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Building Green in a Black and White World-- Chapter 3

The following is an exerpt from the book Building Green in a Black and White World.
Section 2; Chapter 3; Part 2; Start Where You Are--Pricing Options

David Ritchey Johnston
January 1, 1900
HousingZone

-------Pricing Options--------

Pricing options is a tricky proposition. When green is carefully designed into the home from the start, potential incremental costs can often be reduced. Energy savings can offset the increased cost of the monthly mortgage payment (see cost section below) so that the homeowner’s net monthly payment is nearly the same. When additional costs for green options do exist, they can be incorporated into the base price, and the monthly mortgage payment increase will be negligible.

When green features are offered as an option package, identify the additional costs. You might want to start by reducing mark-up on the initial green offering to gauge the reaction of your buyers. Some customers, of course, would rather put additional money into a whirlpool tub in the master bedroom or a cabinet upgrade in the kitchen. Let them know their options. Tell them that such improvements are comparable in cost to a total green upgrade. As always, it is how you present the packages that sells them. When the customer believes the benefits outweigh an additional few dollars a month, it is often an easy sell.

Peter Pfeiffer
Barley & Pfeiffer Architects
Austin, Texas
(512) 476-8580

Peter Pfeiffer spent 15 years in the design and construction industry before opening his sustainable architecture firm in 1987. Pfeiffer specializes in sustainable design and energy consulting and has focused much of his career on developing practical methods to "mainstream" green building. In addition, Pfeiffer serves as an advisor to the City of Austin’s internationally recognized "Green Builder Program." In 1994, the Energy Efficient Building Association awarded Pfeiffer their Conference Chair’s Award for his career accomplishments in pioneering environmentally sensitive architecture.

Peter Pfeiffer, an Austin, Texas, architect, was one of the early proponents of green building in Austin. With 28 years of experience under his belt, he finds: "It doesn’t have to cost more to build green, and it will provide a marketing edge. It may actually save clients money. Fewer recessed light fixtures, smaller air conditioning units, low pitched roofs, and properly placed windows can reduce the cost of the job. Stained and scored concrete floors save flooring costs, reduce dust, and improve indoor air quality. I always sell comfort over features."

Costs, Contractors, and Products

A caution with option packages: When trades contractors have to go back and forth between conventional products and green substitutions, that can cause confusion. If they are used to using one product and you require them to use another, you may encounter some resistance.

Making the change might also require additional supervision, which is another cost increase. If some of these changes become standard practice, however, you can often get quantity price discounts from suppliers. This helps reduce the incremental costs of new products and encourages your suppliers to carry them on a continual basis.

Bill Eich, of Spirit Lake, Iowa, has been building green homes for years. He relates this story: "The costs of building green came to a head on an entry-level home. We were competing with a modular home and there was a difference between our bids of $1500-$2000 because of our airtight construction approach. The crew got together and said, ‘Don’t give them the option. Give them the upgrade, and we will do the work to bring the cost down through increased performance. We won’t build a house wrong anymore.’ From then on it has never been an option, it’s just the way we build."

The moral of the story is that isolating green costs can be an illusion. There are many variables that determine the final cost to the consumer. Labor productivity can easily off-set increases in material costs. Also, with good design, savings in one area can balance out increases in another.

One Builder’s Advice

Jim Van Derhyden
Investec Construction
Santa Barbara, California
(805) 962-7828

Jim Van Derhyden is Vice President of Investec Construction, a multifaceted real estate company involved in all aspects of real estate. In the early 1990s, Investec got involved in homebuilding along the central California coast, primarily in Santa Barbara and San Luis Obispo. They started using green building practices due to governmental incentives to reduce processing time for exceeding energy efficiency requirements. Investec’s commitment to green principles has facilitated approvals for them to build in areas highly opposed to growth, while at the same time meeting the sophisticated demands of their buyers.

Jim Van Derhyden, describes Investec’s process: "My goal is to build green for the mass market, not solely for the upper crust who want to be politically correct. It doesn’t do any good if 2 percent of the houses in the country are green and the other 98 percent aren’t. But if you get to a point where 30-40 percent of the houses in the country are incorporating sustainable methods into their construction, then you are going to start making some difference in the world."

Van Derhyden says that everything is bottom line. When he tells people about the advantages of green building, they’ll often say, "Oh, but it costs more." He tells them that it doesn’t have to. He says that planning makes all the difference. Building green is a thought process that starts in the beginning so that the systems are designed with whole house in mind. And in the end, what some people would say is dumb luck, is really good design. The number one goal for his company is that the bottom line cost stays the same. The consumer gets a much better product, the house will save energy over its 30-50 year life, and it will have fewer mechanical problems.

Costs vary with every builder and by geographic location. But some approaches can be generalized. The following section discusses one way to understand how to approach the additional costs of green building.

Continue to Actual Costs--Is Building Green too Expensive?