The number of building permits has plummeted, the housing recession has forced many builders out of business, existing home prices continue to free fall while making it almost impossible for builders to compete, and now tougher environmental building standards will make it more expensive to build.

Out of the 500 cities in California, over a dozen have decided to up the ante by requiring residential builders to exceed current state energy conservation standards. The increase in requirements will mean an increase in cost. As if the economic times weren’t tough enough, with these increased requirements, builders might not be able to handle the increased costs, which could be anywhere from 1 to 4%.

Impact on New Home Construction

The impact of the new green building standards will significantly increase the cost of constructing new homes, thus reducing housing affordability. Cities such as Stockton, one of the worst hit in the foreclosure crisis, saw only 838 building permits in 2008.

• Stockton has a population of 680,000 people and, in January 2009, new home sales totaled 70, which is down 90% from sales recorded in December 2008.
• One in eleven housing units received a foreclosure notice last year.
• Existing home prices fell 47.3%, and competition from bank sales has made it difficult for builders to compete.

The new green building standards will make it tough to make a profit in this market. In more desirable cities, where the competition with banks isn’t as fierce, such as Napa or Santa Rosa, the increased outlay to meet energy conservation standards could most likely be recouped.

Santa Rosa Ups the Ante

Santa Rosa plans on getting greener by implementing more stringent environmental building standards above and beyond the standards set by the state. Under the city system, they award points for construction components that impact air quality, energy, and water use. The more eco-friendly, the more points earned and they plan on raising the minimum point level. The higher point requirement could inspire builders to include solar powered water heating systems or photovoltaic energy systems into the new homes.

Consultants for the city of Santa Rosa estimate the tougher requirements will add between $2,671 and $12,487 to the cost of building a new home.

Despite Down Market, Upward Growth in Green

McGraw-Hill Construction in partnership with National Association of Home Builders (NAHB) released a report last October with regard to an upward growth in green home building despite the down market. The new report, “The Green Home Builder: Navigating for Success in a Down Economy” reveals market opportunities as well as obstacles and trends. Here are some of the findings from that report:

• 60% of builders say homebuyers are willing to pay more for green homes
• 40% of builders say building green makes it easier to market in a down economy.
• Quality is the top driver behind green home building – green consumers are buying a green home for performance reasons.

Talk to one of CalFinder’s helpful Customer Support Specialists to be connected with estimates from our certified remodelers who specialize in going green!

Photo credit: Acro Electric Inc.

Links:

http://www.greenbuildinginsider.com/articles/20081021_10

http://www.pressdemocrat.com/article/20090215/NEWS/902150327

http://www.builderonline.com/

http://www.builderonline.com/local-markets/the-weakest-housing-markets-for-2009.aspx

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