The Inevitable Question: Does Green Building Cost More?

By Ann V. Edminster

Green building is more expensive because it’s better building. Learning curve, certification, and better construction details may come at a premium, but the cost will flatten out. The costs of not building green however, will keep going up.

When I teach about green building, someone in the audience always asks the inevitable question: “How much does it cost?” After answering this query several gazillion times, I’ve realized that it boils down to three questions:
1. What does a green rating cost?
2. What’s the learning curve?
3. What will it cost to change the way I build?

You pay for the rating, you get quality assurance
The first question is the only one with a simple answer. A green rating will cost whatever price is charged by the rater. It’s usually a small fraction of the overall cost of the project, ranging from several hundred up to a few thousand dollars. This depends on type of home(s), location, timing, and the amount of technical support you need.

What’s often overlooked is that most of the cost is for field verification. This is fundamentally a quality assurance activity – something that is all too frequently lacking in the home building industry. This is a good investment!

Learning curves: change: is inevitable – adapt or go belly-up
The second cost, while the hardest to predict accurately, can be addressed in a way that most businesspeople immediately grasp: organizations must absorb change routinely; this is simply the cost of staying in business. These ordinary learning curve costs come from developing new supplier relationships, recruiting and training new personnel, investigating new products and technologies, grappling with new requirements or regulations, and other things. But these costs drop off quickly.

What’s notable about the learning curve costs is that it’s common to attribute them to the particular green building project. However, in reality if you undertake the learning curve it’s because you’ve decided that green building is a sound business direction and will benefit your future market position. These costs are no different from continuing education, updating marketing literature, or developing a new website.

The bottom line depends on your shade of green
The third cost can be quantified, but there’s no one-size-fits-all answer – it depends on where you start and where you want to be. Building practices exist on a spectrum, from bare-bones and barely-legal to net-zero-energy and beyond. Getting from point A to point B is relative.

Consider a Hyundai producer who decides to convert the production line over to Honda. The products are generally comparable in size, weight, and look. However, the Honda is (arguably) more durable, better-engineered, and more fuel-efficient. The Honda also costs a fair amount more. If, however, you’re a Hummer producer and convert to Honda production, your prices won’t increase (they may actually go down), and you’ll incorporate dramatic performance improvements – at least from an environmental impact perspective.

Similarly, builders of modest homes who upgrade to green may experience a cost increase. (However, they also may command a higher selling price or faster sales.) Builders of large homes may find opportunities to incorporate efficiencies without experiencing any significant cost increase. For example, a slight decrease in size combined with better up-front design may be a break-even proposition, or better windows and insulation may be offset by reductions in the size of the mechanical equipment. The premiums, when they exist, will disappear as energy prices head for the stratosphere and the value of green becomes more of a no-brainer.

Green building is an investment, not a cost
Answering this cost question requires that you identify exactly what green building practices or products you will use that differ from your status quo, and cost out those changes. This process means gathering detailed data from staff, consultants, and subcontractors and then value-engineering based on the outcomes. This type of analysis may be essential if you’re working for a production builder with stockholders to satisfy.

In a smaller, more informal company, just understanding what changes you will need to make may be enough. Either way, you’ll need to understand where you are and where you want to be on the Hyundai-Honda-Hummer spectrum. And if you do decide to re-tool your product line, keep in mind that it may not be realistic to expect your product to cost the same, or to sell at the same price point. It’s no longer the same product; it’s a better one.

--Ann V. Edminster is an architect and Principal of Design Avenues in Pacifica, Calif. She is also a GreenBuildingAdvisor at GreenBuildingAdvisor.com