Financial benefits of green building you need to know about
BY CARL SEVILLE
Decisions made in the planning and development stages of multi-family projects are typically based on long or short-term financial return. Location, amenities, and other features all contribute to financial success. Notable benefits include cost savings, financial incentives for green certification, construction quality control, and improved tenant retention.
The most obvious, and easiest to comprehend, benefit is energy and water savings. Reducing common area utilities increases net operating income (NOI) while providing a measure of insurance against rising energy and water rates in the future. Energy savings can be achieved by following building and energy codes, thoughtful design, and smart purchasing and construction decisions. Lower tenant utilities provide an opportunity to increase rents compared and maintain overall expenses. The good news is making a better building doesn’t need to increase construction costs.
“Millennials are willing to pay a premium for products or services that align with their environmental goals and avoid those that don’t.”
Reduced Construction Costs
Integrated design, the concept of bringing the entire team together early in the design process, is encouraged and incentivized in all green building programs and can lead to construction cost savings and better performance. Instead of each team working independently in a silo, everyone works together to collaboratively determine the best path to high-performance construction. Reduced construction costs, lower utility bills, and reduced maintenance and repair costs are some of the benefits of an integrated design process. Having the certifying consultant involved early on helps you make the right decisions up front, avoiding last-minute changes that cost time and money.
Finding the Right Incentives
Financial benefits for green buildings multifamily include local and regional, from municipalities and utilities, and national incentives including tax credits, Fannie Mae’s basis-point reduction for new and existing green certified projects, and HUD’s 211(d)(4) mortgage insurance premium discount. The cost of meeting certification requirements is often more than offset by the savings. Developers can often “double-dip” by taking advantage of multiple incentives on a single project.
Tenant Acquisition and Retention
Millennials are willing to pay a premium for products or services that align with their environmental goals and avoid those that don’t. Beyond energy savings, green buildings are often more comfortable, are quieter, and improved indoor air quality over conventional buildings. Residents who are happy are less likely to leave when their lease renews.
A key benefit of green certification is quality control. Contractors expertise typically rarely extends to insulation, air sealing, moisture management, and HVAC quality. Certification programs require regular inspections to confirm that all such work is done properly. Green program verifiers identify deficient work and confirm corrections are complete before they are covered. Having a third party on-site to inspect contractors’ work assures owners that they are getting the quality project they are paying for. Deficient installations are avoided, creating a better-performing building and limiting the risk of defects including mold, mildew, and structural deterioration.
It All Adds Up
Green building does not need to come with a high price tag. Meeting basic green certification requires careful design, meeting codes, following product installation instructions, and good building practices. Multi-family projects typically are high density, have small unit sizes, and are located in walkable neighborhoods, capturing credit towards certification.
In the National Green Building Standard, almost any project that meets the 2015 IECC (Energy Code) can simply achieve Bronze certification. Certification often involves no added construction costs due to the inherent sustainability of mult-ifamily projects noted above. When you look at all the benefits , the case for green certification is strong.
Andrew Yule at Albion Residential puts it this way: “Green building certification has helped our newly created assets sustain the lowest-cost utilities in the industry. It’s a cost-effective program that’s proven to satisfy our prospects and residents, from a leasing perspective, while benefiting the owners of each asset, from a utility-consumption and expense standpoint.
Selecting and reviewing the requirements of a green program early in the process takes little effort and can lead to a smooth certification process. Incorporating green certification in your projects just makes cents.”
Carl Seville is a consultant for the construction industry. His firm, SK Collaborative, consults on and provides green certification for single and multi-family buildings throughout the country.