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Zero Energy Homes Comparable in Cost

Even though the energy efficient, high performance features of a zero energy home are slightly more expensive, any added cost can be kept to a minimum using several strategies. Doing so will help ensure that zero energy homes are both affordable and cost comparable to similarly-sized homes built to code. Even when zero energy homes cost 5 to 10% more than a comparable standard home, they will cost less to own.

How to Design and Build Affordable Zero Energy Homes

If you can afford a new home, you can afford a zero energy home. You can build and design a zero energy home that cost less to own from the minute you walk in the door. Bruce Sullivan shows you how. This webinar covers good design, material choices construction methods, appliances, lighting and equipment. Most importantly, you’ll learn how to approach construction costs and financing so that the economic benefits will begin the moment you move in.

Bruce Sullivan is a building energy efficiency consultant and trainer, has been helping people improve the energy efficiency and reduce the environmental impact of their homes for more than three decades. He has provided training to builders, designers, code officials and others around the Northwest; and he has built his own low cost zero energy home; and is the energy consultant and blogger for the Zero Energy Project.

Zero Energy is Ready for the Mainstream

Zero energy homes may have a reputation for being too expensive for mainstream buyers, but a new study by the Rocky Mountain Institute (RMI) shows the margin is closing. Performance improvements in the building shell and heating equipment needed to reach a “zero energy ready” state increase home prices by only 4%. Adding the solar panels needed to generate all the energy needed for this efficient building brings the total price increase to only 8%. This slightly higher purchase price will be recouped in future energy savings. The study describes four different cost thresholds that home buyers use to compare the purchase price with cost savings down the road. Best of all the cost for energy-saving features, including solar panels, is continuing to trend down, improving affordability.

Return on Investment

There’s an old adage that “You have to spend money to make money.” You can apply this thinking to zero energy construction. The additional construction cost for a zero energy ready (ZER) home is about 4%, while a full zero energy (ZE) home is about 8% due to the cost of the solar panels.

After investing this money upfront, you receive a string of returns in the form of lower energy costs. Businesses evaluate this investment by calculating return on investment or internal rate of return. Here’s an investment analysis using the cost figures from the RMI study. These examples show that zero energy homes are a sound financial investment with benefits that begin the moment the homebuyer accepts the keys.

Strategies for Building Affordable Zero Energy Homes

Select the most cost effective energy saving techniques, materials, and products using energy modeling.
Design a smaller, more spacious home. The average new home in the U.S. is around 2,400 square feet. One way to offset the entire cost of zero energy features is to make the home smaller. For example, if the cost of construction is $150/sq. ft., then designing a home that is 2,100 sq. ft. instead of 2,400 sq. ft. would save close to $45,000 – enough to pay for the entire up-front cost premium for a zero energy home. Sarah Susanka’s book, “The Not So Big House: A Blueprint for the Way We Really Live,” offers tips on how to design and build a smaller home that feels more spacious and efficient to live in.
Take advantage of the many financial incentives available to help offset the costs of those high-performance features. Federal tax credits are available across the U.S. and state tax credits are available in many states. Utility incentives are also available in some areas. See the DSIRE website for specific information about incentives available in your area.
Be conscious of cost when selecting home features, finishes, and amenities. For example choose countertops that are highly attractive, but much less expensive than granite. Interior finishes are expensive and constitute a large percentage of a home’s discretionary cost. In the long run, finishes will be replaced, while the structural elements that affect energy performance will last the entire life of the home.
Consider offering a leased solar PV system to reduce the upfront cost to buyers.
Consider designing and building a zero energy ready home that has all the energy saving features of a zero energy home and is fitted for solar, but postpone the installation of the solar system until you are ready.
Identify and direct buyers to a local bank that offers an Energy Efficient Mortgage (EEM). An EEM will allow them to add $3,000 to $6,000 to the loan amount they would ordinarily qualify for by increasing the borrower’s income by a dollar amount equal to the estimated energy savings.
Ensure that the home’s assessed value takes into consideration all the energy upgrades.
With careful, cost-conscious design and construction, and after state and federal incentives, the price tag for a zero energy home may be 4 to 8% higher than a similar home built to code. However, zero energy homes in that range will cost buyers less to own than similar homes built to code.

Cost Comparable Homes in Oregon and Massachusetts

Figures from zero energy homes built in Oregon and Massachusetts, both of which used energy modeling, provide relevant examples of how the cost differential between building to zero net energy standards and similar homes built to code can be reduced.

Oregon

In two very similar 1,500 to 1,530 sq. ft., zero energy custom homes (average 2013 sales price around $400,000), the added cost compared to a similar house built to code, before rebates and tax incentives, broke down as follows:

Shell upgrades (insulation, framing, doors, and windows): $7,000 to $12,000
HVAC upgrades (heating, cooling, ERV, electrical and plumbing): $3,000 to $4,000
Solar PV and hot water: $36,000 to $40,000

Before all rebates and tax incentives available in Oregon, the average additional costs for these zero energy homes came to $51,000, or approximately 13% of the sales price.

After rebates and tax deductions available from the federal government and in Oregon, the total added cost for these custom-built zero energy homes was $10,00 to $14,000, which is less than 5% of the sales price.

Massachusetts

In a 1,200 sq. ft. zero energy home in a Massachusetts development (2012 sales price around $195,000), before rebates and tax incentives, the added cost compared to a similar home built to code came to:

Framing Double-studded Walls, Rafters: $1,670
Super Insulation: $5,970
PV System: $33,000
SunDrum Hot Water Heating System: $4,500
Windows: $689

Before all rebates and tax incentives, the additional costs for zero energy came to $40,393 or about 20% of the sales price.

After all tax rebates and incentives and cost savings available in Massachusetts, the added costs came to about $9,000 or 4.6% of the sales price.

Figures will vary over time and because every home and every community is different. Since these homes were built, the cost of solar PV has come down. Rebates and tax credits also vary from state to state. And cost-savings on development homes will be greater than on custom homes. But these examples demonstrate how affordable zero energy homes can be. Builders and designers are making every effort to learn new techniques that will make these homes even more affordable, and mass adoption of the involved technologies will bring prices down further, just as we are seeing with LED light bulbs and solar PV.

Lower Foreclosure Rates

A study by the University of North Carolina and the Institute for Market Transformation of home energy efficiency and mortgage risk shows that the more energy efficient a home is, the lower the foreclosure rate. Thus an energy efficient home can make the difference between foreclosure and maintaining mortgage payments. This is another indicator that highly energy efficient homes, such as zero energy homes, are truly affordable in the real world.

Higher Resale Value

Another reason that zero energy homes are affordable is that they are a positive investment. Not only do they hold their value because they are built to the standards of the future, they have a higher resale value than similar homes built to code. Increasingly buyers are looking for homes that are airtight and well-insulated with low energy bills and, increasingly, realtors are finding that energy efficiency features positively affect the value of a home. In fact, a 2012 market study by Yahoo! Real Estate shows that 50% of Americans now consider green and energy efficient features a part of their “dream home.” And 27% of potential home buyers say that “looking for a greener, more energy efficient home is a significant reason they want a new home.” According to a recent Smart Market Report survey, over 60% of green builders reported that their customers are willing to pay on average 6% more for homes that are energy efficient. A study conducted by Vanderbilt University Law School found that on average buyers were willing to pay 5% more for a green labeled home, provided the green label indicated actual energy savings. More highly-rated houses commanded an even higher premium.

Measures that establish a high degree of energy efficiency, such as those found in zero energy homes, influence buyers and add to the desirability and price of a home, making them a more valuable asset than similar homes built to code. For example, in King County, Washington, Ben Kaufman of Green Works Realty reports,

“In Seattle… certified [energy efficient] homes made up 33 percent of the new home market, sold for a 9.1 percent premium per square foot and were on the market for 24 percent less time. Further, from November 2009 through January 2010, King County non-certified homes continued to decrease in value as certified home values increased. Remarkably, green homes carried a $92,175 price premium, were 12.3 percent smaller and continued to sell in less time than a non-certified home. In Seattle, third-party verified homes, which are often a ‘deeper green’ home, sold for 23.5 percent more per square foot in 10 percent less time and make up 6 percent of the market. The difference is notable and growing.”

Affordable Forever

After minimizing the cost differential, zero energy homes will clearly cost less to own, making them affordable for every home buyer. And these high performance homes will remain affordable forever because they have zero energy costs no matter what the price of fossil fuels and electricity is in the future and because they are built to last.