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D4COST Software


Cost of Going Green with the National Green Building Standard
By Home Innovation Research Labs

Established in 2009, the NGBS Green Certification Program provides a credible, flexible, affordable option for residential builders. There’s a saying that you can have good, fast, or cheap, but not all three. You can pick two of those options based on your priorities, but then the third will be sacrificed to some extent based on those choices. This adage would hold that if you want good + fast, the end result will necessarily be expensive. Home Innovation Research Labs sought to shatter this common belief when designing our National Green Building Standard (NGBS Green) Certification Program (www.homeinnovation.com/green).

Our goal was to deliver a program that met all three criteria. We wanted a program that was rigorous and credible (good), so we could be confident it was resulting in high-performance green homes. We wanted a program with excellent customer service and efficient turnaround (fast), so clients did not have to suffer delays to get technical assistance, interpretations, or their certification documentation. And we wanted a program that was affordable (cheap), so cost was never a barrier.

Since 2009, when Home Innovation began providing residential green certification to the NGBS, we have consistently delivered on this promise. Read on to discover how we manage to be rigorous, service-focused and affordable in our delivery of truly green, marketable homes and apartments.

First, let’s tackle one of the underlying questions you may have – why get homes certified? Certification provides consumers with confidence that the products we purchase will perform as expected. Within the construction industry, builders rely on product certifications to verify that testing has been done to prove a building product, component, method, or material performs at a level compliant with applicable codes, standards, and regulations. But is it enough for a product manufacturer to test its own products and assert that they meet the relevant specifications? Probably not for consumer confidence, and for many building products, it is not enough for code compliance either.

Consumers, code officials, and building professionals want unbiased, validated evidence from an independent, third-party certification agent. This type of certification adds cost to any product — but is it worth the cost? Ask yourself if you’d want your OSB’s structural performance untested. What about the R-value of the insulation you use? Buying a product that’s “pretty close to R-19” might be ok, but most builders rightfully expect a little more precision and confidence from their building products.

The same holds true for consumers and their homes. In fact, if reasonably priced, home certification is perhaps even more essential than certification of any of the products that go into a residential project. After all, building products are typically made in a factory-controlled environment with stringent quality control procedures in place. On-site construction is far messier, with a lot more variables to consider, and a lot less control over the process. Weather alone can wreak havoc on construction managers – a factor building product manufacturers seldom have to worry about.

All green certification programs have three buckets of cost, no matter what the program.

  • First, there’s the compliance costs, or the “sticks and bricks” needed to complete the project.

  • Next is the certification fee.

  • Finally, there are the verification costs.

For multifamily buildings, typically the increased cost is approximately 0.12% of total construction costs; or $.50 to $.70 more per square foot to achieve the Bronze level for NGBS Green Certification.Cost Considerations for Compliance/Design & Construction
In 2009, Home Innovation Research Labs did a comprehensive analysis to determine the increased cost for a code-minimum home to attain NGBS Green Certification. The analysis demonstrated that the Bronze certification level cost approximately 1.7% more for a $250,000 single-family home. Since that time we’ve heard from our builder partners that, with experience, that cost can be considerably lower. For multifamily buildings, we typically hear the increased cost is approximately 0.12% of total construction costs; or $.50 to $.70 more per square foot.

Assemble the Right Team: Keeping the construction costs in check starts with the design of a project seeking green certification. It’s best to amass your “green team” as early in the process as possible. This will ensure you don’t inadvertently miss out on point-worthy elements associated with land development/site considerations, building orientation, green product specifications, etc. While some aspects of green can be added into the plan later in the process, others simply cannot. There are significant benefits to knowing all the options and considering the best practices up front with someone in the know.

It may seem daunting to hire or contract with a team of green designers, but there are plenty of experienced green builders out there who would say that not having your own green team will cost you more in the end. Green homes or apartments require a higher degree of precision in their design and construction to ensure that the finished product works the way it was designed to work, as a whole building relying on interdependent systems for its optimum efficiency and occupant comfort. Having a team of experts well-versed in green products, practices, and protocols can end up saving you thousands of dollars in trial-and-error and/or callbacks. It’s important to get everyone in your construction chain on the same page with what you’re trying to accomplish – contractors and suppliers who are not informed can create inadvertent barriers (and added costs) to your ultimate success.

Select the Right Practices: The National Green Building Standard is very rigorous in its rating criteria, but it’s also very flexible in the hundreds of point-generating practices you can select for your particular project. Be sure to identify the practices that fit best with your geographic region/climate, buyer profile, housing type, and price point. Each project must meet a minimum level of points in each of the six green categories within the NGBS to attain any level of certification (minimum point thresholds increase for each higher level of certification), and there are some mandatory practices throughout, but filling in the other practices is based on what best fits your market and budgetary needs.

Specify the Right Products: Be sure to make strategic product selections based on the practices you’ve chosen to accomplish the project goals (see sidebar on benefits of specifying NGBS Green Certified Products). One way to maximize green benefits while keeping construction costs low is to use products or practices with multiple green features. For example, when specifying cabinets or cabinet materials, look for those that have low- or no-formaldehyde content and are made of recycled material. That way, you may be able to gain green certification points for both indoor environmental quality and resource efficiency. While most green rating systems won’t allow for “double-dipping” on points – i.e., claiming points in more than one area for the same green attribute in the same product or practice – most, including the NGBS, will allow for multiple green attributes in the same product to be counted across multiple point categories.

Our accredited verifiers with extensive multifamily experience report that many of the most common product selections required to meet the Bronze level of NGBS Green Certification add very little or no additional cost over their clients’ non-green projects. As the market has shifted more toward making green more mainstream, there are fewer price premiums associated with products like Energy Star appliances or low-flow bathroom fixtures. The few exceptions we’ve heard where greener product choices may actually be more expensive than their standard counterparts, and pricing still varies depending on the region, are high-efficiency washing machines, HVAC equipment, and some high-efficiency window products (especially in areas with more stringent impact requirements for hurricanes). There may also be premiums associated with the labor required for more advanced framing techniques, or proper installation of certain products or techniques, like insulation and air sealing. This is another area where work with an acc
redited verifier early pays dividends – they can let you know in advance where these extra costs may be a factor, which allows you to identify appropriate tradeoffs in your project planning.

Cost Considerations for Verification
Verification will be the largest bucket of costs associated with NGBS Green Certification, however, most of our architect, developer, and builder clients find the value well worth the cost. NGBS Green Verifiers set their own rates, and with over 400 accredited nationwide the market is quite competitive. They are not assigned “territories” and travel freely which ensures builders and developers can get the best price.

NGBS Green Verifiers (www.homeinnovation.com/FindNGBSVerifier) work closely with architects and builders early in the design stage to help ensure the project will successfully meet NGBS requirements. Verifiers can help avoid or even correct myriad construction issues such as poor insulation installation and wrong product installation (even when the right products were specified and ordered). Their on-the-ground expertise can help builders implement additional green practices they hadn’t considered. For architects, liable for the performance of the building for years, on-site verification can help ensure the plans they design are actually constructed as designed. For builders and developers, it is an independent validation system to ensure the quality of the asset. Up-front collaboration between the design team, construction managers, and building owner streamlines the verification process and helps ensure the building meets its performance objectives.

Once the building design is scored by the builder, or perhaps in collaboration with the verifier, the scoring spreadsheet is used by the verifier to visually inspect the building and ensure all of the green practices are installed. For many practices, the verifier must also ensure the practice is installed correctly. Home Innovation requires every home and apartment to be inspected at least twice. Buildings must be inspected before drywall is installed so the verifier can inspect the green building practices that are in the wall cavity walls (such as correct insulation installation or sealed ducts), and when the building is complete and all of the green practices are fulfilled. Verifiers cannot award points unless they are completely satisfied. In general, statements from builders/contractors/developers or photos to confirm that the practice has been or will be met are not acceptable, with very few exceptions. Some practices, particularly in the Lot Design/Construction section, require both documentation revi
ew and visual inspection to ensure that features are implemented as designed. Scheduling of inspections and/or re-inspections if a practice is not complete or visible the first time can significantly affect pricing – another good reason to work early and closely with an accredited verifier to avoid added costs.

Certification Fees/Administrative Costs
Fees for Home Innovation’s NGBS Green Certification are reasonable and simply calculated. Single-family home certifications cost $200 and multifamily buildings are $200 plus $20 per unit. There are no hidden fees for interpretations, technical assistance, or registration. Home Innovation provides all of those services as part of the certification fee to our clients.

We keep these costs in check by starting with a suite of certification tools and program resources designed to standardize the program, eliminate user error, simplify the requirements, and demystify the process. The NGBS Green Scoring Tools document the green building practices an architect and builder intend to implement. Our scoring spreadsheets work like TurboTax® by walking architects, builders, and remodelers through the NGBS requirements in a simple, straightforward way. Cells in the spreadsheets turn red when NGBS logic is violated or mandatory practices are missed, and the spreadsheets keep a running tally of certification points.

And we don’t sacrifice service for cost savings. Our NGBS Green Partners are provided with free technical assistance, and all NGBS interpretations are free. Home Innovation’s staff includes mechanical, structural, and electrical engineers; planners; economists; architects; former builders, remodelers, and contractors; lab technicians; and market research experts. Combined, we possess an unparalleled depth of knowledge and experience in all facets of building science research and testing. Our expertise can help clients along their path to NGBS Green Certification.

NGBS Green program partners report communities that have attainted green certification to the NGBS attract more renters to visit their communities and lease up faster than their non-green competitors.WHAT ABOUT VALUE?
Multifamily construction is booming. Housing starts were up 6.3% in September compared to August of this year, and the increase was led by an 18.5% rise in multifamily (and a 1.1% rise in single-family). So far in 2014, multifamily starts are up an impressive 23%. Even with strong production, vacancy levels remain low. And the forecast is bright for this sector – multifamily construction is projected to remain strong through 2015 due to demographic trends and a decreasing homeownership rate.

Multifamily green certifications to the NGBS are also booming. So why add any costs, even minimal/reasonable ones, to “go green” in the midst of this market boom for multifamily? There are both short- and long-term values. Simply put, you are buying market differentiation from the competition; an independent, third-party certification for your high-performing asset; a risk mitigation strategy for future energy price volatility; and a risk mitigation strategy for higher appraisal values.

Market Differentiation: Green certification might not (yet) command higher rental rates, but in many cities it is an appreciable market differentiator. Anecdotally, the evidence is strong. Our NGBS Green program partners report that they attract more renters to visit their communities and lease up faster than their non-green competitors. Market research consistently confirms that Millennials and Gen Xers want greener lifestyles but believe that it is the responsibility of businesses to create green products. For multifamily developers this is the unique value proposition — making prospective renters feel as though they are making as little negative impact on the world as possible, while enhancing their lifestyles with well-designed apartment communities.

Marketing Support: Marketing green homes can be tricky, and frankly, many builders get it wrong. Home Innovation can provide the marketing collateral and expertise necessary to promote your NGBS certified projects and stay on the right side of the Federal Trade Commission’s guidance on green marketing. Our website allows homebuyers and renters to search for NGBS certified and in-progress properties.

Institutional Investors: Large institutional investors want to invest in projects seeking green certification, and NGBS Green Certification meets their requirements. These investors have determined there is a competitive advantage to green certified buildings. A recent CoStar Group study confirmed that green buildings outperform their non-green peer assets in key areas such as occupancy, sale price, and rental rates, sometimes by wide margins. Although the conclusion regarding higher rental rates for apartments remains unsubstantiated for many markets, the fact remains that non-residential commercial buildings, at the forefront of green certification for a decade, are showing significantly higher resale values. Combine higher-value properties with lower operating costs and you get a lower cap rate. This is a big plus from an investor’s perspective and guaranteed to command greater attention from institutional investors as they seek out high-yield, low-risk investment opportunities.

Energy Price Volatility: Some developers select green certification to mitigate the future risk of higher rent rates and building values for green certified buildings compared to non-green buildings. Others are looking to hedge energy price volatility. Energy is a significant operational cost for all apartment managers; utility costs represent the single largest controllable cost in an apartment community. Improving building performance and lowering overall utility costs for developer/owners can increase net operating income and make a significant difference to the bottom line. Long-term forecasts continue to predict that residential utility costs will rise appreciably. If you are not building energy and water efficiency into your buildings today, you are building in obsolescence.

Corporate Reputation: The investment community believes that between 30 and 50% of a company’s value is intangible, based mostly on corporate reputation. (Others place the value of such intangibles at 70%.) Being an environmental leader and setting corporate sustainability goals are among the more important strategies to building a favorable corporate reputation. Further, the mounting convergence of brand and corporate reputation means that the corporate brand is as important, if not more important, than product brand(s). Land development and construction activities in particular have a very visible impact on the environment. Setting clear, transparent, and measurable sustainability goals is an efficient way to position multifamily developers in a favorable light. Seeking affordable, attainable NGBS certification for all new construction can solidify the corporate sustainability commitment.

Streamlined Entitlement Process, Development Review, and Public Participation: In some jurisdictions NGBS Green Certification brings tangible rewards including expedited permitting, density bonuses, tax credits, permit fee reductions, rebates, and LIHTC preference. In those situations the reason to commit to green is obvious. But even in areas where green isn’t mandated or incentivized, savvy developers understand that seeking NGBS Green Certification can grease the wheels of many sluggish development review processes. Local officials and local community residents appreciate when developers propose projects with reduced environmental impacts and above-code construction practices. By demonstrating environmental bona fides by attaining NGBS Green Certification, you get to select which green practices to employ in your project, as opposed to a government mandate of how you attain green.

When all these facts are taken into consideration, the value of NGBS Green Certification certainly merits the costs associated with it. The question is less about if you can/should afford to go green, and more about if you can afford not to. To find out if NGBS Green Certification is right for your residential construction business, visit www.homeinnovation.com/green or call Home Innovation Research Labs at 800.638.8556.

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