Green building is smart building. Not taking the conventional route does add an extra expense, but payback is short. A lot shorter than most people think. And once built, a green building delivers a lifetime of energy savings. Though savings (in both dollars and the Earth’s resources) are reason enough to build green, the benefits don’t stop there. Green buildings are more comfortable, healthier, return higher productivity rates and have a higher resale value.
LEED-certified buildings cost on average 1 to 2% more than comparable conventional buildings. Yet public perception is quite a different thing. According to this study, 62 per cent of people surveyed believed that there’s a significant cost difference between green building and standard building. And those surveyed were builders, developers, building owners—people who would have a much better idea of building costs than the general public.
The General Services Administration (GSA), a U.S. agency that manages federal government property, studied the costs of building to a LEED standard. They broke their analysis down into new construction and building modernization and found that the cost to build LEED-certified ranged anywhere from 0.4% less than conventional in a low-cost scenario for the minimum LEED-certified rating to 8.2% more than conventional for a LEED Gold rating in a high cost scenario (SOURCE: GSA LEED Cost Study).
Greening Buildings and Communities: Costs and Benefits, a landmark international study supported by renewable energy investor Good Energies, found that most green buildings cost 0 to 4% more than conventional buildings, with the highest concentration being in the 0 to 1% range. About 50% of all the buildings studied reported a payback of five years or less just from energy and water savings, but when health and productivity benefits were taken into account, that figure jumped to 90%.
Davis Langdon, a construction cost-planning and management consultancy, also found that most buildings did not require additional funding to achieve LEED certification. Some buildings did require additional funding, but only to pay for expensive features like solar PV systems. (SOURCE: Costing Green: A Comprehensive Cost Database and Budgeting Methodology).
Green buildings can be built for even less than conventional buildings because efficient design allows for HVAC equipment to be downsized. The key to keeping costs down is to plan the project to be sustainable from the beginning rather than making design changes later on.
Each certification program yields different results (and in some cases, guarantees) on home performance. ENERGY STAR for New Homes promises homeowners will save on average 25% of monthly energy costs when compared to standard homes built to the minimum building code.
The following payback estimate is a simplified example illustrating the impact of the aforementioned 2% green building premium. This example compares a typical 1,200 square foot single-detached three-bedroom ENERGY STAR home in an average neighbourhood of Saskatoon to a standard home of the same size in the same place. Construction costs per square foot vary greatly, but for this example an estimate of $125 per sq. ft. is used.
Average construction costs (standard home) = $125/sq.ft x 1200 sq. ft. = $150,000
Average construction costs (green home) = $127.50/sq. ft. (2% premium) x 1200 sq. ft. = $153,000
Annual energy costs = $250/month x 12 = $3000
Annual energy savings = $3000 x 0.25 (25% energy savings) = $750
Interest = $3000 x 0.04 (4% 3-year fixed mortgage) = $120 x 3 years (payback period) = $360
Cost differential = $3000 + $360 – $1000 (government rebate for purchase of an ENERGY STAR new home) = $2360
Payback period = $2360 (cost differential) / $750 (annual power savings) = 3.1 years* (without the government rebate, 4.5 years)
* Energy utility rates have been increasing at about the rate of inflation. Any changes to the rate of utilities will affect this payback period. ROI on the $3000 also needs to be accounted for. The average Government of Canada bond rate is about 1 to 1.5% per year.
Additional rebates available in Saskatchewan for purchasing an ENERGY STAR home, according to Resource Efficient Housing Inc., include:
- $1,000 rebate for the purchase and installation of a solar domestic hot water heating system that is certified to the CAN/CSA F379 standard and provides a minimum energy contribution of 6 GJ/yr.
- $3,500 for the installation of a CAN/CSA-C448 compliant Geothermal System.
- $150 for the installation of a drain water heat recovery system, and/or
- $100 for the installation of one qualifying natural gas appliance or $250 for two qualifying natural gas appliances. Qualifying natural gas appliances include clothes dryers, barbecues, cooktops, and ranges.
- 10% mortgage loan insurance premium from CMHC
After the 3.1 years are up the extra cost of building green is accounted for and you’re living in an energy efficient home that will continue to save you (and future homeowners) an average of 25% per year.
This example only accounts for energy savings. Water consumption and waste production can also be saved through building design, saving you even more. And with renewable energy systems you could even make money from the energy you produce by selling back to the grid or by leasing your property to a company such as SkyPower to develop a solar project on your land.
Other financial benefits
Property value – In addition to utility savings, green buildings are also showing higher property values and average sales price increases of more than $20 per sq. ft. (SOURCES: “Making the Business Case for High Performance Green Buildings,” “Green Value: Green Buildings, Growing Assets” and “Greening Buildings and Communities: Costs and Benefits”)
Because the green real estate market is still small, people are even willing to move great distances to get into a green built community or to find just the right home. Read our interview with Doug McClenahan of NRCan to gain insight into one example of this occurrence in the Canadian green housing market.
Decreased demand on infrastructure - High performing buildings demand less energy and water, which decreases the strain on common resources and allows infrastructure capacity to extend farther. Municipal governments have two big reasons to be happy here. They can charge higher property taxes for buildings that have a higher property value and they save on infrastructure spending.
Increased productivity and attendance - Studies have found a positive correlation between improved indoor environmental quality and productivity and attendance. Productivity gains of 2 to 10% and a reduction of 35% for absenteeism have been reported for green leased space. (SOURCE: “Health and Productivity Gains from Better Indoor Environments and Their Relationship to Building Energy Efficiency” and “Making the Business Case for High Performance Green Buildings”).
Improved sales – Higher sales have been reported in buildings that maximize natural light. A survey documented in Skylighting and Retail Sales: An Investigation into the Relationship Between Daylighting and Human Performance, reports a 40% increase in sales among stores that use skylights rather than electric lighting.
Gas savings – “Greening Buildings and Communities: Costs and Benefits” found that a green built community can result in annual gas savings of as much as $1000 per household because homes are built near necessary infrastructure.
Investment decision – CaGBC’s Ian Theaker, LEED program manager, found Canadian LEED buildings to have an ROI of 15 to 20% just based on energy efficiency measures. “A Business Case for Green Buildings in Canada,” notes that net present values of green over conventional buildings range from $50 to $400 per sq. ft. And it turns out that the small construction premium doesn’t matter that much for certain investors. Over the 30 to 40 year lifespan of an institutional building, only 8% of its cost is the initial capital. The rest go towards operation and maintenance, according to a City of Hamilton study (SOURCES: City of Hamilton Council Presentation – Feb. 20, 2001 and Benefits of Building Green).
Buildings have a considerable environmental impact. According to Industry Canada, they account for:
- 50% of the extracted natural resources and 1/3 of the country’s energy use
- 25% of landfill waste
- 10% of airborne particulates
- 35% of greenhouse gases
Using the five core areas common to comprehensive green building rating systems as a guideline, the following benefits can be observed by building green:
- reduced sprawl
- preservation of natural spaces, wildlife habitat and native species
- minimized reliance on cars from improved access to infrastructure
- reduced soil erosion from sustainable landscaping
- minimized light pollution from reduced and optimized lighting
- reduced water consumption
- water reuse and collection
Energy and atmosphere
- reduced greenhouse gas emissions
- reduced energy consumption
Materials and resources
- waste reduction
- locally sourced materials and resources
- minimized material usage due to durability
- renewable resources
- natural materials
Indoor environmental quality (IEQ)
Just as a building can make people sick (sick building syndrome), a building can also contribute to people’s wellness. In “A Business Case for Green Buildings in Canada,” CaGBC reports that improved ventilation reduces sickness by 9 to 50%. Measured in terms of health care costs, it was found that building retrofits which improved the indoor environment of buildings resulted in a reduction of communicable respiratory diseases (9-20%), reduced allergies and asthma (18-25%) and non-specific health and discomfort effects (20-50%) (SOURCES: “Health and Productivity Gains from Better Indoor Environments and their Implications for the U.S. Department of Energy” and Why Go Green?)
A green building is a healthy building. Health can be measured in many ways, not just for the body and mind, but for one’s finances. Building green makes for a wise residential, industrial or commercial investment. The benefits far outweigh the costs. Though it may take a little longer to plan and build green and cost slightly more, the benefits will more than pay themselves back within a few years. And what’s not measurable in dollars and cents is the impact on the environment and health—immeasurables that on their own make building green a more than worthwhile investment.
See the benefits of green building on this tour of a LEED gold certified building:
photo courtesy Massachusetts Dept. of Environmental Protection (CC-BY)