Profitable Residential Green Building: Can It Save the Real Estate Market?

Residential green building has arrived. Once the niche of innovative companies like Living Homes and Michelle Kauffman Designs, green building has begun to be embraced by traditional residential builders. In the recent McGraw Hill Report: The Green Home Builder, Navigating for Success in a Down Market, they report that 6-10% of the market this year will be green vs. 2% in 2005.
What motivates traditional builders to go greener? A larger profit for builders and increased green building regulations from government encourages builders to follow the path to green building.

The Residential Market Shifts Towards Green Building in Search of Profits

Customers are demanding green homes because features include:
* Higher quality
* Lower energy costs
* Healthier living environments for families
* Better for the environment
In a down market, these features differentiate homes and lead to a stronger bottom line for builders.
Fast Company quotes David Wood, Director of Boston College Institute for Responsible Investing as saying “Until recently, the publicly traded home builders saw green building as a niche market best taken up by smaller players. But with the down market, this could be a good time for them to differentiate themselves from competitors.”
Industry giant KB Homes announced that all of their homes in 2009 will be built to Energy Star standards. “I’m not saying we’re green, because we’re not. But we’re doing the best we can to become greener,” Chief Executive Jeff Mezger said in an interview. Leadership from KB Homes raises the bar for the entire building industry.
Proliferation of Standards and Regulations
Residential guidelines such as the USGBC’s LEED for Home, NAHB’s Model Green Building Guidelines, and the Federal Government’s Energy Star Program are starting to penetrate the market. California has adopted the nation’s first statewide green building code. The code will be voluntary until 2009 and will most likely become mandatory in 2010. The new rules will mandate that all new construction reduce energy use by 15%, water use by 20% and water for landscaping by 50%.
Increasingly material certifications such as GreenSeal and FloorScore help builders pick the right materials. Websites including and help builders navigate the proliferation of certifications.
While green building may not save the industry, members of the industry who do not adopt green building approaches will find themselves missing all three bottom lines.

Readers: Although it is growing, can green building really save the real estate industry? Please let us know what you see in your corner of the world.

Craig Isakow currently manages the website, a resource for green building. He is a LEED AP and an M.B.A. graduate of The Wharton School at the University of Pennsylvania.