What does global warming mean to you personally? Are you afraid the environment will be a threat to your grandchildren? Do you preach sustainable practices and recycle everything you can?
What does global warming mean to you professionally? Now, that’s a totally different lens on the same issue. Because even though your sentiments may align with the issue, your bottom line must ultimately ensure your business' profitability.
Meeting Code or Making Money?
The 2017 Multifamily Executive Concept Community research shows that most multifamily housing pros feel obligated to incorporate only the baseline of green features into their developments to pass code. Anything more, the research findings reveal, is most likely fighting against the project’s financial performance.
“Developers want to be cutting edge, but they're only taking small incremental steps,” says Erik Earnshaw, partner and senior project architect at Concept Community team member BGO Architects. “Developers are being pushed by economic reasons to add sustainability to projects. If the features weren’t designed in and the code didn’t force it, then it most likely would be cut for economic reasons. Plus, it’s a competitive world with financing. If the developer is barely making it work with overall rising construction costs, it’s hard to get them to pay attention to adding costs for sustainable features.”
As an architect, BGO often has to design sustainability features into a project and then “sell” them to the developer by using hard numbers.
Obviously, developers seek a payback from the products they use. When surveyed for the Concept Community research performed by The Farnsworth Group, developers selected next-generation and sustainable products based on their ability to provide a return on investment, their energy efficiency, and their ability to help sell or lease the residence.
BGO Architects works on a fair amount of HUD projects that have a federally guaranteed loan, with an extended term and lower-than-conventional payments. Plus, the agency awards up to 45 basis points if the project meets the standards of green-certified building programs such as LEED or NGBS. Those financial benefits are huge motivators to incorporate sustainable products in a development.
One of the benefits of such products is that consumers get a better-performing unit, which can be a marketing differentiator for developers. Earnshaw estimates that many required sustainable improvements cost developers $1,000 more per unit, which can calculate out to a solid return after three years or more, depending on how the owner decides to wrap the cost into the rents. After having lowered consumers' utility bills with the improvement, many developers seize the opportunity to add a small amount to the rents.
The Farnsworth Group's research shows that developers' No. 1 approach to enhancing their projects' sustainability and energy efficiency is installing Energy Star appliances, generally considered the bare minimum in providing better building performance.
Yet, when they add sustainable, next-generation products, owners are able to push rents up to 14% higher than in a typical project, the research found. Nonetheless, Earnshaw says, developers tend to purchase energy-efficient appliances only when conventional ones aren’t available.
What Do Consumers Want?
Consumers are starting to become highly engaged with sustainable products, actively seeking them in their housing. BGO Architects recently studied a project outside of Austin, Texas, in a market not generally thought of as cutting edge when it comes to green building.
The developer of the 51-unit community determined that many potential residents drove electric cars and that more than one-fifth of them wanted electric charging stations. As a result, he's chosen to prewire the building up front, instead of going back to install the stations later.
In some parts of the country, consumer demand is even influencing code, most notably in California. “California and some other progressive states are pushing the rest of the country to be more aggressive [in terms of] energy codes," Earnshaw says.
How Does the Next-Generation Development Incorporate Sustainability?
The 2017 Concept Community has explored a variety of sustainable processes and products in order to help the apartment industry learn how feasibly and affordably they can be adopted in multifamily construction. To that end, the project incorporates the following six features:
1. New sources of capital. Based on its design features, the Next-Generation Development will be able to use Commercial Property Assessed Clean Energy, or C-PACE, financing, a program created to help multifamily owners access affordable, long-term financing for qualified energy upgrades to their developments via a voluntary assessment on their property tax bill. The product is available through a variety of qualified capital providers.
2. Solar energy. The Next-Gen Development will capture solar energy using photovoltaic windows, glazing, and roof shingles. The shingles and glass will be paybacks within the first five to seven years post-construction, Earnshaw says.
3. Walkability. The Next-Gen Development's tenants will be able to minimize their use of automobiles because of their proximity to work and entertainment venues, equating to cost savings not only for the developer, who can reduce or eliminate parking allocations, but also for residents, who can opt for ride-sharing services rather than take on the expense of owning a vehicle.
4. Geothermal heating and cooling. Dominion Properties' Sage on Prospect, in Milwaukee, maximizes its HVAC system's efficiency, temperature consistency, comfort, and cost savings for residents using 24 400-foot-deep geothermal wells, which operate via quiet heat pumps in each apartment unit.
5. Modular construction. Several of the Concept Community's buildings are being designed with modular construction, which reduces waste on the jobsite, among other benefits.
6. Water savings. All the buildings being designed for the Concept Community/Next-Gen Development will incorporate graywater systems, which recycle water for use in irrigation. In addition, all of the community's interior plumbing fixtures will be low-flow, saving tens of thousands of gallons of water per year.
The Next-Generation Development/Concept Community will be revealed at the 2017 Multifamily Executive Conference, Sept. 18–20, in Las Vegas. Register now to attend, at www.mfeconference.com.
