—we play out moves in our head rapidly, and we’re trained to think outside the box.”

BASF Tightens Up

Built Tight This 2,500-square-foot home in Asheville, N.C., represents the latest application of BASF’s research into and development of insulating building materials. The owner—BASF’s director of sustainable construction Rick Davenport—spends only $18 per month to heat and cool the house.
Courtesy BASF Built Tight This 2,500-square-foot home in Asheville, N.C., represents the latest application of BASF’s research into and development of insulating building materials. The owner—BASF’s director of sustainable construction Rick Davenport—spends only $18 per month to heat and cool the house.

On a hilltop in Asheville, N.C., sits a new 2,500-square-foot home whose energy-efficient construction helps keep down its heating and cooling bills to $18 per month, without relying on a renewable energy source such as solar or geothermal. Its owner is Rick Davenport, director of sustainable construction for BASF, the world’s leading chemicals company. And the house—which BASF calls its Mountain O.A.SYS (for Optimizing Affordable Systems)—represents the latest application of BASF’s research into and development of insulating building materials. The test house was built using advanced framing techniques that reduced the lumber needed by $4,400. BASF created a wall system by encapsulating exterior panels with a continuous sheathing called Neopor that elevates the whole wall’s thermal resistance. Inside the house are behavioral monitors that Davenport expects to help reduce his energy and water consumption by as much as 25 percent annually. The house cost about $150 per square foot to build, compared to $225 for other custom homes in that area. The builder BASF worked with is using the same specs to build 1,200-square-foot houses in the valley for $80 a foot. Davenport says this kind of construction is needed in order for the industry to comply with new ICC codes that call for more stringent air tightness levels and regular testing. He proposes “massive re-education” of contractors on how to deal with ramifications of tightness such as moisture and pollutants.

Ritz-Craft Works Hard for Its Trade Partners

The modular-home manufacturer Ritz-Craft Corp. is “performance driven,” says its CEO Paul John. And in recent years, Mifflinburg, Pa.–based Ritz-Craft has devised several ways to help its trade partners—including a network of 200 builders—to become more successful. Last spring, the manufacturer launched its Total Marketing Solution, which helps marketing-challenged builders reach more home buyers effectively by tying together the builders’ customized websites, email marketing, lead management, and results tracking. Ritz-Craft enhances its own productivity through vertical integration. Its cabinet division took “a huge step” in 2010, says John, by acquiring a 250,000-square-foot facility from Yorktowne Cabinets that allows Ritz-Craft to control quality and cost. Ritz-Trans, an internal trucking company that supports Ritz-Craft’s building materials distribution entity Legacy Building Products, last year expanded the scope of its operations by offering backhauling services for Ritz-Craft’s suppliers to other builder-clients.

Kohler Derives Design Ideas From Employees

Kohler and unique product design are practically synonymous. So confident is this kitchen and bath products maker in its status as an idea factory that it sets an ambitious annual metric of generating a specific percentage of overall revenue from products designed within the previous three years. But ideas don’t arrive out of thin air. The company’s business units are required to come up with a “star” product for each category every year that is either best in class or taps into growing markets. “We challenge people to compete but not to copy,” says president and COO David Kohler. One recent creation drawing lots of attention, including more than 600,000 YouTube downloads, is Kohler’s Numi toilet, with a heated seat that raises automatically, a bidet washlet, and a built-in music system. Before designing the product, Kohler studied toiletry habits worldwide. Made in China with vitreous materials from the U.S., Numi “is an incredible product that’s worth the money,” says Kohler. He should know: He installed one in his house.

Learn more about markets featured in this article: Los Angeles, CA, San Jose, CA, Phoenix, AZ.