Lois Vitt Sale, AIA, LEED Faculty
Help Build Green Homes

Wight's chief sustainability officer, Lois Vitt Sale, AIA, LEED Faculty, recent op-ed piece "Help Build Green Homes" appeared in National Mortgage News.

OPEN FORUM: Help Build Green Homes

18 January 2010 / Vol.34, No.16

Comedians had a field day last month when, while speaking at a Home Depot in Virginia, President Obama jokingly asked company CEO Frank Blake, "Frank, don't you think insulation is sexy stuff?" Unfortunately, the quip overshadowed the president's main message: Clean energy in our homes can be a powerful engine for job growth. As he noted:

"The simple act of retrofitting these buildings to make them more energy-efficient - installing new windows and doors, insulation, roofing, sealing leaks, modernizing heating and cooling equipment - is one of the fastest, easiest and cheapest things we can do to put Americans back to work while saving families money and reducing harmful emissions."

Green homes help the economy, the environment and homeowners. Want job creation? The vast majority of green building and remodeling projects are done by local contractors, and Commerce Department data show that small businesses such as these have generated 60% to 80% of net new jobs annually over the past decade. Concerned about global warming and energy independence? Homes built in the first half of the last century can use about 50% more energy than today's homes, and the housing sector accounts for 21% of all carbon dioxide emissions in the U.S. What about lowering energy costs? According to the Department of Energy, adding a few hundred dollars worth of "sexy" insulation can reduce annual heating and cooling bills by 10% to 30%.

With all these benefits, you would think that everyone would be eager to jump on the green home bandwagon. But that's not the case. In fact, perhaps the most influential players in the housing sector - providers of private mortgage capital - are actually discouraging green residential construction. These lenders often fail to recognize the economic advantages of energy efficient homes, which means their appraisals do not reflect their real value.

Let me give you an example. I recently designed a small (about 1,200 square feet), zero-energy house in Downers Grove that is now under construction. It is extremely energy efficient and, although connected to the grid, will generate all its power through on site solar shingles. When my client tried to get a mortgage, the loan officer wouldn't even do an appraisal because she considered the house a bad investment. (My client eventually secured some financing in addition to using his personal funds.)

Private mortgage capital to a large extent determines a home's value. And the criteria lenders and appraisers use to make these valuations often have a direct impact on consumer choices and behaviors. (Remember when it seemed that every other homeowner was remodeling their kitchen to increase resale value?) If, as most of us would agree, we want our homes to be greener, mortgage companies need to find a way to include energy efficiency metrics in their valuation process.

For example, mortgage companies typically will prequalify perspective homeowners based on the ratio between the purchase price and their gross annual income. While this formula has proved invaluable in determining what individuals can afford for monthly payments, a more creative approach also might incorporate the anticipated costs for maintaining and operating homes over an extended period of time. Mortgage companies need to find a way to "credit" buyers of green homes to account for the fact that their lifetime operating expenses will be significantly lower. In the case of the zero energy home noted earlier, my client's lifetime savings should have had a positive effect on his ability to qualify for a home loan as well as its size.

Mortgage companies also should consider green renovations as technology investments with long-term paybacks that exceed initial costs. I personally can attest to these benefits after having used a number of green technologies when I doubled the size of my home. Since these changes, my electricity bill has gone down by 30%.

Another factor that may warrant some consideration is the potential impact of green features on a home's resale value. This is admittedly hard to measure, but there's no question that green technologies are becoming more mainstream and energy expenses will go up. The actions of mortgage companies in acknowledging this reality will further accelerate the growth of green homes and enhance their value. When a home's value is based not just on its number of bedrooms and bathrooms but its lifecycle energy costs, you can be sure more owners will integrate energy saving measures into their homes.

Federal, state and municipal governments are actively promoting - and often subsidizing - weatherization programs and other green home initiatives. As a result of the investments made under the American Recovery and Reinvestment Act, about 500,000 homes will be upgraded by the end of 2010. However laudable, these efforts alone are not enough. It's time for the entire real estate industry, especially private mortgage lenders, to assign quantifiable values to the energy saving benefits of green homes.

Ms. Sale is the chief sustainability officer at Wight & Company, Chicago, and the former chairperson of the U.S. Green Building Council's Chicago chapter. She lives in a green home with a green roof in Downers Grove, Ill.

Additional information can be found on the National Mortgage News website.




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