Karla Martin is marketing director for McStain Neighborhoods in Boulder, Colo. The company has a history of commitment to the building and development of new homes in sustainable partnership with the natural environment. It has designed and built more than 5,000 homes, and its core business is land development and construction of for-sale condominiums, town homes and single-family homes. McStain is a founding member of Built Green® Colorado.

HousingZone.com editor Felicia Oliver talks with Martin about the challenges builders have in marketing and selling green homes to potential homebuyers.

HousingZone: Why has McStain Neighborhoods made such a commitment to green building?

Martin: It's interesting, because we are based out of Boulder, Colo., which happens to be a pretty environmentally sensitive area to begin with. So it's well received where we are, but also it's an ingrained value system for the owners of the company. We really only attract those people who share the same values as part of our mission statement.

HousingZone: What particular elements of green building are you incorporating into the homes that you presently are developing?

Martin: We started with the Built Green® program that came into our area. We happen to have been the very first Built Green® builder in the State of Colorado, the first production builder, actually. We have just recently launched a tiered system in Built Green® – Tier I, Tier II and Tier III, and they all have different standards.

I would say we have, over the years, done four research projects in application – practical research projects that have allowed us to see what works and what doesn't. It started in 1995 in what we called our Environmental Research House, where we took a regular home that we normally build. It wasn't a big house – not much more than 3,000 square feet. We took that house that we built in a production environment and chose 36 substitute materials that we could put into that house and really test them for their efficiencies, their availabilities, their installation abilities, consumer demand, and their overall performance as they related to their counterparts. Whether it was cost, whether it was the understanding of a subcontractor to be able to install it, whatever, we tested those materials from there.

We left the house open for a month and let the public come and tour it, and then we got their feedback on what they want and what they were willing to pay for. We tested it for receptivity in the market place, which was great.

And that's how, from there, we started our first Built Green® community. Those materials that had met all of our criteria had to perform equal or better than their counterparts, they had to be easy to obtain and install, and then they had to be of value to the consumer.

HousingZone: What can green builders do to market and sell the advantages of environmentally friendly homes to potential buyers?

Martin: Sometimes it's just as important to know what you shouldn't do. We discovered (this) in a community that we're building in northern Colorado, which is outside our primary market area. We thought we would use the same approach that we are used to in our Boulder market area to connect with potential buyers. When we went into the community, we decided we were going to have a non-profit, community-based environmental center that would house not just the residents of that neighborhood, but the entire community at large. We designed this facility to help people understand how to recycle, how to xeriscape their own yards, (and) how to compost. The facility had stewardship over several hundred acres of dedicated open space.

When we got our first buyers in the door, we told them all about this wonderful benefit and that we would be charging a small transfer fee to help support the non-profit organization. They politely (said), "Great! We get to pay for a facility that takes away the open space that we used to get to hunt on!" We got a totally different reaction than what we expected. Very quickly we realized that the only way to market to this group of people was to not talk about the benefits of how to save the world and be a better corporate citizen or responsible citizen, but really how much money they're going to save in the long run by buying environmental materials.

HousingZone: But is that always the case? If it's energy efficient then, yes. But there are probably other elements of green building that might cost a little bit more.

Martin: Most of them (do). Yes, that's true. So what we really have to figure out is how to communicate to our consumers that, "Yes, you're absolutely right. If you're really going to buy a house by the square foot price, which we don't propose you do because you really don't buy a car by the square pound price, really think about what you're buying in to. We tend to be a little bit more "boutique" priced, but we also have done some studies, Mr. and Mrs. Consumer, that show a 4 - 11% increase in value over (the) years when you go to resell (your home), in addition to the fact that we're going to save you "X" on your utility bills."

In fact, we have recently begun doing studies, because we are energy certifying every home we build. We can actually give them a certificate that says this is how much we estimate you (will be) saving per month. So, you might have spent a little bit more for a high efficiency furnace or for sound insulation, but here's what it results in for your monthly utility bills, and here's what it results in when you go to sell your house for resale.

When we test out consumers who purchase homes from us it's interesting, because construction quality happens to fall on the top of their list. That's when we remind them that, don't forget – construction quality often means these energy efficient replacement components, too.

HousingZone: So you're saying that an additional benefit of using certain "green" materials is that the actual sturdiness and durability of the homes that you build increases?

Martin: Sure. You have to be much more careful about how you install some of these components if you want them to perform the way they're supposed to. Therefore, carefulness results in better quality of construction.

HousingZone: Is there always a significant cost differential in building a green home? Or, are there only certain aspects that tend to be more expensive?

Martin: It's just like anything else we buy as consumers. The more demand there is and the more opportunity for manufacturing these materials, the lower the price. Anytime something new comes out, we're going to pay a premium for it. As we start to find out things like – "Oh, if you (get) a Certainteed air conditioner, Public Service (Company of Colorado) is going to offer you a rebate," well guess what? Now you have just paid more for it.

HousingZone: Has the job of selling clients on the concept of green building become easier in recent years?

Martin: Once again, it depends on the market. Absolutely. We took the stand that (since) Public Service just raised energy prices, "Isn't this the most ideal time for you to purchase a new home instead of a resale home?" And, I think I mentioned to you, we can even tell them how much they'd be saving on utility bills. So that is much easier.

The reality is, I think, consumers are more wary of purchasing new homes today than they were a number of years ago because they have some concerns about quality of construction. Absolutely, touting energy efficiency is going to make selling a new home versus your (non-energy efficient) new home competitors far easier.

HousingZone: Especially once you educate them about how green conscious homes tend to be better made.

Martin: It's entirely critical to educate. Otherwise you get comments like, "Man, why are you so proud of your homes versus so-and-so?"

HousingZone: Do you feel that it's hard work educating consumers? You mentioned the green-friendly climate in Boulder. Are homebuyers generally more educated about these things?

Martin: I'd like to tell you a funny story. We sponsor a local program here in Boulder. Our local radio station has something called "E-Town," which is about bringing artists into the community, and it's a very environmentally based program. We decided that we were going to sponsor it and we (provided) the host speaker. It was so interesting, because we're very proud of the fact that we bring environmentally friendly materials and practices to the table. Then we get comments like, "But how many prairie dogs did you kill?" I will tell you that no matter what you do, no matter at what level you contribute, there's always going to be somebody to challenge you to do better.

HousingZone: I'm curious as to how being a green builder has affected your bottom line over time. Obviously, you've been able to sell your homes at a higher price. Was it more of an uphill climb at the beginning?

Martin: I can tell you this. In 1986-87, when our local economy hit the floor, we survived. So that's a huge success story. Just to be able to stick around and maintain a business in a market where everyone was going bankrupt is a huge success story. As a small local builder, we have consistently increased our sales over the last few years to the point where we'll probably reach 500 (units) in 2007. And that's as large as we want to get.

HousingZone: So, you feel that's it has positively affected the bottom line in your business?

Martin: Absolutely. And it gives us something to be proud of.

HousingZone: Do you anticipate a time in the future when green building will be an even easier sell, that it will be more the rule rather than the exception?

Martin: Yeah, it won't be a sell. We're finding that (for) some of the newer land development opportunities out there – for instance, our Stapleton Redevelopment – the land developer is requiring that every single builder participate on the Built Green® program. City codes are getting more and more stringent. What used to be innovative is now the norm. You find new developments where they will say, "OK, every home here has to be Energy Star® certified." It's going to do nothing but increase the reputation of new home construction versus resale.