Monday, March 2, 2009
Part 5 of the Regulating Green Series--Constitutional Challenges To Legislating Green
Part 5 of the Regulating Green Series--Constitutional Challenges To Legislating Green
Posted on February 26, 2009 by Shari Shapiro
Throughout the Regulating Green series, I have tried to identify strategies which will lead to great green regulations. I gave a presentation to municipalities in Southeastern PA who are considering green regulations. In preparing for the presentation, I identified a few additional considerations for green regulations. Here are some of the thoughts I shared:
1. Avoid improper delegation of authority
Delegation of a power normally exercised by government authorities to a private agency is considered an improper delegation of authority. Requiring green certification by a third party entity (like the USGBC) in order to get a Certificate of Occupancy would be subject to this challenge. This challenge probably would not apply for incentive based programs or for municipalities' own buildings.
2. Develop a sound rational relationship between the regulatory means and the ends
In enacting land use regulations, the means a municipality uses to regulate must bear a a real and substantial relation to the ends sought. Thus, green regulations should include a clear intent, be supported by external authority, and implement rational regulatory mechanisms that tie to the original intent of the regulation.
3. Ensure that your regulations are not void for vagueness
Regulations violate due process if a regulation fails to give a person of ordinary intelligence fair notice that contemplated conduct is forbidden or encourages arbitrary enforcement, or both. Green regulations which include language like "LEED or equivalent standard" might not withstand a vagueness challenge.
4. Be careful of imposing arbitrary and excessive fees
If the cost of compliance with the regulation is too high, it may amount to a virtual taking of the property of the persons being regulated. This standard is high--the value of the property must be reduced to almost nothing for a taking to occur. But, regulatory license fees must be reasonably related to the costs associated with the services being provided. If a municipality imposes a fee for standard projects (i.e. projects which are not green), there could be a challenge that the license fees are not related to the services being provided.
Wednesday, February 25, 2009
Stimulus Offers Limited Tax Help to Builders
* From: BUILDER 2009
* Posted on: February 25, 2009 10:36:00 AM
Stimulus Offers Limited Tax Help to Builders
Companies with revenues below $15 million can carry back losses for five years; other firms may want to research benefits of ‘debt forgiveness’ clause included in stimulus.
By: Teresa Burney
Now that the ink is dry on the American Recovery and Reinvestment Act of 2009, and its hundreds of pages of pricey provisions somewhat deciphered, it appears that the stimulus bill includes little to aid builders’ balance sheets, accountants say.
“It’s not as good as it could have been,” summarized Steve Friedman, national director of home building services for Ernst & Young.
Of biggest note, a provision that would have allowed all companies, not just builders, to carry back their losses for five years and collect refunds from taxes paid during profitable years was eliminated for all but small businesses.
And, while many smaller builders might qualify for the carry-back extension if they have receipts of less than $15 million a year, the extension only lasts for 2008. In addition, because of the way most are structured, as tax pass-through companies, S corporations, or LLCs, the effect is expected to be limited, said Friedman.
Larger production builders, who establish smaller separate companies to develop in different markets, also would not be able to qualify for the carry-back on each of their smaller companies because of an “affiliate test,” said Friedman.
While the carry-back for small businesses isn’t likely to help as many builders as when it was initially proposed, Lisa M. Jackson, vice president of John Burns Real Estate, said it could provide some assistance to their small trade partners. “The silver lining is that it’s likely to provide some benefit to the trades that serve the industry. Keeping some of them in business ultimately supports not just housing but the general economy,” she said.
But a less-known provision in the stimulus plan could help some builders restructure their balance sheets. The title of this financial tool is a mouthful—“the deferral and ratable inclusion of income arising from business indebtedness discharged by the reacquisition of a debt instrument”—but it’s worth understanding for builders in this troubled housing market and economy.
Here’s how it works: If a company manages to cut its debt, either by buying back its bonds at less than what it sold them for or by convincing its bankers to accept less to repay a loan, the difference between the amount of the original debt and the new debt is taxable at a corporate rate of 36%.
Under a new provision in the stimulus plan the taxes on that “forgiven” debt may be deferred until 2014 and then paid back in yearly installments of 20% ending in 2019 if the debt is bought back in the two years, from Jan. 1, 2009 until Dec. 31, 2010.
This would allow a company which has bond debt that is trading for less than the company paid for it to buy back the bonds at a lower price. This would essentially lower the company’s indebtedness and defer any tax consequences for four to five years.
Private builders theoretically could also take advantage of the tax code change to lower their debts by persuading their bankers to take less than the full value of a loan. If that loan happened to secure property, the builder could then sell the property for less than the loan and generate much-needed cash with deferred tax consequences.
Obviously, lowering debt helps the balance sheet of a company, especially if there are no tax consequences for at least four years. “But if your strategy is cash preservation, then you are going to have to do an analysis as to which is better,” said Friedman.
That’s because advantage of the debt forgiveness clause can have costs of its own. It takes cash to buy back the bonds and bank debt. For builders who have been hoarding cash to hold them over until the market turns, this provision may not be particularly useful.
“Right now everybody is looking for more liquidity,” said Albert Pisanelli, corporate tax director for Orleans Homes. “Yeah, you could buy your debt down … but at the end of the day, if you are not selling anything, you still need to pay our bills.”
Besides, Pisanelli said, most builders have such high losses that they would be able to offset any gains from loan forgiveness anyway.
Jackson of John Burns agreed that the provision is something of a mixed blessing for builders. “Reducing debt obligations, either through renegotiations or repurchasing at a discount could allow some to restructure their balance sheets,” she noted. “That being said, liquidity is so critical at a time like this, builder executives would have to really weigh the pros and cons of this. There is still no clarity about the length of the downturn, and those that do have cash have worked hard to get it. They may decide it’s more prudent to keep their acorns squirreled away.”
* Posted on: February 25, 2009 10:36:00 AM
Stimulus Offers Limited Tax Help to Builders
Companies with revenues below $15 million can carry back losses for five years; other firms may want to research benefits of ‘debt forgiveness’ clause included in stimulus.
By: Teresa Burney
Now that the ink is dry on the American Recovery and Reinvestment Act of 2009, and its hundreds of pages of pricey provisions somewhat deciphered, it appears that the stimulus bill includes little to aid builders’ balance sheets, accountants say.
“It’s not as good as it could have been,” summarized Steve Friedman, national director of home building services for Ernst & Young.
Of biggest note, a provision that would have allowed all companies, not just builders, to carry back their losses for five years and collect refunds from taxes paid during profitable years was eliminated for all but small businesses.
And, while many smaller builders might qualify for the carry-back extension if they have receipts of less than $15 million a year, the extension only lasts for 2008. In addition, because of the way most are structured, as tax pass-through companies, S corporations, or LLCs, the effect is expected to be limited, said Friedman.
Larger production builders, who establish smaller separate companies to develop in different markets, also would not be able to qualify for the carry-back on each of their smaller companies because of an “affiliate test,” said Friedman.
While the carry-back for small businesses isn’t likely to help as many builders as when it was initially proposed, Lisa M. Jackson, vice president of John Burns Real Estate, said it could provide some assistance to their small trade partners. “The silver lining is that it’s likely to provide some benefit to the trades that serve the industry. Keeping some of them in business ultimately supports not just housing but the general economy,” she said.
But a less-known provision in the stimulus plan could help some builders restructure their balance sheets. The title of this financial tool is a mouthful—“the deferral and ratable inclusion of income arising from business indebtedness discharged by the reacquisition of a debt instrument”—but it’s worth understanding for builders in this troubled housing market and economy.
Here’s how it works: If a company manages to cut its debt, either by buying back its bonds at less than what it sold them for or by convincing its bankers to accept less to repay a loan, the difference between the amount of the original debt and the new debt is taxable at a corporate rate of 36%.
Under a new provision in the stimulus plan the taxes on that “forgiven” debt may be deferred until 2014 and then paid back in yearly installments of 20% ending in 2019 if the debt is bought back in the two years, from Jan. 1, 2009 until Dec. 31, 2010.
This would allow a company which has bond debt that is trading for less than the company paid for it to buy back the bonds at a lower price. This would essentially lower the company’s indebtedness and defer any tax consequences for four to five years.
Private builders theoretically could also take advantage of the tax code change to lower their debts by persuading their bankers to take less than the full value of a loan. If that loan happened to secure property, the builder could then sell the property for less than the loan and generate much-needed cash with deferred tax consequences.
Obviously, lowering debt helps the balance sheet of a company, especially if there are no tax consequences for at least four years. “But if your strategy is cash preservation, then you are going to have to do an analysis as to which is better,” said Friedman.
That’s because advantage of the debt forgiveness clause can have costs of its own. It takes cash to buy back the bonds and bank debt. For builders who have been hoarding cash to hold them over until the market turns, this provision may not be particularly useful.
“Right now everybody is looking for more liquidity,” said Albert Pisanelli, corporate tax director for Orleans Homes. “Yeah, you could buy your debt down … but at the end of the day, if you are not selling anything, you still need to pay our bills.”
Besides, Pisanelli said, most builders have such high losses that they would be able to offset any gains from loan forgiveness anyway.
Jackson of John Burns agreed that the provision is something of a mixed blessing for builders. “Reducing debt obligations, either through renegotiations or repurchasing at a discount could allow some to restructure their balance sheets,” she noted. “That being said, liquidity is so critical at a time like this, builder executives would have to really weigh the pros and cons of this. There is still no clarity about the length of the downturn, and those that do have cash have worked hard to get it. They may decide it’s more prudent to keep their acorns squirreled away.”
Green Support Remains, LEED Interest Slips
Reprinted from GlobeSt.com
EXCLUSIVE Last updated: February 25, 2009 06:21am
Green Support Remains, LEED Interest Slips
By Bob Howard
LOS ANGELES-The commercial real estate and construction industries continue to overwhelmingly support green building, but support for official LEED certification has slipped in a new survey. The third annual Annual Allen Matkins/CTG/Green Building Insider Green Building Survey shows that 93.4% of those surveyed agreed that it is worth the time and effort to build green, but only 66.2% believe that obtaining LEED certification is worth the effort. To view the survey, click here.
Among the other findings in the survey were that designers, owners and contractors have differing views on the risks involved in green construction and different ideas on whether green construction adds to the cost of projects. The annual survey included responses from 900 design professionals, contractors, subcontractors, construction planners, building owners and others in the industry.
Bryan Jackson, chair of the green building and sustainable construction group at the Los Angeles office of the law firm of Allen Matkins Leck Gamble Mallory & Natsis, tells GlobeSt.com that the survey authors were surprised to find that willingness to obtain LEED certification had slipped from 76% in the previous year's survey, although he adds that this year's 66.2% is still a very high percentage in favor of certification.
Jackson points out that the USGBC "is probably already ahead of the curve in trying to recapture that 10% drop." He says that the primary reasons for the decline in willingness to obtain LEED certification have to do with competition from other certification agencies, newly enacted green building regulations and concerns over carbon footprints. Results of the new survey show that, while some of these regulations require LEED certification, the majority do not favor a specific rating system. In addition, many of the new regulations focus on greenhouse gases and carbon impacts that LEED has only indirectly addressed.
But Jackson says that new LEED requirements being introduced this year include a "carbon overlay" that should bring many of the survey respondents back into the fold with respect to LEED certification. Another change in the new LEED requirements is that the certification process takes into account regional differences, which should also help the LEED process to regain some of its lost adherents, he says.
The survey showed that contractors, subcontractors, architects, engineers, building owners, attorneys and consultants felt that construction risks increased for green projects compared with traditional projects. Jackson says that he and other Allen Matkins attorneys who specialize in construction law "are telling everyone, including our competition, that we all need to raise the bar" in terms of making sure to address green building and sustainability implications in construction contracts, leases, design agreements other legal documents. "When people draft contracts without addressing these issues, you have fights about who is responsible. We want everyone involved to be as educated as possible so that we can write contracts in a way that will avoid litigation down the road," Jackson says.
Another practice that helps to avoid problems down the road, Jackson adds, is the growing use of Building Information Modeling, which employs computer-aided design to produce three-dimensional models of projects for incorporating green design elements from the very start of and throughout a project. Although many of those surveyed estimate that green construction adds between 1% and 4% to the cost of a project, those who use BIM "say that if you design for green and sustainable elements from the very beginning, you will be able to come out with a project in that could certify to Green, LEED, Gold or Silver without spending any more than conventional construction, which is pretty amazing," Jackson says.
Jackson, who is an adjunct professor of green and sustainable construction at USC, and who is editor of the weekly Green Building Update, notes that the survey results are becoming more reliable each year as the green building movement gains momentum. He explains that those being surveyed now have significantly more experience in green building than they had when the survey began three years ago.
EXCLUSIVE Last updated: February 25, 2009 06:21am
Green Support Remains, LEED Interest Slips
By Bob Howard
LOS ANGELES-The commercial real estate and construction industries continue to overwhelmingly support green building, but support for official LEED certification has slipped in a new survey. The third annual Annual Allen Matkins/CTG/Green Building Insider Green Building Survey shows that 93.4% of those surveyed agreed that it is worth the time and effort to build green, but only 66.2% believe that obtaining LEED certification is worth the effort. To view the survey, click here.
Among the other findings in the survey were that designers, owners and contractors have differing views on the risks involved in green construction and different ideas on whether green construction adds to the cost of projects. The annual survey included responses from 900 design professionals, contractors, subcontractors, construction planners, building owners and others in the industry.
Bryan Jackson, chair of the green building and sustainable construction group at the Los Angeles office of the law firm of Allen Matkins Leck Gamble Mallory & Natsis, tells GlobeSt.com that the survey authors were surprised to find that willingness to obtain LEED certification had slipped from 76% in the previous year's survey, although he adds that this year's 66.2% is still a very high percentage in favor of certification.
Jackson points out that the USGBC "is probably already ahead of the curve in trying to recapture that 10% drop." He says that the primary reasons for the decline in willingness to obtain LEED certification have to do with competition from other certification agencies, newly enacted green building regulations and concerns over carbon footprints. Results of the new survey show that, while some of these regulations require LEED certification, the majority do not favor a specific rating system. In addition, many of the new regulations focus on greenhouse gases and carbon impacts that LEED has only indirectly addressed.
But Jackson says that new LEED requirements being introduced this year include a "carbon overlay" that should bring many of the survey respondents back into the fold with respect to LEED certification. Another change in the new LEED requirements is that the certification process takes into account regional differences, which should also help the LEED process to regain some of its lost adherents, he says.
The survey showed that contractors, subcontractors, architects, engineers, building owners, attorneys and consultants felt that construction risks increased for green projects compared with traditional projects. Jackson says that he and other Allen Matkins attorneys who specialize in construction law "are telling everyone, including our competition, that we all need to raise the bar" in terms of making sure to address green building and sustainability implications in construction contracts, leases, design agreements other legal documents. "When people draft contracts without addressing these issues, you have fights about who is responsible. We want everyone involved to be as educated as possible so that we can write contracts in a way that will avoid litigation down the road," Jackson says.
Another practice that helps to avoid problems down the road, Jackson adds, is the growing use of Building Information Modeling, which employs computer-aided design to produce three-dimensional models of projects for incorporating green design elements from the very start of and throughout a project. Although many of those surveyed estimate that green construction adds between 1% and 4% to the cost of a project, those who use BIM "say that if you design for green and sustainable elements from the very beginning, you will be able to come out with a project in that could certify to Green, LEED, Gold or Silver without spending any more than conventional construction, which is pretty amazing," Jackson says.
Jackson, who is an adjunct professor of green and sustainable construction at USC, and who is editor of the weekly Green Building Update, notes that the survey results are becoming more reliable each year as the green building movement gains momentum. He explains that those being surveyed now have significantly more experience in green building than they had when the survey began three years ago.
Green Building is the Economy’s Bright Spot
Reprinted from McMorrowReport.com
WASHINGTON, D.C.—New studies and reports point to green building as one of the growing bright spots for the U.S. economy.
In fact, as economic experts call for a recovery plan focused on green jobs and infrastructure, as consumers look to live in more economically sustainable homes, as businesses strive to cut operating costs, and as our national security needs depend on an end to reliance on foreign energy sources, green buildings’ ability to deliver solutions to these pressing challenges promises to change the way we view the building industry.
“As research comes in from diverse sources examining the interest in green buildings among a wide range of Americans, the numbers keep painting the same picture: The future of our built environment clearly centers on energy efficiency, water reduction, systems that encourage cleaner indoor air, the use of recycled and more sustainably developed materials, and communities that coexist with their environments,” said Rick Fedrizzi, President, CEO & Founding Chair, U.S. Green Building Council. “Over and over again, Americans are saying the same thing: The key to a prosperous future is sustainability, and the triple bottom line—environmental responsibility, economic prosperity and social equity—is imperative as we move forward.”
According to Turner Construction Company’s “Green Building Barometer,” 75% of commercial real estate executives—including developers, rental building owners, brokers, architects, engineers and others – say the credit crunch will not discourage them from building green. In fact, 83% said they would be “extremely” or “very” likely to seek LEED certification for buildings they are planning to build within the next three years. The U.S. Green Building Council’s nationally recognized LEED® green building certification program provides third-party review and certification of buildings’ design, construction and performance in five key areas of environmental and health concern, including energy efficiency, water efficiency, materials and resources use, sustainable site development and indoor air quality.
Other key findings from this and other studies, conducted over the past year among constituencies ranging from consumers and homeowners to commercial real estate executives, include:
* 70% of homebuyers are more or much more inclined to buy a green home over a conventional home in a down housing market, according to McGraw-Hill Construction’s 2008 SmartMarket Report, “The Green Home Consumer.” That number is 78% for those earning less than $50,000 a year, showing the increasing access to green buildings for all members of our society. In fact, 56% of respondents who bought green homes in 2008 earn less than $75,000 per year; 29% earn less than $50,000.
* More than 80% of commercial building owners have allocated funds to green initiatives this year, according to “2008 Green Survey: Existing Buildings,” a survey jointly funded by Incisive Media’s Real Estate Forum and GlobeSt.com, the Building Owners and Managers Association (BOMA) International and the U.S. Green Building Council (USGBC). Some 45% plan to increase sustainability investments in 2009.
* That same study showed that 60% of commercial building owners offer education programs to assist tenants in implementing green programs in their space, up 49.4% from last year, illustrating a growing understanding of the importance of environmental awareness among employees and customers in addition to the use of green materials and systems.
* LEED-certified projects are directly tied to more than $10 billion of green materials, according to a Greener World Media study on green building. That could reach more than $100 billion by 2020, contributing to a vibrant industry that could drive an economic recovery.
* The Center for American Progress and the Political Economy Research Institute at the University of Massachusetts Amherst, in a September 2008 study, found that a national green economic recovery program investing $100 billion over 10 years in six infrastructure areas would create 2 million new jobs. The investments would include retrofitting existing buildings to improve energy efficiency and investing in wind power, solar power and next-generation biofuels.
The opportunities for creating a built environment which performs at a higher level and works for building owners rather than against them and their tenants are many and varied. New buildings can be built with greener construction methods and designed for long-term operations and maintenance savings. Likewise, our nation’s vast existing building stock can be made greener—and the studies show that building owners are interested in doing so. Incisive Media’s “2008 Green Survey: Existing Buildings” found that almost 70% of commercial building owners have already implemented some kind of energy monitoring system. Energy conservation is the most widely implemented green program in commercial buildings, the survey found, followed by recycling and water conservation. Nearly 65% of building owners who have implemented green buildings say their investments have already resulted in a positive return on investment. And 84% of respondents to Turner’s “Green Building Barometer” said their green buildings have resulted in lower energy costs, with 68% reporting lower overall operating costs.
As green buildings help companies cut costs and build sound financial situations, the Center for American Progress’ study shows how such green investments on a wide scale can ignite the economy of the nation as a whole. A $100 billion green infrastructure investment over 10 years, with a focus on green building retrofits and investment in alternative energy sources, could be paid for with proceeds from carbon permit auctions under a greenhouse gas cap-and-trade program. That’s roughly the same amount of investment as the tax rebate checks sent as part of the April 2008 economic stimulus plan but would create 300,000 more jobs. Also, about 22% of total household expenditures— the goal of a tax rebate stimulus plan—go to imports, while only about 9% of purchases for green infrastructure investment would.
Building and design professionals, product manufacturers and others getting involved in green building are establishing themselves as leaders in a rapidly growing industry, McGraw-Hill Construction’s Green Outlook 2009 report “Trends Driving Change” shows. By 2013, the overall green building market (both residential and non-residential) is likely to more than double from today’s $36-49 billion to $96-140 billion. Green building is estimated to be 10-12% of the current commercial and institutional building market; McGraw-Hill predicts it will represent 20-25% of new commercial and institutional construction starts by 2013. And it’s possible these predictions could be conservative: In 2005, McGraw-Hill predicted green building would make up just 5-10% of the market in 2008.
WASHINGTON, D.C.—New studies and reports point to green building as one of the growing bright spots for the U.S. economy.
In fact, as economic experts call for a recovery plan focused on green jobs and infrastructure, as consumers look to live in more economically sustainable homes, as businesses strive to cut operating costs, and as our national security needs depend on an end to reliance on foreign energy sources, green buildings’ ability to deliver solutions to these pressing challenges promises to change the way we view the building industry.
“As research comes in from diverse sources examining the interest in green buildings among a wide range of Americans, the numbers keep painting the same picture: The future of our built environment clearly centers on energy efficiency, water reduction, systems that encourage cleaner indoor air, the use of recycled and more sustainably developed materials, and communities that coexist with their environments,” said Rick Fedrizzi, President, CEO & Founding Chair, U.S. Green Building Council. “Over and over again, Americans are saying the same thing: The key to a prosperous future is sustainability, and the triple bottom line—environmental responsibility, economic prosperity and social equity—is imperative as we move forward.”
According to Turner Construction Company’s “Green Building Barometer,” 75% of commercial real estate executives—including developers, rental building owners, brokers, architects, engineers and others – say the credit crunch will not discourage them from building green. In fact, 83% said they would be “extremely” or “very” likely to seek LEED certification for buildings they are planning to build within the next three years. The U.S. Green Building Council’s nationally recognized LEED® green building certification program provides third-party review and certification of buildings’ design, construction and performance in five key areas of environmental and health concern, including energy efficiency, water efficiency, materials and resources use, sustainable site development and indoor air quality.
Other key findings from this and other studies, conducted over the past year among constituencies ranging from consumers and homeowners to commercial real estate executives, include:
* 70% of homebuyers are more or much more inclined to buy a green home over a conventional home in a down housing market, according to McGraw-Hill Construction’s 2008 SmartMarket Report, “The Green Home Consumer.” That number is 78% for those earning less than $50,000 a year, showing the increasing access to green buildings for all members of our society. In fact, 56% of respondents who bought green homes in 2008 earn less than $75,000 per year; 29% earn less than $50,000.
* More than 80% of commercial building owners have allocated funds to green initiatives this year, according to “2008 Green Survey: Existing Buildings,” a survey jointly funded by Incisive Media’s Real Estate Forum and GlobeSt.com, the Building Owners and Managers Association (BOMA) International and the U.S. Green Building Council (USGBC). Some 45% plan to increase sustainability investments in 2009.
* That same study showed that 60% of commercial building owners offer education programs to assist tenants in implementing green programs in their space, up 49.4% from last year, illustrating a growing understanding of the importance of environmental awareness among employees and customers in addition to the use of green materials and systems.
* LEED-certified projects are directly tied to more than $10 billion of green materials, according to a Greener World Media study on green building. That could reach more than $100 billion by 2020, contributing to a vibrant industry that could drive an economic recovery.
* The Center for American Progress and the Political Economy Research Institute at the University of Massachusetts Amherst, in a September 2008 study, found that a national green economic recovery program investing $100 billion over 10 years in six infrastructure areas would create 2 million new jobs. The investments would include retrofitting existing buildings to improve energy efficiency and investing in wind power, solar power and next-generation biofuels.
The opportunities for creating a built environment which performs at a higher level and works for building owners rather than against them and their tenants are many and varied. New buildings can be built with greener construction methods and designed for long-term operations and maintenance savings. Likewise, our nation’s vast existing building stock can be made greener—and the studies show that building owners are interested in doing so. Incisive Media’s “2008 Green Survey: Existing Buildings” found that almost 70% of commercial building owners have already implemented some kind of energy monitoring system. Energy conservation is the most widely implemented green program in commercial buildings, the survey found, followed by recycling and water conservation. Nearly 65% of building owners who have implemented green buildings say their investments have already resulted in a positive return on investment. And 84% of respondents to Turner’s “Green Building Barometer” said their green buildings have resulted in lower energy costs, with 68% reporting lower overall operating costs.
As green buildings help companies cut costs and build sound financial situations, the Center for American Progress’ study shows how such green investments on a wide scale can ignite the economy of the nation as a whole. A $100 billion green infrastructure investment over 10 years, with a focus on green building retrofits and investment in alternative energy sources, could be paid for with proceeds from carbon permit auctions under a greenhouse gas cap-and-trade program. That’s roughly the same amount of investment as the tax rebate checks sent as part of the April 2008 economic stimulus plan but would create 300,000 more jobs. Also, about 22% of total household expenditures— the goal of a tax rebate stimulus plan—go to imports, while only about 9% of purchases for green infrastructure investment would.
Building and design professionals, product manufacturers and others getting involved in green building are establishing themselves as leaders in a rapidly growing industry, McGraw-Hill Construction’s Green Outlook 2009 report “Trends Driving Change” shows. By 2013, the overall green building market (both residential and non-residential) is likely to more than double from today’s $36-49 billion to $96-140 billion. Green building is estimated to be 10-12% of the current commercial and institutional building market; McGraw-Hill predicts it will represent 20-25% of new commercial and institutional construction starts by 2013. And it’s possible these predictions could be conservative: In 2005, McGraw-Hill predicted green building would make up just 5-10% of the market in 2008.
Friday, February 20, 2009
Green Stimulus -- or Morass?
Posted By: lthayer at 7:03 AM in Remodeling Magazine Online.
If it’s Friday, February 20, the painters should arrive at my 90-year-old home any minute to finish the insulating and air-sealing project that was supposed to take one day but has stretched out over four months.
Why the project took so long to complete – and why my January gas bill was still close to $700, despite all the cellulose and spray foam that has been pumped into some of my home’s countless cracks and crevices – is a topic for another blog or two. Or maybe a book, a tell-all. A cautionary tale about what I've found to be the promise and peril of green remodeling, for homeowners and contractors alike.
The morale of this book would be: It isn’t so easy being green.
(It all began with the blower door test. We never got the results, come to think of it.)
Real Money
I didn’t intentionally time it this way -- I mean the confluence of my little remodeling wind-down and President Obama’s signing, this week, of the $787 billion economic stimulus bill, formally known as The American Recovery and Reinvestment Act of 2009.
I’ve been studying up on the legislation, to learn what might be in it for remodelers, and I’m torn between thinking it’s the greatest thing ever for the green remodeling movement or the undoing of it.
Here’s a good Wall Street Journal summary chart of what goes where in the stimulus bill: http://online.wsj.com/public/resources/documents/STIMULUS_FINAL_0217.html
More specifically, here’s a section of the legislation that seems likely to impact green remodeling most profoundly (and here's some cellulose being pumped into my house):
Tax Credits for Energy-Efficient Improvements to Existing Homes.
The bill would extend the tax credits for improvements to energy-efficient existing homes through 2010. Under current law, individuals are allowed a tax credit equal to ten percent (10%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements installed during the taxable year. This tax credit is capped at $50 for any advanced main air circulating fan, $150 for any qualified natural gas, propane, oil furnace or hot water boiler, and $300 for any item of energy-efficient building property. For 2009 and 2010, the bill would increase the amount of the tax credit to thirty percent (30%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements during the taxable year. The bill would also eliminate the property-by-property dollar caps on this tax credit and provide an aggregate $1,500 cap on all property qualifying for the credit. The bill would update the energy-efficiency standards of the property qualifying for the credit. This proposal is estimated to cost $2.034 billion over 10 years
and:
Removal of Dollar Limitations on Certain Energy Credits.
Under current law, businesses are allowed to claim a thirty percent (30%) tax credit for qualified small wind energy property (capped at $4,000). Individuals are allowed to claim a thirty percent (30%) tax credit for qualified solar water heating property (capped at $2,000), qualified small wind energy property (capped at $500 per kilowatt of capacity, up to $4,000), and qualified geothermal heat pumps (capped at $2,000). The bill would repeal the individual dollar caps. As a result, each of these properties would be eligible for an uncapped thirty percent (30%) credit. This proposal is estimated to cost $872 million over 10 years.
In simplest terms, these changes mean that homeowners get a much bigger tax deduction -- 30%, up from 10% in most cases -- of the cost of various energy-efficient improvements, from jobs even smaller than my $2,800 air-sealing project to someone else’s $30,000-plus geothermal heating and cooling system.
“Suddenly, the money is relevant,” said Mike Williams, executive director of Minnesota Greenstar, a nonprofit, third-party green training and certification organization with several hundred building industry members. Before, “when you were doing a $200,000 remodel and got a $500 credit, people said yee-haw. Big deal,” he told me yesterday. “Now that the credit is tripled, it gets people’s attention.”
Greenwashing Galore
The downside? While many remodelers will be even more inclined than the recent buildup to get on the “green bandwagon,” a good number of them will not know how to do green remodeling correctly – or profitably.
Things can go wrong in green remodeling. Besides botched communications and dropped balls and incomplete paperwork and distracted tradespeople and poor preparation – the usual downfalls of many well-intentioned remodelers (including, I think, those I last hired) – there are real dangers in trying to go green without thinking things through.
“There are two sides of greenwashing,” said Williams. “Intentional greenwashing is where companies are taking it purely for marketing play only.” They slap the word “green” on their marketing materials to get customers in the door, “and then talk them out of it once they get there.”
The second type of greenwashing, “accidental greenwashing,” happens to “companies who just don’t have enough information yet,” Williams told me. They create “energy audit checklists” but apply them to the house as a series of unrelated parts, rather than as an interconnected system. They “energy seal” homes but don’t test for radon, or for backdrafting of flue gas, and thus create dangerous conditions for the inhabitants. They neglect to adequately screen and properly schedule and price the many specialized trades that are integral to the work, moreso than in conventional remodeling.
In one Midwestern city, an authority on green remodeling expert told me, “We had a remodeler who replaced the building paper, re-sided the home, and replaced the windows to make the house 50% less leaky.” Unfortunately, the work “also caused every appliance to fail the worst-case combustion spillage test.”
Said another longtime green remodeler of the stimulus legislation: "It's a really good thing. It's going to push the pendulum pretty far in the right direction." But, he cautioned, "I guarantee that a lot of remodelers willl go into it assuming there's a lot of money to be made, and not realizing how complicated it can be. And a lot will be selling bad product," he added.
Spend some time reading, listening, learning. Educate yourselves and your trade partners first, and your clients second. Go green, but carefully.
Leah Thayer, senior editor
lthayer@hanleywood.com
If it’s Friday, February 20, the painters should arrive at my 90-year-old home any minute to finish the insulating and air-sealing project that was supposed to take one day but has stretched out over four months.
Why the project took so long to complete – and why my January gas bill was still close to $700, despite all the cellulose and spray foam that has been pumped into some of my home’s countless cracks and crevices – is a topic for another blog or two. Or maybe a book, a tell-all. A cautionary tale about what I've found to be the promise and peril of green remodeling, for homeowners and contractors alike.
The morale of this book would be: It isn’t so easy being green.
(It all began with the blower door test. We never got the results, come to think of it.)
Real Money
I didn’t intentionally time it this way -- I mean the confluence of my little remodeling wind-down and President Obama’s signing, this week, of the $787 billion economic stimulus bill, formally known as The American Recovery and Reinvestment Act of 2009.
I’ve been studying up on the legislation, to learn what might be in it for remodelers, and I’m torn between thinking it’s the greatest thing ever for the green remodeling movement or the undoing of it.
Here’s a good Wall Street Journal summary chart of what goes where in the stimulus bill: http://online.wsj.com/public/resources/documents/STIMULUS_FINAL_0217.html
More specifically, here’s a section of the legislation that seems likely to impact green remodeling most profoundly (and here's some cellulose being pumped into my house):
Tax Credits for Energy-Efficient Improvements to Existing Homes.
The bill would extend the tax credits for improvements to energy-efficient existing homes through 2010. Under current law, individuals are allowed a tax credit equal to ten percent (10%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements installed during the taxable year. This tax credit is capped at $50 for any advanced main air circulating fan, $150 for any qualified natural gas, propane, oil furnace or hot water boiler, and $300 for any item of energy-efficient building property. For 2009 and 2010, the bill would increase the amount of the tax credit to thirty percent (30%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements during the taxable year. The bill would also eliminate the property-by-property dollar caps on this tax credit and provide an aggregate $1,500 cap on all property qualifying for the credit. The bill would update the energy-efficiency standards of the property qualifying for the credit. This proposal is estimated to cost $2.034 billion over 10 years
and:
Removal of Dollar Limitations on Certain Energy Credits.
Under current law, businesses are allowed to claim a thirty percent (30%) tax credit for qualified small wind energy property (capped at $4,000). Individuals are allowed to claim a thirty percent (30%) tax credit for qualified solar water heating property (capped at $2,000), qualified small wind energy property (capped at $500 per kilowatt of capacity, up to $4,000), and qualified geothermal heat pumps (capped at $2,000). The bill would repeal the individual dollar caps. As a result, each of these properties would be eligible for an uncapped thirty percent (30%) credit. This proposal is estimated to cost $872 million over 10 years.
In simplest terms, these changes mean that homeowners get a much bigger tax deduction -- 30%, up from 10% in most cases -- of the cost of various energy-efficient improvements, from jobs even smaller than my $2,800 air-sealing project to someone else’s $30,000-plus geothermal heating and cooling system.
“Suddenly, the money is relevant,” said Mike Williams, executive director of Minnesota Greenstar, a nonprofit, third-party green training and certification organization with several hundred building industry members. Before, “when you were doing a $200,000 remodel and got a $500 credit, people said yee-haw. Big deal,” he told me yesterday. “Now that the credit is tripled, it gets people’s attention.”
Greenwashing Galore
The downside? While many remodelers will be even more inclined than the recent buildup to get on the “green bandwagon,” a good number of them will not know how to do green remodeling correctly – or profitably.
Things can go wrong in green remodeling. Besides botched communications and dropped balls and incomplete paperwork and distracted tradespeople and poor preparation – the usual downfalls of many well-intentioned remodelers (including, I think, those I last hired) – there are real dangers in trying to go green without thinking things through.
“There are two sides of greenwashing,” said Williams. “Intentional greenwashing is where companies are taking it purely for marketing play only.” They slap the word “green” on their marketing materials to get customers in the door, “and then talk them out of it once they get there.”
The second type of greenwashing, “accidental greenwashing,” happens to “companies who just don’t have enough information yet,” Williams told me. They create “energy audit checklists” but apply them to the house as a series of unrelated parts, rather than as an interconnected system. They “energy seal” homes but don’t test for radon, or for backdrafting of flue gas, and thus create dangerous conditions for the inhabitants. They neglect to adequately screen and properly schedule and price the many specialized trades that are integral to the work, moreso than in conventional remodeling.
In one Midwestern city, an authority on green remodeling expert told me, “We had a remodeler who replaced the building paper, re-sided the home, and replaced the windows to make the house 50% less leaky.” Unfortunately, the work “also caused every appliance to fail the worst-case combustion spillage test.”
Said another longtime green remodeler of the stimulus legislation: "It's a really good thing. It's going to push the pendulum pretty far in the right direction." But, he cautioned, "I guarantee that a lot of remodelers willl go into it assuming there's a lot of money to be made, and not realizing how complicated it can be. And a lot will be selling bad product," he added.
Spend some time reading, listening, learning. Educate yourselves and your trade partners first, and your clients second. Go green, but carefully.
Leah Thayer, senior editor
lthayer@hanleywood.com
Thursday, February 19, 2009
Defining "Green" Standards
Building Industry Green Debate Shifts from Acceptance to Defining Standards
Blue ribbon panel analyzes how builders lare ooking for new business strategies to transform to the "greener" landscape.
San Diego, CA, February 13, 2009 --(PR.com)-- Although the debate regarding the movement towards a greener building industry has ended, the discussion of what is meant by green or how certain standards are defined and applied continues to evolve according to a recent expert roundtable.
“The building industry has moved beyond whether or not ‘green’ is a viable and long term business strategy. They are now looking for ways to practically incorporate its best practices, standardize the measurements and galvanize the existing demand.” said Steve Fabry CEO of information services firm Compendia and moderator of The Green Mega Trend and Its Impact on Your Business.
But despite political and consumer will for all things green, there are still “kinks in the machinery” to work out. Fabry added, “We can’t yet agree on what it means to be green. There are multiple standards, vague policy goals, competing certification programs, and evolving technologies. But we all agree that the trend has transcended mainstream culture and builders must incorporate green as an overarching strategy to achieve superior long term success.”
Panelist Brian Gitt, Executive Director of Build It Green added, “We truly have a perfect storm; this unprecedented convergence of market drivers: policies, soaring energy costs, consumer demand and builders need to understand and adapt to these policies that continue to transform how buildings are being built.”
According to Gitt, a builder’s biggest obstacle is the flexibility to build in multiple jurisdictions using the local or regional codes to measure “greenness.” He suggested using one of the three certification programs (Build It Green, USGBC LEED for Homes or California Green Builder) to create benchmarks as they are typically cited by local governments or exceed the existing codes.
Builders must also be careful what they promise as the specter of unfulfilled expectations often sparks litigation. According to panelist Tim Corbett, president of the risk management consultancy SmartRisk said, “As soon as one thing is wrong, owners start pointing fingers.” He indicated that most on the newly inherited risk from green building is a result of misaligning homeowner expectations when it comes to building cost, performance and savings.
“For many people green building is a new concept and they come to the table with many faulty notions and expecting perfection. They may expect significant and immediate cost savings which, in reality, may not be realized for several years,” he said.
Corbett pointed out that builders must educate, create realistic, obtainable strategies and clearly identify responsibilities for inspection, maintenance and operation. He listed several risk mitigating tactics including avoid express warranties and guarantees, maintain a qualified project team, ensure project certification and keep updated with the latest materials and technologies.
Mark Johnson, Director of Customer Service for leading green developer Gerding Edlen agreed that education is a key component missing from most builders. “A lot of builders who are doing all the right things on the construction side are not carrying the message through to the sales staff.” One of the most important responsibilities a builder can undertake is to articulate and teach the consumer that sustainability promotes a better quality of life and reduces the cost of home ownership.
“The big myth of green building is about protecting the environment. Whereas this is a great side benefit, the reason to build green; the reason to be a green builder is to create a direct benefit to your life. Green is about building better and bringing those tangible benefits to that owner.” he said.
Johnson also addressed the perceived cost differential between building green versus non-green. Johnson countered, “This is another oversimplification. Teams are building green with little or no added cost. There are low and high cost green buildings just as there are low and high cost non-green buildings.” He pointed out the higher costs typically occur when applying to the highest green standards such as LEED’s platinum rating. “As contractors gain experience building green their costs go down." The US Green Building Council notes that the additional costs average for a green building is 1.84%.
“The debate is over. Whether you believe in the reasons or causes it really doesn’t matter,” Gitt said. Mandates in states like California have rendered the argument moot. Public utilities, building standards commissions, trade organizations, the air resources boards and even state legislatures have already passed statutes and/or adopted several initiatives that require environmentally responsible considerations for any new residential construction. And the day is coming when these considerations will be applied to commercial construction, remodel and renovation.
Fabry added “It’s an exciting time; an important time: builders must transform or die. Soon there will be no green standards code. There will just be a code that simply assumes inclusion of what we today interpret as green.”
Wednesday, February 18, 2009
National Green Building Standard™
National Green Building Standard™
Purchase the National Green Building Standard at www.BuilderBooks.com
In 2007 the National Association of Home Builders (NAHB) and the International Code Council (ICC) partnered to form to establish a much-needed and nationally-recognizable standard definition of what is meant by "Green Building."
A consensus committee was formed to develop this standard in compliance with the requirements of the American National Standards Institute (ANSI). The resulting ANSI approved ICC-700-2008 National Green Building Standard defines green building for single and multifamily homes, residential remodeling projects and site development projects while still allowing for the flexibility required for regionally-appropriate best green practices.
Similar to the NAHB Model Green Homebuilding Guidelines, a builder, remodeler or developer must incorporate a minimum number of features in the following areas: energy, water, and resource efficiency, lot and site development, indoor environmental quality, and home owner education. The more points accrued, the higher the score.
The Standard, however, includes more mandatory items and suggests that higher thresholds be met in several categories. A new threshold - "Emerald" - was added to denote the highest achievement in residential green construction. The following tables highlight the point values required in each area for green buildings and subdivisions.
| Green Building Categories | Performance Point Levels (1) (2) | |||||
|---|---|---|---|---|---|---|
| BRONZE | SILVER | GOLD | EMERALD | |||
| 1. | Chapter 5 | Lot Design, Preparation, and Development | 39 | 66 | 93 | 119 |
| 2. | Chapter 6 | Resource Efficiency | 45 | 79 | 113 | 146 |
| 3. | Chapter 7 | Energy Efficiency | 30 | 60 | 100 | 120 |
| 4. | Chapter 8 | Water Efficiency | 14 | 26 | 41 | 60 |
| 5. | Chapter 9 | Indoor Environmental Quality | 36 | 65 | 100 | 140 |
| 6. | Chapter 10 | Operation, Maintenance, and Building Owner Education | 8 | 10 | 11 | 12 |
| 7. | Additional Points from any category | 50 | 100 | 100 | 100 | |
| Total Points | 222 | 406 | 558 | 697 | ||
| (1) In addition to the threshold number of points in each category, all mandatory provisions of each category shall be implemented. | ||||||
| (2) For dwelling units greater than 4,000 square feet (372 square meters), the number of points in Category 7 (Additional Points from any category) shall be increased in accordance with Section 601.1. The "Total Points" shall be increased by the same number of points. | ||||||
| Green Subdivision Category | Performance Point Levels | ||||
|---|---|---|---|---|---|
| One Star | Two Stars | Three Stars | Four Stars | ||
| Chapter 4 | Site Design and Development | 79 | 104 | 134 | 175 |
Many of the mandatory measures found in The National Green Building Standard are consistent with the International Code Council's I-Codes. Additionally, the baseline for energy savings has been updated to IECC 2006. To qualify for "Bronze" in the energy efficiency chapter of the Standard, a home must be at least 15% better than the 2006 IECC (ENERGY STAR™ equivalent). Below is a rough breakdown of the energy efficiency differences between thresholds and illustrates the percentage above ENERGY STAR™ requirements needed to achieve higher thresholds within the Green Building Standard's Energy Efficiency performance path.
The Green Scoring Tool allows scoring a building to the Standard (as well as the NAHB Model Green Home Building Guidelines), and includes decision support materials such as how to verify, intent, how to implement, resources, and Green Approved Products.
For more information see ANSI National Green Building Standard
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