Leading Builders Here on the Hill in Energy Push
The Leading Builders of America charter group of 16 large public and private home builders has joined the 33-year-old Alliance to Save Energy to strengthen its more direct line of contact with Capitol Hill.
Today [Wednesday, March 10], Meritage Homes Chairman and CEO Steve Hilton addressed the Alliance’s Great Energy Efficiency Day (GEED), in the Capital’s Dirksen Senate Office Building, as part of a daylong agenda that put building and communities in the spotlight:
Building for the Future: EE Technologies Today and Tomorrow
- Moderator: Robert Dixon, Senior Vice President & Global Head, Efficiency & Sustainability, Siemens Industry, Inc.
- Steven J. Hilton, Chairman and Chief Executive Officer, Meritage Homes Corporation; Chairman, Energy Committee, Leading Builders of America
- Faren Dancer, Principal, Paradigm Development Partners
- Steve Hochhauser, President, Residential Systems, Ingersoll Rand
- Michael Lawrence, Vice President & General Manager, Johns Manville
“The key for us is getting appraisals to properly value the increased value of more efficient homes and recognizing the value of energy efficiency in the mortgage process so highly efficient homes are affordable,” says LBA executive director Ken Gear. ”We have created a unique partnership with the Alliance to Save Energy to help make new homes as efficient as possible without pricing them out of the market.”
Here’s the transcript of Hilton’s remarks, which gives good background on the Leading Builders of America and its policy initiatives, which we wrote about earlier.
[Bob Dixon will introduce Steve as Chairman & CEO of Meritage, and welcome LBA to the Alliance as part of the introduction]
Thank you for the kind introduction, Bob.I want to thank the Alliance for the opportunity to speak here today, representing the Leading Builders of America.
Leading Builders of America is a new trade group that includes sixteen of the largest home builders in the country. Combined, we delivered about 129,000 new homes in 2008, representing approximately 25% of all homes built in the U.S. that year, so we bring to the table a broad and deep understanding of home buyers across the country. We also account for more than 367,000 jobs nationally through our employees and sub-contractors.
LBA members are driving energy efficient practices and materials into the mainstream of homebuilding. We have been instrumental in helping ENERGY STAR reach 1 million qualified homes in the U.S., and our members are active partners in many other energy efficiency initiatives, including the DOE’s Building America Program. Through our collective efforts with trade partners and other organizations represented here, the homes we build today consume one-third less energy than homes built just 10 years ago.
Meritage Homes has been a member of LBA since its beginning, and I head the organization’s energy bill working group. As CEO of Meritage Homes, I am proud to say that Meritage is committed to energy efficiency and sustainability. This year, every home we build will exceed the EPA’s ENERGY STAR requirements, providing lower costs of ownership and healthier living environments to our home buyers, while reducing their energy consumption. Meritage’s commitment to sustainability is underscored by the fact that we are incorporating energy efficient features standard in every home we build, rather than making them optional at an added cost to the home buyer.
We are here today because we are all convinced that building energy efficient features into homes is the right thing to do, and we want to play an active role in formulating strategies to reduce energy consumption while also preserving and creating jobs to help strengthen the economy. Most importantly, consistent with LBA’s mission “to preserve home affordability for American families,” we want to ensure that homeowners realize a net benefit from the added costs of building more energy efficient homes.
Energy efficiency should be a win-win situation for everyone involved.
So why aren’t home buyers embracing energy efficient homes more than they are today?
There are several reasons.
It’s no surprise that energy efficient features cost more, but most buyers today aren’t willing to pay more for a new energy efficient home, given the choice of a lower-priced but less efficient home, unless they can clearly see the value and afford the higher price.
We are working with our trade partners to reduce the costs of building in more energy efficient features, in order to keep prices down. In addition, we see several opportunities to encourage buyers to opt for more energy efficient homes when buying.
Energy efficiency must be easier to quantify and compare, affordable, and provide a net positive benefit to a homeowner, in order for them to purchase a more energy efficient home.
LBA believes there are three key opportunities that we support in that regard:
(1) The first is to adopt a uniform standard for measuring and labeling the energy efficiency of homes.
So much of what we do to make a home consume less energy isn’t seen as you walk through a prospective home, and there is a great deal of confusion in the marketplace about how to quantify the benefits of an energy efficient new home.
Use of a standard efficiency measurement such as the DOE’s EnergySmart Home Scale is an essential first step to provide a basis for comparing the energy efficiency of homes.
(2) The second opportunity we see is to translate the additional energy efficiency into dollars, to be used commonly by buyers, appraisers and lenders. Energy Efficiency should make homes more affordable, not less.
In order to substantiate the increased costs associated with higher efficiency construction and components, the additional value of an energy efficient home should be reflected in its appraisal. That is not the case in today’s appraisal process.
Additionally, underwriting guidelines should allow for lenders to give a buyer credit for lower projected monthly energy costs when qualifying them for a mortgage.
This is an area where federal leadership is absolutely essential. If FHA and the other GSE’s address energy efficiency in their underwriting and appraisal standards, they will move the entire market.
(3) Third, we must use a cost/benefit analysis in setting energy efficiency targets and standards, to ensure that additional costs can be fully offset by reduced operating expenses.
LBA has studied this carefully and done extensive cost/benefit analysis, and we believe significant improvements can be justified in the near term. These improvements are achievable by carefully coordinating federal goals with the code development cycle, in order to ensure that builders and local governments have sufficient time to comply with and enforce any new requirements.
To summarize, if we want consumers to buy more energy efficient homes, we must address three issues:
First, give home buyers the tools they need to understand and compare new energy efficiency.
Second, ensure that energy efficient homes are affordable, by reflecting their higher value in the appraisal process and by incorporating energy savings into mortgage qualification standards.
Finally, ensure coordination between the federal government, code bodies, state governments and builders, working together to develop a realistic timetable for increasing energy efficiency in new homes.
I have additional handouts that provide a much more thorough discussion of these points, which I would be glad to share with you.
In closing, I want to let you know that LBA member companies are committed to energy efficiency. And we are committed to working with groups like the Alliance to help advance this very important national priority.
Thank you for your time.
Looks like the LBA is looking to buy time to comply with what it foresees becoming energy efficiency mandates sooner than later. In its phrasing, it seeks to coordinate “federal goals with the code development cycle,” and wants to tie energy efficiency to a tangible “net value” gain for a home buyer, which can involve tricky cost and savings over time analysis to get at. And, as Gear points out, if the government gives credit (in terms of appraised value) to home buyers with energy efficient home solutions, the finance-ability of homes becomes more achievable.
All in all, a strong positive message from a group whose stakes may differ on this issue from the short list of priorities the bigger NAHB builder group is pursuing in its lobbying efforts.
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