Breaking the Builder Conumdrum

A common problem in the market for energy efficient homes is paying for the added cost. This problem stems from different incentives for builders and home-buyers. Today, the incentive for builders is to build a big house cheaply. That way, when the real estate agent runs the "comps" Sally Shoddy's constructions look cheaper than Ernie Efficient's.

There is two ways around this. First, use more imagination. For example, if you use high quality windows and insulation, do you need as large a furnace? The Rocky Mountain Institute doesn't think so. Their building in Snowmass, CO has no furnace whatsoever.

But even if you can't get that cost down, you can use a green mortgage highlighted in today's Wall Street Journal. I predict this product will catch on in coming years. The lender rolls the price of the energy efficiencies into the mortgage.
""We liked the house but wouldn't have been able to afford to fix it up," Ms. Craig says. She says the cost of improvements adds an extra $100 to their monthly mortgage costs, but they save an estimated $2,000 a year on energy bills."

What happens is the bank considers that $2000 per year as additional income. With the subprime fallout, this will be a way to make yourself more credit-worthy to banks. So everybody wins - you get that green house and the bank qualifies you for a bigger mortgage.

And the builders?
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The products are also available for new construction. Homes that are already energy-efficient can be audited and the amount that is predicted to be saved on utility bills is counted as extra income for the home buyer.
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The builders can differentiate their offering from Sally Shoddy's by being able to offer this product.