Summary

            The final article of the Adaptive Building series dives into how above and beyond measures can provide their weight in value when communicated properly. More specifically, this article will look at the role of data in the building industry. I briefly touch on how the root of proper communication, undeniable data, sits at the foundation of the value of above and beyond measures. I then rope in examples of how superior building performance is quantified and subsequently sold, among other examples. In the end, selling your above and beyond effort in a building will be as simple as tracking and quantifying the headaches the extra thought avoids.

The Role of Data

            Every year the role data plays in our daily lives is increasingly becoming visible and extensive. Similar to the financial efficiency measures mentioned in the previous sections, the building industry will not escape data efficiency and utilization that other industries are currently experiencing (think of shipping logistics, manufacturing operations and so much more). Seeds of this transformation are already sprouting with building quality certifications (such as Living Building Challenge), and energy usage reporting requirements.

            Once a building is built, only the builders fully understand the building’s quality and performance. Owners do have the option to get their building’s performance tested, however, without standardized requirements, performance tests are a luxury.

            Utility and government programs to increase building energy efficiency, such as Massachusetts’s MassSave program, are the beginning of society creating building data on a wide and standardized scale. Buildings serviced by MassSave have verified energy efficiency ratings that tell buyers if they choose to buy said building that they will not have to worry about poor insulation and their conditioned air leaking out. Here is a list of other energy efficiency programs across the country.

            There is an interesting phenomenon that could influence this transition. The human tendency to turn luxuries into necessities could occur here as people grow accustomed to having more data. Buyers who enjoy the luxury of comparing efficiency metrics during the buying process will begin to only consider buildings with verified efficiency. There was a time when plumbing was once a luxury and remember that saying: “never fly first class because you won’t go back.” Humans are pleasure/comfort seekers and any information about a potential investment’s quality will provide just that.

“One of history’s few iron laws is that luxuries tend to become necessities and to spawn new obligations. Once people get used to a certain luxury, they take it for granted. Then they begin to count on it. Finally, they reach a point where they can’t live without it.” ~ Yuval Noah Harari, Sapiens: A Brief History of Humankind ³

The Pilot

            Energy efficiency is perhaps the undeniable first step of decarbonization. With energy efficiency initiatives, society does not have to replace all the energy from fossil fuels with renewable energy, because we are reducing the total amount of energy demanded regardless if fossil fuels or renewables are the source. As such, energy efficiency programs were one of the first things sponsored by municipalities and utilities to help our communities decarbonize, as well as to save a buck in the process.

            Berkeley California was one of the first cities to mandate a Home Energy Score (HES) assessment during any sale of a building. A home energy score essentially weighs home energy performance on a 1-10 scale. Buildings with a low number use more energy than needed, and high numbers mean the building is using energy efficiently . Other cities, such as Portland Oregon and Austin Texas would follow suit and enact their own programs and HES mandates.¹

            Other states have sponsored similar, yet still different programs. Massachusetts for example, has a utility funded home energy efficiency testing and retrofitting program. With utility programs, every rate payer contributes a couple dollars every month under an energy efficiency charge which for pay the majority of the costs of a home energy assessment and future insulation and air sealing services.

            No matter what program you, as a consumer, may be exposed to, building performance data is becoming increasingly available. I understand I am using retrofit examples in a thread of articles whose common theme is “think about it upfront, reduce the need to retrofit.” However, retrofitting, while expensive, is required for society to decarbonize in a 1.5-2 degrees manner. Fortunately, with retrofits, our “think about it upfront” advocacy still applies, as builders can try to solve many future problems construction period.

Home Energy Scores

            If you had some completely random person walk up to you and say “I can come into your home for a day or two, make a few changes and make sure you’ll never notice my work, and you’ll save roughly $303 every year” what would you do? Thinking the about how that 303 bucks could be spent; you would likely at least humor the random person. Come on, that’s a new car part, an awesome seat for a concert or sports event, an extremely nice romantic dinner, the majority of a quick weekend getaway. Now turn that stranger into a verified company sponsored by a government program your neighbors have also considered, and now we are facing an even bigger no brainer.

            That $303 average yearly savings number came from the Portland HES mandate/program. Like Berkeley Ca, Portland Oregon also required every new building sale to come with a home energy performance assessment.²

Here is a simple overview of the program structure:

• The seller is initially required to conduct the HES assessment, but the financial burden can be transferred to the buyer in mutual agreement
  • Shifting the burden to the buyer allows the burden to be included in any mortgage/loan, along with any investment in recommended improvements
• The assessment provides a current performance score, a list of recommendations, and the payback period of said recommendations
  • The “score with recommended improvements” is almost never a 10, meaning these recommendations are based on performance per dollar spent keeping them grounded in reality

Resale after the Resale

            The averaged 303 dollars might get someone in the HES energy efficiency measures door, but what about another resale? Those energy efficiency measures still work no matter who occupies the building (the mandated HES during building sale would confirm that), so the proof is in the pudding, as they say. The pudding here are the well documented electric bills. All it takes is for a real estate agent to compile the building’s electric bills before and after energy efficiency measures to sell the value of a home’s energy efficiency, obviously controlling for seasonal differences. “Sure, that home is a few grand cheaper, but this home is cheaper to operate by $400 every year.”

Solar

            Selling a photovoltaic (PV: Solar) system is a bit more complex in resale than energy efficiency measures, as they have a complex structure of incentive payouts and an implicit negotiation process. Some underlying facts:

• There is no set value appraisal standard for PV systems in resale, hence negotiation
• PV systems typically pay themselves off in 5-8 years
  • It takes that amount of time for the investment to create as much value as its initial purchase price
  • Pay off periods are unique to each system, but each system typically has a very accurate pay off period given during PV system contract signing
• PV systems are typically rated to have a 25-year lifespan
  • At 25 years, a PV system’s ability to generate energy degrades by roughly 20%
    • 80% of initial production capacity is still valuable and useful

            Whether a system was installed under the common Solar Renewable Energy Credit (SREC) system, or a declining block incentive program, like Massachusetts SMART program, PV system owners can anticipate future payments from their previous investment, on top of the value of the energy the system creates.

            The Massachusetts Clean Energy Center (MassCEC) outlines this value predictability in their Selling the Sun course. Both their ‘income’ and ‘sales comparison’ approaches outline how to find the present and future value of a PV system by reading the installation documents. Realtors who understand these concepts are able to negotiate more value for their clients, or at the very least, understand what a fair valuation is so their clients aren’t “losing” negotiations.⁴

            Imagine this scenario: a house is being sold with a PV system that will break even in a year (4-6 years old). The buyer’s realtor could propose (understanding that the PV system is not currently included in the value of the home): “you can add the value last year’s payments into the homes sell price and keep any future incentive payments in your name/bank account for the PV system to be included in the sale of the house.” Without looking at numbers, this is, in theory, a good deal, slightly lopsided to the buyer. The seller doesn’t take a hit on their PV investment, and they still stand to make money from the incentive payments despite no longer living there. The buyer, after paying for a single year, has a system that will save/generate them thousands of dollars over the following 18 years and then some. Please keep in mind that this is just a scenario. Each negotiation is unique.

Other Precedence

                The online car service, Carfax, led an information transformation for the car industry. Years ago, the average consumer was inundated with the commercials of the fox asking to show the Carfax. Personally, those commercials are a distant memory, yet the value of a Carfax is still affirmed by many mechanics when discussing a used car purchase decision (I should know, I’m discussing one right now).

            When you’re buying a 5+ year old car, looking at that report is the closest thing you have to knowing everything about the car short of being the prospective car’s only owner. Specific items such as reported crashes, non-typical and untimely work, and much more give the sealer leverage in the negotiating process. As a buyer of a potential home or commercial building, would you rather have a bunch of information or no information about your prospective purchase’s quality?

Wrapping it all In

            You may be wondering how home energy scores and solar panels pertain to adaptive buildings… They don’t. After all, I did call efficiency measure mitigation strategies that don’t serve a building’s structural integrity laid out  in the Visualizing Building Code article. They do, however, provide precedence and experience for realtors.

            Some people may ask, “sure, but who’s going to pay for that.” The answer is anyone when the value, and most importantly, the headaches avoided are effectively communicated. This article has gone over tangible value: “save $303 every year,” and subconsciously, the rest of this Adaptive Building series has been about the headaches.

            Outlined in the Stormonomics, it can be less stressful and financially responsible to cater to as many risks as possible during the construction of a building when time is a luxury. Obviously, being rendered homeless by a severe storm is not only stressful, but the stressors are multiplied by the potential for  increased costs of raw materials and labor caused by the storm’s building demand shock, as well as the general procedure of going through insurance and finding a new place to live. Problems that are out of sight out of mind are like tectonic plates that haven’t moved in a while: ready to explode and wreak havoc.

            Realtors selling an adaptive building should [ideally] be able to say: “I know this house’s purchase price is a little higher than one with the same square footage but let me tell you this; the increased purchase price will be the only headache you’ll have living here. This dry pond is why it costs a little extra, but here is the construction crew’s site assessment and reasons why they built one. Also, here is some third-party climate data supporting the concerns the dry pond addresses.”

Conclusion

            The building industry is on the precipice of two major revolutions. As outlined throughout the series, building specifically to the site accommodating everything you can imagine humans and nature can throw at a building, as compared to building solely the minimum regional requirements in mind. The second revolution is with those who are able to communicate the complexity of those decisions to the average unknowing consumer in a concise and coherent manner. Fortune favors the bold, and the bold are the companies and people who tackle the learning curve before the luxury turns into a necessity.

Sources Cited:

¹ ACEEE. (2018, October). Home Energy Efficiency Policies: Ratings, Assessments, Labels, and Disclosures. Washington D.C.; American Council for an Energy-Efficient Economy.

² Foley, C. (2019). Selling the Sun: Listing, Marketing, and Establishing Value for Solar PV Homes. Boston; Mass Clean Energy Commission.

³ Harari, Y. N. (2015). Sapiens. Harper.

⁴ Roy, A., Jacob, A., Romain, B., & Campbell-Orrock, C. (2018). Learning the Score: Lessons from Developing and Deploying the Nation's First Mandatory Home Energy Score Polices. Washington D.C.; American Council for an Energy-Efficient Economy.

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