Is Going Green Worth the Trouble?

Green certification programs have come a long way from where they were when Carl Seville began getting involved about eight years ago.

Seville was working as a contractor when he recognized the value a green certification program could add to a building, and his interest was piqued. He decided to get ahead of the trend, and signed up with the Greater Atlanta Home Builders Association to help develop the EarthCraft Multifamily certification program.

Nowadays, Seville works as a green consultant and has helped to build and certify more than 80 developments, both multifamily and single-family. And while he still believes certification is worth every penny, many multifamily owners, developers, and managers don’t exactly share the same opinion.

“I have heard that there are developers that are doing green practices in their buildings and not paying for the certification because they’re cost conscious,” Seville says.

The team at Pinnacle is just such a company.

Rick Graf, president of the Seattle-based Pinnacle Family of Companies, isn’t convinced certification is worth the cost.

While Pinnacle still implements many green building practices, such as installing energy-efficient lightbulbs and low-flow fixtures, the company doesn’t need certification to dictate how to do it, Graf says.

“We do a lot of things in the apartment space that are green-type things—recycling; always looking at ways to reduce energy usage; low-flow toilets; and so on,” he says. “But it’s been driven mostly on the expense side. So, for me to have to go through that process [of getting certified], I just don’t know that it’s something we need to do.”

Do RENTers REally Care?

Graf believes pursuing a green seal of approval makes sense to cut down on utility expenses in common areas, but he isn’t convinced that a renter will necessarily pay more for a green-certified building.

“While they may want it,” he says, “they aren’t willing to pay for it.”

Michelle Desiderio agrees. She doesn’t believe the adoption of green practices will be driven by resident demand, because, when push comes to shove, they won’t want to pay more to live in a sustainable building.

Desiderio, vice president of Upper Marlboro, Md.–based Home Innovation Research Labs, says residents aren’t interested in paying a premium to live in a green building. While a renter may see about $20 off their water and energy costs, they aren’t willing to pay more up front to save somewhere down the line, she says.

A survey conducted by Strata Research earlier this year, however, found that 77 percent of renters felt green apartments were important. The survey also found that Energy Star appliances were the No. 1 green feature tenants were looking for and that 64 percent of respondents said they would maybe pay more for green features. Maybe.

Meanwhile, tenants with rents of less than $700 are considerably less likely to pay extra for green features compared with those who pay more than $700 a month, according to the survey.

Desiderio, who also works as the director of green building programs for the National Association of Home Builders, believes market differentiation is the No. 1 reason builders obtain certification.

“Developers feel that renters, particularly Millennials, are interested in being in a green building,” she says.

Many investors also heavily prefer to be involved in communities that have a green certification, she says.

“Will they invest? Yes,” she says. “But they would prefer to see investments in projects that are going to get a green certification.”

COMFort for them, and validation for you

Seville says that while Gen Y renters may want a green building, it’s hard to quantify the demand. If they’re willing to pay for it, then how much more is it worth to them?

Renters may want to live in the comfort of a green environment, but they may not know that the certification is what makes it so comfortable. “It’s just a better place to live,” he says. “I think what we will see is the demand [for them] will continue to increase from a health standpoint.”

Improved air quality and noise control are two features that increase quality of life, but renters may not necessarily be able to pinpoint exactly how green building techniques make them happen. And while the residents may have a better living experience, owners should also find inherent value in the durability of a certifiable building, Seville says.

“It’s a good long-term thing for owners to have,” he says.

Brian Natwick agrees that while green building can be costly, it’s worth it in the long run.

“When we commit to sustainability, we have increased the value of that investment,” says Natwick, president of multifamily at Charlotte, N.C.–based Crescent Communities.

Crescent is dedicated to integrating sustainability into its buildings and communities. But the company picks its spots: It may not always use the most expensive certification program but, rather, the one that fits the specific community best.

“I can’t think of one investment where we don’t have at least one certification program implemented,” he says.

He also believes green certification is worth the extra work because it allows a company to confidently put its money where its mouth is, because a third-party source validates the claim.

“I think having a process helps you ensure that you’ve done what you said you were going to do,” Natwick says.

WORTH the Trip?

Asa Foss says the biggest hit builders take when they don’t get certified is to their credibility.

“You have got to put your money where your mouth is,” he says. “Getting a certification is really the only way to prove that something has been done and verified.”

Foss, a director of LEED residential technical development for the Washington, D.C.–based U.S. Green Building Council (USGBC), says using a verifier through a green certification program will actually save builders money by reducing waste and making a building run as efficiently as possible.

If just 5 percent of a space is left uninsulated due to poor installation, the space is going to lose 50 percent of its effectiveness, Foss says.

“A project will pay a bunch of money for good insulation,” he says. “But, if it’s installed poorly, which it almost always is, it’s only going to perform at half of the level it should be at.”

But a verifier is trained to catch something like that.

“It doesn’t cost anything to install it properly; you just have to do it properly,” Foss says. “And that, frankly, is one of the most important benefits and why projects should be getting green certifications.”

One of the largest components of a certification program is making sure moisture strategies are implemented correctly, Foss says.

Just ask Seville about the importance of moisture control. He recently worked on a building in Atlanta that had to strip its facing to remediate moisture-related damage. In fact, fixing the problem could cost up to $42 million, he says.

“Even when you have people who are conscientious and trying to do a good job, there’s still risk,” Seville says. “One of the things I do with my clients is not cover up any of the exteriors until I can inspect them.”

While he admits that having a third-party source check a crew’s work is a costly addition to the green certification process, Seville still argues that it’s worth it. “You have an extra layer of insurance that it’s being done right,” he says.

But that extra layer sometimes is one layer too much for many multifamily owners, managers, and developers, many of whom view green certifications as more of a marketing play than anything.

“A lot of them see certification as an extra cost,” Seville says. “They may be shortsighted, because [eventually] they might see there’s long-term value in having a building certification. But I can’t make them spend their money.”

Isn’t LEED Tough Enough?

To keep up with changing standards and stay ahead of the curve, ­officials at the USGBC are releasing a new version of the LEED standard later this month. The biggest change in the new version will ­affect multifamily buildings four to eight stories tall, according to Foss. Buildings in that size range had the option of using LEED for new construction or mid-rise, but under the new system, mid-rise will be mandated.

The certification system was tweaked to make the standards a little more exacting, and to reflect the reality that many municipalities are changing the way they view energy-efficiency requirements.

“Each time we do a rating-system update, we make it more stringent,” Foss says. “Energy codes are getting better, so we need to keep up with them. So, for us to remain a leadership standard, we have to increase the rigor of our rating system.”

But for many, LEED is already too stringent. Natwick says each rating system is unique and that although LEED may be the biggest, sometimes it isn’t always the best option. Comparing and contrasting different green certification programs allows the developer to make the best choice for the community’s needs.

When the team at Crescent began drawing up the plans for a garden community, it chose to work with an Audubon International certification as opposed to LEED.

“If you wanted to implement LEED at a garden community, the certification doesn’t lend itself to it,” Natwick says. “It becomes a cost-prohibitive certification.”

One of the issues with the LEED program that didn’t sit right with Natwick was the mandate to bring outside air into each unit—a process that can tack on about $1,000 per unit in a 300-unit building.

That’s just one example of LEED’s downside—but the name itself, and the weight that those four letters carry, is a huge upside for apartment ­owners.

“That’s a significant investment,” Natwick says. “But, again, the trade-off is that LEED has pretty substantial brand recognition.” MFE