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THIS LEGISLATION CAN FUEL GREEN GROWTH
SAVE the Industry04
Times are tough for builders. But there’s a potential fix out there. The Feds should insist that mortgage underwriters include energy efficiency in their calculations. BY CLAYTON TRAYLOR, GUEST COLUMNIST
We’ve all read the headlines: “Efficiency, our First Fuel;” “Green: The Future of Homebuilding;” “Building the Net-Zero Home.” Each story predicts a transformation in homebuilding, fueled by consumer demand and guided by regulatory mandates.


Headlines like “Extreme Energy Efficiency—Spectacular Savings,” “Save more $$$” and “Energy Star Partner of the Year” on builder websites confirm that builders get the message. Yet, despite all the attention, revolutionary progress in the number of energy-efficient new homes built remains elusive. Why?


The simple fact is that today’s home buyers and builders face fundamental disincentives to building and buying energy-efficient homes.


Let’s consider today’s typical new homebuyer. For them, it’s all about choice: location, floor plan, options. But when it comes to choosing energy efficiency, the choices are tough. Most consumers have limited budgets, and must prioritize between energy-efficient features and other desirable options such as granite countertops, media rooms and upgraded appliances. Forcing consumers to make this difficult choice strongly undermines the goal of increasing energy efficiency in new homes across the board.


Now let’s consider the case of the new homebuilder who faces tough choices as well. Builders know that buyers want energy-efficient features. They also know that buyers don’t like having to choose between a high-efficiency HVAC unit and stainless steel appliances —they want both. One option for the builder is to include energy-efficient features in the base price of the house. The risk with this approach is that the builder is competing against other new homes that may not have energy-efficient features and resale homes that almost certainly don’t. In today’s highly competitive market, the builder must choose between absorbing the cost of the energy-saving features or leave them out and hope that buyers will agree to pay more to add them.


A Solution Exists
These difficult choices serve as strong disincentives for consumers and builders alike to optimize energy efficiency in new homes. The good news is that these problems can be resolved by adopting simple changes to mortgage underwriting and appraisal procedures. These changes include updating underwriting procedures so that energy costs and savings are included when calculating the total cost of home ownership [principal, interest, taxes and insurance, plus energy (PITI+E)]. This approach will improve the accuracy of mortgage underwriting and reward consumers who purchase energy-efficient homes and invest in energy-saving retrofits. At the same time, we need to develop uniform procedures to ensure that energy saving features are consistently and accurately valued in the appraisal process.


09.2011
43

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