Although consultant Pierter VanderWerf believes builders should construct green homes (“It’s the right thing to do”), he told attendees at the NAHB Green Building Conference in Dallas there are few buyers willing to pay more, even though the houses cost 2% to 18% more to erect.
So, in order to bring the costs down--and increase the number of potential buyers--VanderWerf advises his developer clients to obtain cash back, up to $5,000, for building green. The president of BuildingWorks in Chestnut Hill, Mass., said there are three major subsidies available for pros: federal tax credits, utility rebates, and trade association programs. Homeowners also can qualify for utility rebates, energy-efficiency mortgages, and insurance discounts totaling thousands of dollars.
First, VanderWerf told attendees they need to at least build to the Energy Star for Homes standard, which he noted is not hard to achieve. (Energy Star-rated homes must be at least 15% more efficient than a standard code-built house.) VanderWerf, a former builder who constructed with insulated concrete forms (ICFs), admitted it will cost $400 to $700 to have the home rated, but that the certification will open the door to rebates and other dollars.
VanderWerf also noted that even though other national green certifications, like the National Green Building Standard and LEED for Homes, don’t come with rebates or discounts, they offer many intangible values. They allow builders to have independent proof that their homes are green and to generate media coverage and other free publicity.
Federal Tax Credits
Building to the Energy Star standard, the presenter said, qualifies a home for a federal tax credit of up to $2,000 to the builder. The tax credit is set to expire Dec. 31 for homes built and sold in 2009, but VanderWerf said he believes the Obama Administration will extend the credit.
VanderWerf noted that some states also offer energy tax credits to builders and to homeowners, and that your local Residential Energy Services Network Home Energy Rater (HERS) should know.
Local Utility Programs
Although there is a wide variation in these programs, VanderWerf said they usually pay the buyer or builder or both $150 to $1,500 for a home that meets a specified energy-savings requirement. Typically, these programs reward dollars for overall efficiency or for specific features, like Energy Star-rated appliances or energy-saving construction techniques.
Most metropolitan-area utilities offer rebates; if your local utility doesn’t, ask it to develop one, the consultant recommended. One Kansas City, Mo., builder in the audience noted he and other area builders convinced one of their local utilities to start a rebate program, and after that, the other two area utilities followed suit.
VanderWerf mentioned that consumers who install solar energy systems, including photovoltaics and solar hot water heaters, qualify for a federal tax credit and often utility rebates. But he said even with the incentives, the systems still may cost tens of thousands of dollars and be cost-prohibitive for most buyers.
Builders and their clients can find out more information about tax credits for renewable energies and energy-efficiency improvements to existing homes at the Department of Energy’s Web site.
Some trade associations also offer rebates and other incentives. For instance, VanderWerf said that when he was building with ICFs, the Portland Cement Association (PCA) provided him with $1,000 for the first home he built in a development, and up to $20,000 for 10 houses. A PCA official in the audience confirmed that those rebates still exist.
In addition, many trade groups will help a builder promote its green homes to the local media and may even pay for open houses. “And this can be for as little as one house,” VanderWerf commented.
Typically, these mortgages offer better terms for buyers of green homes, such as slightly lower closing costs and interest rates. Most require that the home have a green certification from a well-recognized organization.
The energy-efficiency mortgage doesn’t provide money to the builder, but it does allow buyers to qualify for larger mortgages, typically 5% to 8% more, which can help the pro sell more green homes, VanderWerf said.
But, he cautioned, it is hard to find out if lenders offer energy-efficiency mortgages because even if a national lender has a program, local branches often don’t know about it.
“Local lenders deal in five to 10 types of mortgages,” he noted, advising pros to always verify with a mortgage company that it offers energy-efficiency mortgages before sending clients there. And if a lender doesn’t offer energy-efficiency mortgages, ask it to develop a product, he said.
Preferential Insurance Policies
Green homes often are built with advanced construction techniques or alternative building systems, such as ICFs or structural insulated panels (SIPs), that may better withstand violent weather conditions. And many insurance companies will give homeowners a discount ($50 to thousands of dollars) on their annual premiums for dwellings built with these systems, VanderWerf said, noting that about half of all insurers offer such discounts.
The discounts aren’t money in the builder’s pocket, but again, they can help sell more houses, the consultant said.
In wrapping up the session, VanderWerf told pros their eco-friendly houses can qualify for more than one rebate or incentive from utilities, governments, and trade groups. “No program is exclusive,” he said with a smile.
For more information, contact VanderWerf at [email protected].