Builders see green

Kermit the Frog may have been wrong when he sang, "It's not easy being green," at least when it comes to building construction.

"Green is becoming the price of admission," said Bob Nold, director of construction management services for Knutson Construction, the oldest continuously operating construction services firm in Minnesota, headquartered in the Twin Cities. "Few RFPs (request for proposal) we receive do not address sustainability or green construction."

Building "green" is becoming more acceptable, even trendy. Yet while it is more widespread, green construction remains uneven in parts of the Ninth District and elsewhere in the country. Indeed, it's difficult to gauge how deeply the green movement has penetrated the building market because simply defining it is illusive.

Green market springing up

Sources say universally that green construction is growing and is the future of building. But measuring green construction in terms of building units or construction value or economic impact is as difficult as defining it.

Data on the industry are hard to nail down, particularly at the state and local levels. But there are some national estimates and surveys to fall back on. In a 2006 survey of 75,000 builders by McGraw Hill Construction in conjunction with the National Association of Home Builders (NAHB), new residential construction with green components was reported to be a $7.4 billion industry in 2005 and was expected to grow three- to fivefold by 2010. The survey also predicts that green construction will soon be the standard, with the tipping point coming in 2007, when two-thirds of home builders are expected to use some form of green construction.

In commercial construction, the U.S. Green Building Council (USGBC) estimates that 6 percent of the U.S. commercial construction market is involved in its Leadership in Energy and Environmental Design (LEED™) rating system. Nearly 800 buildings have been certified, and over 5,500 under construction are being built to meet certification standards. Across the country, the LEED system has been adopted by federal, state and local governmental agencies as a way to ensure energy efficiency in publicly funded buildings.

Other green support organizations have proliferated nationwide and in the Ninth District. Those active in district states include the Green Institute in Minneapolis; Green Built Home(tm) in Madison, Wis.; Green Built™ Michigan; and the federal Energy Star and regional Pollution Prevention Resource Exchange (P2Rx™) programs, just to name a few. These and the aforementioned national organizations promote green building through training workshops and certification programs for builders.

What's driving green?

There are many drivers behind the market for green buildings, but perhaps the major one has been rising energy costs that need taming. Governments and utilities have fueled demand for energy efficiency further by offering tax credits and other financial incentives. Though some green measures like better energy efficiency can mean higher upfront building costs, both builders and consumers are starting to better understand that such efforts can save money in the long run.

Other motivations have an environmental bent—"doing good by doing good," as Robin Pharo, program director of Green Built Home in Madison, put it. The intent is to put less pressure on the environment through sustainable and eco-friendly building practices. That seemingly squishy consumer preference is being translated fairly quickly to construction practice. And in competitive construction markets, building green can differentiate a builder from the competition.

According to Calli Schmidt, director of environmental communications at the NAHB, home builders seriously began thinking green to address high energy costs for buyers. As builders gain experience, building green becomes more intuitive and less expensive. For example, they can save money by recycling materials and avoid tipping fees. For greater energy efficiency, it's generally cost-neutral to site a house with south-facing windows, which can generate indoor warmth in winter.

Green is already becoming the norm in commercial and public building construction, said Taryn Holowka, the USGBC's communications manager, in an e-mail. "The bottom line (is) what's driving green construction," Holowka said. The USGBC touted the environmental benefits solely at the start, she said, but now, "we talk about the business benefits." Building green can reduce utility bills by 20 percent to 50 percent and decrease water usage by 30 percent. There are people benefits as well, according to Holowka. It's been shown that occupants of green buildings are healthier, and thus more productive.

In commercial construction there has been a sea change in the past two years, largely driven by energy costs, said Corey Brinkema, executive director of the Green Institute. He recently sat on a building awards panel for a Twin Cities business newspaper and noted that of 40 submitted projects, at least one-third touted green aspects. That didn't exist when he first participated in the program seven years ago, he said. He added that one suburban Twin Cities developer is building the first area speculative office complex that is going after LEED certification for its shell and systems.

According to Pharo, builders are becoming proactive in green building. She said many governments are pursuing green building legislation, and the more proactive builders are, the less they face the threat of being behind the green curve if such legislation passes.

Guaranteeing green

Third-party certification programs are springing up alongside green construction. Some are national; others regional or local. The NAHB has identified 56 green home building programs across the country, 25 of which are administered in cooperation with state and local home building associations, with 18 more planned to launch in 2007. The goal of each program is to ensure that builders play by the rules and that buyers know exactly what they're getting.

The NAHB launched its certification system for green construction in 2005, and by 2008 the organization hopes to set the industry standard. In February, the NAHB announced an agreement with the International Code Council, a nonprofit organization whose purpose is to offer a single set of comprehensive and coordinated national model construction codes and to develop and publish a residential green building standard.

The current industry standard for commercial/government building construction is the USGBC's LEED program, which was introduced in 2000. A rating system for residential housing is in the development stage. "LEED is like a nutrition label for your building—you can see exactly how much energy and water it is using, what the building is made of, where the materials came from and what the indoor environment is like," according to the USGBC's Holowka.

"In some markets, [certification] is a trend, but in other places it's the way you do business," said Michael Vogel, professor of housing and environmental health at the Montana State University Extension in Bozeman.

"Going green doesn't mean you have to do everything in the world," Vogel said. "But the rater programs, including Montana's Energy Star, are a good way to learn what green means." But Vogel also cautioned against labeling a building "green" too easily. He said something like the Energy Star program gives a house a "tint of green," but there needs to be more of a sustainability aspect. "You can't just put in windows and say, 'I've gone green,'" he added. It's important that consumers understand what they're getting, he said, which is one thing that's driving the certification programs.

Getting the lie of the Ninth green

Some parts of the Ninth District have embraced green home building more than others, due in part, perhaps, to larger markets in some areas where greater competition among builders also exists. Minnesota, Montana, Wisconsin and Michigan all have active green building support programs, while North and South Dakota and the Upper Peninsula are less focused on green building.

Wisconsin's Green Built Home program, the first residential green building program east of the Mississippi River, was founded in 1999 and last year was named green building program of the year by the NAHB. Green Built has certified 30 percent of new home construction in the Madison area, which amounts to only 1 percent of Wisconsin's total market. Still, that means about 750 green homes were built in Wisconsin in 2006.

In Minnesota, green building is largely focused in the Twin Cities. The Green Institute in Minneapolis is working in partnership with the Building Association of the Twin Cities to develop green building certification guidelines that will rate five areas of achievement: energy efficiency, materials efficiency, indoor environmental quality, land site and water conservation. While the system is based on the NAHB's green guidelines, Brinkema, the institute's executive director, said that builders and buyers will likely be more comfortable with a locally designed system.

No formal green building program exists in Montana. Still, western Montana in particular is alive with green, according to Vogel. "Where there is also a lot of competition among builders, you see more using innovative materials and systems," Vogel said. But, he added, "it's still a niche market in Montana."

Some modest efforts are afoot. Byron Roberts, executive director of the Montana HBA, said he is working with state energy programs to develop sustainability programs for builders. Paul Tschida, program specialist with the Montana Department of Environmental Quality, works with the state's Energy Star program. He said that close to 50 percent of new homes follow the energy code, but beyond that, he's not seeing much green. Tschida reported seeing a survey in which 70 Montana home builders were asked about building green, and the response was, "We will build what the consumer asks for."

In the Upper Peninsula of Michigan, "We were building green long before it became a buzzword," said Lynn Swadley, president of Sunrise Builders Inc. in Marquette. Building energy-efficient homes is just a matter of business for home builders in northern Michigan's cold climate. But Swadley said the overall concept of green building, which he has championed, has not been promoted by U.P. builders. Still, he added, what might be considered an upgrade in terms of energy efficiency in a home in Lower Michigan is just standard building practice in the U.P.

Swadley recently applied to join the Green Built Michigan program that offers a set of guidelines and third-party certification for green home builders. The program, while independent, bases its guidelines on those of the NAHB. Chris Hall, president of Green Built in Lansing, said the guidelines are aimed at the mainstream builder. There are significant benefits to builders, and at little cost. Hall said that for less than $5,000 in additional construction and certification costs, a builder can build a pretty good green home, get it certified and market the longer-term cost savings to the buyer. The certification process differs somewhat from the NAHB's national model in that Michigan requires adherence to the federal Energy Star requirements as well.

Though North Dakota sees a little green through the federal Energy Star program, "there's not a whole lot taking place" in the state, according to Kim Christianson, manager of the state's renewable energy and energy efficiency office. "I'm frankly disappointed that we don't have more builders" focusing on green, Christianson said. He added that most buyers are more interested in the square footage of a home than in paying upfront extra costs. And while not much is happening on the home building side of green, Christianson noted that the new Bank of North Dakota building is going for an Energy Star rating.

The story is much the same in South Dakota. "You don't hear a lot about [green construction]," said Jeane Wharton, executive vice president of the South Dakota Home Builders Association in Pierre. However, she does think that with all the conferences and training programs available to builders that their awareness of the benefits of building green will increase. For example, Enercept Structural Insulated Panels in Watertown, S.D., markets its product to green builders and was featured at the NAHB's green conference in March. Wharton said that when a group of South Dakota builders toured the plant, they were surprised to learn what a big difference the company's insulated panels could make in a home.

In some cases, the green leader is government. Most governments don't yet require green certification for new public facilities, but many are leaning in that direction. The only local government in the district that requires LEED certification is Minneapolis, where all city-financed municipal projects are required to be LEED certified. All new construction or major renovations of municipal projects over 5,000 square feet need to achieve LEED silver-level certification.

There is more activity at the state level. For example, the state of Michigan mandates that all state-funded new construction and major renovation projects over $1 million be LEED certified. In Wisconsin, a 2006 executive order dictates that the Department of Administration establish and adopt LEED-based guidelines for new construction and existing buildings. At the local level, LEED standards apply to all municipal projects over $1 million in Madison and any new commercial and multifamily buildings that receive public funding.

No green brochures

The McGraw/NAHB study reported that the greatest obstacles to green home building are the perceived higher first costs, consumer willingness to pay and the lack of consumer education on green building. But sources noted that few builders are well-informed about the benefits and savings of building green, and an even smaller number do a good job of marketing those benefits to consumers.

Brinkema, from the Green Institute, said the economic benefits to green building are real, but it is "up to builders and real estate marketing people to translate that to buyers." There could be, for example, a 30 percent to 40 percent savings in heating costs—say, $75 off a bill of $200—but a builder may not stress that.

Home buyers might also find it interesting that a green-built house could be more valuable. According to Brinkema, a sales comparison in Colorado that looked at similar houses—some built green, others not—noted a 10 percent to 12 percent increase in sales price, more than recouping the premium paid by the original buyer.

Vogel agreed that builders don't always recognize the edge that green might give them in the market. "Builders do a good job of building, but maybe they could do better in marketing all the advantages that building green provides," Vogel said.

The U.P.'s Swadley said that green does well among home buyers in their 30s to 50s, who are on their second or third homes, but young first-time home buyers "just want to get into that house and don't even think green," nor are they necessarily willing to pay any upfront extra costs, despite the savings down the road.

New materials and technologies seem to be readily available, said sources. And the USGBC noted that all segments of the building industry are jumping on the bandwagon. But not all segments are in sync. Hall noted that although there are plenty of manufacturers of green building materials and systems, and builders who want to buy, the middleman often doesn't carry the materials or isn't up to speed on consumer demands or builder needs for green building.

How green is a blue housing market?

Maybe surprisingly, the currently sluggish home market has not affected green building much. Hall said that industry leaders are "keeping busy" because there is a demographic that has the money and is looking for a green product.

"The flat housing market is both a blessing and a curse," Brinkema said, and then cited two blessings. "When you're busy, you build what you know," he said. But in a slower market, a builder has extra time to consider new strategies. The second, and perhaps more important, is that "the market is more competitive, and builders need to distinguish themselves from one another, which we're definitely seeing now," Brinkema said. Wisconsin's Pharo agreed. "The market correction is good for the overall quality of building." In the end, like most innovations, the green building market will come gradually, not all at once, with some areas being quicker to adopt than others. "Like anything else, there's a learning curve to green; it's a continuum," said Schmidt, of the NAHB.

For green construction to become the norm that many predict, the benefits of building and buying green need to be better publicized and marketed. But the future of green construction also relies on students of the building trades. For example, a program for carpentry students at Bismarck State College, operated in cooperation with the state Department of Commerce Energy Office, teaches students to build green. Students have built green demonstration houses as part of their classes.

Michigan's Hall said that's not a fluke. Trades students everywhere are asking for training in green construction. "It's the future of housing," he said.