Homebuilder Dave Caldwell, vice president of Caldwell & Johnson, believes in building energy efficient homes. His recent projects in North Kingstown attracted the attention of U.S. Sen. Sheldon Whitehouse, D-R.I., who is sponsoring a bill in Congress to encourage green building.
Caldwell, who earlier this year testified before Congress, recently took some time to speak with Providence Business News about his projects and Whitehouse’s legislation.
PBN: You recently led U.S. Sen. Sheldon Whitehouse on a tour of some of your projects. What did you show him and why?
CALDWELL: Sen. Whitehouse toured three different projects in North Kingstown. The first house, at 53 Hancock Drive, was the first in New England to be certified under the NAHB National Green Building Standard, the U.S. Green Building Council LEED for Homes program, the U.S. Department of Energy Builders Challenge program and Energy Star.
The buyer of the home is a single public school teacher. This house is extremely energy efficient, having scored a 51 on the Home Energy Rating Scale. A new, code built home would score 100. An existing, older home can score between 130 and 150. Thus, this house is approximately twice as efficient as a new, code built home, and about three times more efficient that an existing, older home.
The additional premium to build the house in this fashion was about $5,000, which, when amortized over 30 years on a mortgage at prevailing rates, is approximately $1 per day. The expected savings in the first year of operation will be almost $2 per day.
However, at present, underwriting and appraisal standards for home loans do not reflect the value created for the homeowner by the small additional cost to build the home. What we are showcasing with these projects is that average, median-income buyers can afford, and economically benefit from, green construction.
Green housing is not the exclusive province of the luxury home market, but is most effective and economically efficient for average homeowners. In effect, it does not make any sense to build a home that is not energy efficient.
PBN: As you know, Sen. Whitehouse is pushing a bill in Congress that aim to encourage green building. Can you tell us how the bill, if it becomes law, would affect builders like yourself?
CALDWELL: Sen. Whitehouse’s bill, the Energy Efficiency in Housing Act, has many incentives that would be helpful to the residential housing industry. Presently, a consumer has far more information at their disposal when buying a box of corn flakes or a new automobile. The consumer is afforded none of this in the purchase of a home, and the market, particularly the appraisal community, is governed by an antiquated cost per square foot metric that does not reflect the value created by energy efficiency.
Much of Sen. Whitehouse’s bill seeks to remedy this market discrepancy through data collection, education, awareness and financial incentives in underwriting that reflect the value to the homeowner created by the investment in energy efficiency. This would encourage homeowners to seek energy efficient remodeling projects and new homes that meet strict energy saving standards.
It would, in effect, be very good for the home building industry. Not only that, it would be a win-win-win, that is to say, good for the consumers, good for the builders, and good for the environment for all of us.
PBN: There is a perception – backed by some studies – that energy efficiencies add to the upfront cost of construction. But you’ve had success in selling homes that include such features. What’s your pitch?
CALDWELL: Unfortunately, a great deal of the initial publicity pertaining to green home building was focused on the luxury segment of the market. Much in the way of green features were simply a collection of often expensive and exotic choices added to the cost of the project.
The most common comment that we receive from customers is “we never thought we could afford something like this.” Many green features, as far as materials, are not exotic and do not cost any more than any common materials. Upgrades in energy efficiency can actually reduce the cost and size of the heating and cooling systems.
We are very cognizant in our business model that any extra dollar spent on a green feature must be able to return to the consumer in value created by that investment.
Our pitch is to educate the consumer. The more the consumer is educated about the value created by green construction, the more likely they are to buy green because you don’t need an MBA to figure out that building green is a sound financial decision.
I like to use the example of buying a new car. If you are looking at two new cars that outwardly appear identical in all respects, but all you know about them is that one costs $25,000, and the other costs about 3 percent more at $25,750, on a cost only basis, one would choose the first car. But if the consumer is then told the second car gets double the gas mileage, the second car becomes the better value proposition.
Presently, there is no mechanism used in the real estate industry to inform the consumer regarding energy costs in housing at the time of purchase. We are seeking to keep our green premium in the 2 percent, 3 percent range, educate the consumer about the value in this premium, and let them make the decision. My target consumer is the educated consumer.
PBN: So do you think more builders will go this route?
CALDWELL: Without question, this is the way of the future unless we experience a dramatic drop in the price of fossil fuels, as happened in the 1980s after the energy crises of the 1970s. Furthermore, there is a growing demand in the market for smaller, greener homes.
Consumers are certainly asking more questions about energy efficiency, indoor air quality and environmental impacts of construction. Within five years, I expect that everything that our company is presently doing will be considered the minimal norm in the industry.
PBN: What’s the next green project for you?
CALDWELL: We have a couple of interesting things on the board. We are looking to build an entire green certified mixed-use development, and we are looking to build some multifamily apartments to green building standards.
