As green building becomes increasingly widespread, and as both owners and communities are requiring the adoption of green building elements into both new and rehabilitation projects, the questions of cost and return on investment are still major concerns for developers and owners of projects. This question is particularly acute for developers and owners of affordable housing projects, where development costs are usually highly constrained by the limits on rent, or sale price, or from public financing restrictions.
In this report, the Enterprise Foundation and Davis Lagdon present findings of an analysis of 52 affordable housing developments from across the United States that were built using either the 2005 or the 2008 versions of the Enterprise Green Communities Criteria. In addition, this report provides a more detailed look at estimated versus actual use of water and energy, and relates that to utility cost impacts for both the developers and the residents of the affordable housing communities included in this study. This report updates the findings from the 2009 report Incremental Cost, Measurable Savings: Enterprise Green Communities Criteria.
The average project analyzed in this study achieved a lifetime utility cost savings of $3,709 per dwelling unit, while the incremental cost per dwelling unit for the average project to comply with the Enterprise Green Communities Criteria was $3,546. In summary, the lifetime savings exceed the cost of integrating the Enterprise Green Communities Criteria into affordable housing.
The lifetime savings was based on conservative assessments of the economic life of building elements, using a typical life of 20 years before replacement or renewal. In practice, since many of the design solutions are passive in nature, such as improved insulation and windows, better building solar orientation, and reduced environmental impact of materials, the economic life of these elements will greatly exceed 20 years, appreciably increasing the actual lifetime savings.
There are many additional benefits from integrating the Enterprise Green Communities Criteria that do not have direct measurable financial impacts. These include but are not limited to:
- improved occupant health and well-being through less exposure to environmental pollutants,
- improved connectivity to services and walkable neighborhoods, and
- good daylighting.
The benefits extend beyond the occupants to the neighboring community by supporting local community services and providing activation of the neighborhood streets, as well as by improving water quality and reducing the impact of rainwater run-off on neighboring sewer systems and water courses.
Data was collected from 52 affordable housing developments (36 following the 2005 criteria, and an additional 16 that followed the 2008 criteria). For each criterion, project sponsors provided the cost to implement (defined as the cost required beyond that necessary to meet existing state or local building codes), the method by which the criterion was implemented, and, in the case of water and energy-efficiency measures, the estimated reduction in resource use expected through implementing these measures. The 52 units together comprise 3,677 dwelling units containing over 3.6 million square feet.
How the Savings Were Achieved
The developments in this study were designed with an emphasis on delivering health, economic, and environmental benefits to the residents, developers, and surrounding communities. Sites were selected that provided easy access to public transit and community amenities, and avoided disturbing existing greenfield space, wetlands, or other sensitive natural environments. Buildings were placed on the site to maximize natural light. Interiors were designed to provide a healthier environment, including the use of low-VOC flooring, paints, and other materials, and providing ventilation in bathrooms and kitchens to minimize moisture infiltration and mold growth, and to introduce more fresh air into the spaces. Each developer also provided guidelines to the residents and maintenance staff to educate them on the green measures that were incorporated, so they could take ownership in maintaining their homes and properties in a sustainable and healthy manner.
The overall median cost to meet the 2008 Enterprise Green Communities Criteria was $3,546 per unit, which equates to a 2 percent increase in total development cost for a project. To integrate only the energy and water saving efficiency criteria, the median cost was $1,139 per unit. Projected lifetime utility cost savings for implementing just the water and energy criterion is $3,140 per unit, based on a 20-year life cycle.
In general, developers found ways of integrating green measures into their affordable housing designs, and were able to implement them in cost-effective ways. As was seen in the earlier report, developers were able to meet a number of criteria for no additional cost, and even where a cost premium did occur, the overall impact was very small:
- The median cost to meet all mandatory site selection, location, and site improvements criteria was $0. This is not surprising, as most of the projects were built in areas where local and state building codes already mandate that projects meet many of the measures included in the mandatory Criteria.
- The median cost to meet the water conservation criteria was only $83 per unit, and the median payback was for less than two years.
- Costs to meet the mandatory energy conservation criteria ($1,056 per unit) accounted for the majority of the premium associated with meeting the Criteria.
- There was a small cost premium related to materials selection, a median of only $165 per unit.
- The cost to meet the Healthy Living Environment section of the Criteria accounted for the second highest cost premium, with a median cost of $680 per unit. However, 14 of the 52 projects reported no cost premium at all to meet these criteria, suggesting that some projects were able to incorporate these particular green measures within their existing budgets.
Twenty-two projects indicated that they had incorporated some form of renewable energy system, and full cost data was available for 11 of these. The majority of systems were photovoltaic systems, although one included wind turbines. The systems ranged in size from 3.5kW to 75kW. Some projects reported receiving financial support in the form of subsidies or grants; some did not.
For most projects, the renewable energy elements were not cost effective, except where subsidized. The median payback period was 33 years.
Utility Costs and Escalation
There was a wide range of costs for both electricity and water. The cost for electricity ranged from a low of $0.03 to a high of $0.24 / kWh, while water ranged in price from under $3 to over $16 / 1,000 CF. Clearly this has a significant impact on the lifecycle value of the savings. It was clear that the projects with the lowest return on investment and the longest payback periods were the ones with the lowest costs for utilities.
In a similar manner, escalation forecasts have a significant effect on the estimates of overall life-cycle savings. For the analysis, energy escalation was based on data from the U.S. Energy Information Administration. The escalation forecasts are relatively low, at around 2.2 percent in the long term, although these are in line with the escalation experienced in the past 10 years. There is no comparable government forecast for water, and the study used a long-term escalation rate of 5 percent, reflecting the high level of infrastructure replacement needed in the coming years. Higher forecast escalation rates give higher future costs, and greater lifetime savings for avoided consumption.
In addition to the long-term escalation rates, utility costs are subject to high levels of volatility and potential for price shock. While energy is usually in the headlines, water rates are perhaps more likely to be very varied and changeable. Many communities have substantial deferred maintenance issues on their infrastructure and will need to make major investments in the coming years. These will result in very sharp rate increases in many locations, often doubling, or more, the cost of water. Not only does energy and water conservation reduce the long-term cost, it also reduces the properties’ exposure to sudden price change.
Actual vs. Modeled Energy and Water Usage
In addition to evaluating costs and projected savings, the study also looked at data for actual energy and water use. Actual energy usage data was available for 28 of the projects, and water usage data for 15.
Perhaps one of the most interesting findings of this study was the high variability in actual energy use versus predicted. Actual energy usage ranged from a low of 47 percent of the predicted amount to a high of 277 percent of predicted. A number of factors are likely responsible for this wide variability, including occupant behavior and base model assumptions, but it does speak to the fact that developers in general may need to reassess how initial energy use models are conducted, and to take such factors as occupant behavior and plug loads into consideration when modeling future buildings.
Water consumption was more difficult to analyze, due in part to the small number of projects providing consumption data and, more important, to the fact that indoor use and outdoor use were not monitored separately. Of the 15 projects that provided consumption data, the majority (12) consumed more water than was predicted during the design process. However, first year water usage tends to be higher, due to the need to establish landscaping plantings, so this may have played some role in the findings.
Financial impact of Green affordable housing
The median cost of implementing the Enterprise Green Communities 2008 Criteria was $3,546 per unit. This represents a 1.85 percent increase to the total development cost for the project. The median cost to integrate only the energy and water criteria was $1,139 and returned $3,709 in predicted lifetime utility cost savings.
It is worth noting that the costs reported do not represent the minimum possible cost for compliance in most cases. Many projects incorporated elements that exceeded the minimum requirements. Examples include rainwater harvesting, green roofs, and graywater systems. Even in the more conventional systems such as water-conserving plumbing fixtures, there is variation in the quality of the fixture. The reported costs therefore represent a sampling of the range of ways in which actual projects have chosen to meet the requirements, rather than an analysis of the minimum possible cost of compliance.
In June 2012 an online event was held to review the report findings and lessons learned at
- Incremental Costs, Measurable Savings Update
- Presentation Slides 1: Incremental Cost, Measurable Savings Update
- Presentation Slides 2: Incremental Cost, Measurable Savings Update
- Q&A Transcript: Incremental Cost, Measurable Savings Update
Enterprise Green Communities www.enterprisecommunity.com