Making Green communities work.

THROUGHOUT THE NATION, THE BUILDING AND COMMUNITY development sectors of the real estate industry are looking more seriously at incorporating "Green" solutions into their projects. Of course, all of these programs cost money to implement, but this isn't stopping many of the enlightened builders and developers who believe the benefits of Green far outweigh the costs. But what exactly does "Green" mean?

Also referred to as sustainable development, Green development (or Green communities) offers an opportunity to create environmentally sound and resource-efficient buildings and communities by using an integrated approach to design that is sensitive to natural resources and their protection. Green development promotes resource conservation, including energy efficiency, renewable energy, and water conservation features. It also takes into account environmental impacts and waste minimization with the goal of creating a healthier and more comfortable environment; reducing operation and maintenance costs; and addressing issues such as historical preservation, access to public transportation and other community infrastructure systems.

With Green development, the entire lifecycle of a development and its components is considered, as well as the economic and environmental impact and performance. An increasing number of developers, land planners, designers, and real estate owners are becoming interested and involved in Green development. National and local programs encouraging Green development are growing and reporting successes, while hundreds of demonstration projects and private developments across the country provide tangible examples of what Green development can accomplish in terms of comfort, aesthetics, and energy and resource efficiency.

While there is a lot of information on Green development available for individual buildings, little exists for large-scale, master-planned communities. Major developers everywhere are trying to make sense of the hundreds of products and applications that could lead to a more sustainable (and hopefully bankable) project. The approach described here attempts to provide a general roadmap for applying Green practices to large, complex, market-driven land development projects. It suggests a process that incorporates market demographics, probes consumer values, and filters Green building and development components through a cost/benefit analysis, all with the goal of assessing from different viewpoints what it would mean to integrate a Green program--or elements of a program--into a project's financial blueprint.

WHY DEVELOPERS ARE INTERESTED IN GREEN COMMUNITIES

Community developers are pursuing Green programs for four key reasons: 1) it is the right thing to do, 2) it improves public and civic image, 3) it accelerates jurisdictional approvals, or 4) it fills an unmet market demand.

Aside from the financial benefits, such as reduced operating costs, value-added premiums and reduced capital costs, green development is appealing because it is development for the future, not just today. Many people like to be associated with projects or developments that are forward thinking and environmentally sound. Indeed, there is satisfaction and value from doing the right thing, both on the part of the developer/builder and the homebuyer.

Clearly consumers are interested in sustainable design. A 2001 survey for the Cahners Residential Group found that eight of 10 homebuyers interviewed say that new homes do not meet their expectations for environmental sustainability, and 96 percent said they would pay more for a home with "Green features." More than half would pay $5,000 to $10,000 extra for a Green home. In a 2001 Housing Zone/Professional Builder survey, consumer belief that new homes do not meet buyers' sustainability needs increased from 60 percent to 80 percent in one year, and the belief that energy efficiency is very important rose from 50 percent to 91 percent during the same period. The same survey noted that the usual new-home upgrades of kitchen cabinets, whirlpools, and exterior trim were on the decline at rates of 30 percent to 50 percent, while indoor air quality and xeriscaping (water-saving landscaping) upgrades were increasing at rates of 18 percent to 50 percent.

Throughout California, government agencies are encouraging, sometimes even requiring, developers to use Green development principles. Every indication is that this is a growing trend and that in many regions a Green program will soon be expected in tandem with the usual master plan and zoning submission. Meanwhile, applying Green measures can definitely win over communities and speed the entitlement process. Voluntarily restoring wetlands and other ecological areas, encouraging alternatives to automobile use, and creating open space for community use go a long way towards building support and reducing legal delays.

Because some Green program elements add costs, it's important to identify the degree to which buyers value the benefits and are willing to pay a sales premium, resulting in higher revenue. This "Green premium," supplemented by tax incentives and lower operating costs, is crucial to developing a balanced Green program. The challenge is to select the right mix of elements that will result in better financial performance in both the short and long run. In regards to Leadership in Environmental Energy and Design (LEED[TM]), one professional had this to say: "You really have to evaluate which products/techniques you want to concentrate on. It's a case-by-case analysis because each project is so different. It's impossible to achieve all 69 of the LEED points, but you don't need to--this is where you pick and choose," said Jorden Segraves, senior level job captain, TCA (Thomas P. Cox: Architects, Inc. of Irvine, Calif.).

The following six steps are suggested in developing a Green program at a community level. Not all projects will use every Green component equally--each region, market, and site is different.

1. Identify an Evaluation Process -- The biggest challenge is developing a systematic approach to balancing and weighing the vast array of technologies, products, and systems. Several tools exist to assess a project's Green potential. For environmental planning, the Audubon Signature Cooperative Sanctuary Program provides comprehensive assistance and education, from design through construction. For balancing the environmental and economic performance of specific building products, the National Institute of Standards and Technology Building and Fire Research Laboratory has developed the Building for Environmental and Economic Sustainability (BEES) software. It provides environmental and economic performance data for nearly 200 building products. The popular LEED Green Building Rating System, developed by the U.S. Green Building Council, provides an accreditation system for individual buildings (commercial, office, industrial and residential over four stories).

The Sustainable Project Appraisal Routine (SPeAR[TM]) Rating System developed by the engineering firm Arup measures sustainability more broadly. The system provides easy-to-understand exhibits illustrating the degree to which the Green program balances environmental, societal, natural resource, and economic aspects of a project, rather than addressing only easily achieved components. The systems cost evaluation tool is especially valuable in comparing Green component costs. Here each of the Green components, such as low-e windows ("low-emissivity" windows that slow the flow of heat through glass) or R-24 insulation, is categorized into one of four categories of cost recapture: no additional cost, cost recaptured within the current phase of development, cost recaptured at some point during the development process, and lastly, no recapture of cost. This allows logical trade-offs to be made and the costs kept in perspective.

2. Using Market Analysis to Identify a Green Revenue Stream -- Every developer knows that costs are more easily predicted than revenues, especially when dealing with less tangible amenities and their premiums. Given the lack of precedent in Green consumer spending, demographic and value-based consumer research is helpful in projecting a Green premium. First, demographics can suggest the level of Green innovation a target market can support. Higher-income, more sophisticated markets have the discretionary buying power to better express their Green preferences than lower income, more value-oriented markets.

An emerging rationale is that there is a measurable, unmet demand for Green communities in the market place. Basic economic theory suggests that if a significant segment of the market is searching for greener living at the home and community levels, and little if any is being offered, then the projects that step forward should enjoy either higher pricing, faster absorption, or both.