Assessing High Performance Homes

Nathaniel Cramer – Bureau of Local Assessment

On a perfect fall day last October, Bureau of Local Assessment staff from the Springfield, Worcester and Boston offices met with Jonathan Wright, owner of Wright Builders in Northampton, for a tour of Village Hill Northampton.

Village Hill is a planned development on Hospital Hill and once the site of the old Northampton State Hospital. It includes a combination of commercial and residential properties with walking trails and residential spaces with panoramic views. Built in a series of phases over the past several years, Village Hill is made up of new construction and two surviving buildings, one of which was featured in the movie The Cider House Rules.

The portion of the development currently being built by Wright builders is the only all-Leadership in Energy and Environmental Design (LEED) certified neighborhood in western New England. The opportunity to tour this development in different stages of construction provided our staff with excellent insight into the difference between high performance homes and those created by standard construction methods. We toured both the residential and commercial buildings and walked the grounds.

High performance homes are a fast-growing trend related to environmentally-friendly building practices. The six elements of green building are site, water, energy, indoor air quality, materials, and operations and maintenance Examples of such elements are energy efficient windows, heating systems and appliances. While this sounds very appealing, one may be forced to ask if the simple presence of these features actually add value on resale or if they are merely a clever marketing scheme that allows builders to justify a higher list price. Individually, adding new appliances or more efficient heating systems may help a property owner save some money, but there remains a significant difference between a home where the owner has retroactively added extra insulation in the attic and a truly built-to-purpose home. Third-party rating systems exist to help determine just how efficient a green home is. The three most widely recognized are as follows.

LEEDLeadership in Energy and Environmental Design (LEED) is a green building certification program that recognizes best-in-class building strategies and practices. The LEED rating system was unveiled in March, 2000 by the U.S. Green Building Council. There are currently over 180,000 certified professionals, which hold LEED credentials that are obtained through educational offerings. To receive a LEED certification, building projects satisfy prerequisites and earn points to achieve different levels of certification, which include Certified, Silver, Gold and Platinum. There is a guide available on the USGBC website. Prerequisites and credits differ for each rating system, and there are fees associated with each level of certification.

HERS –The Home Energy Rating System (HERS) Index is the industry standard by which a home’s energy efficiency is measured. This was created by the Residential Energy Services Network (RESNET). It is also the most nationally recognized system for inspecting and calculating a home’s energy performance. HERS ratings are considered the most meaningful rating system available when determining how efficient a property improvement is. A score of 100 is representative of a home that was newly constructed in 2006. A score over 100 indicates a home is less efficient, while a score less than 100 indicates it is more efficient. HERS ratings are often compared to a miles per gallon rating when purchasing a car. At the Village Hill Development we visited in Northampton, HERS ratings are expected to be 40 or below, which means those homes will be at least 60% more energy efficient than a typical newly constructed home. Ratings are determined by third-party professionals who have been trained to test different variables that affect energy consumption. The cost to hire a third-party HERS rater is based on the size of the building and whether it is new construction or existing. For a typical eight-room home with four bedrooms and two and a half baths, the cost would be approximately $1,000. The price to get a HERS rating on that same house if it were being built new would range from $1,500-$2,500. The higher cost is due to multiple visits throughout the construction process.

Energy StarTo earn this designation, a home must meet strict guidelines for energy efficiency set by the U.S. Environmental Protection Agency (EPA). To ensure a home meets Energy Star guidelines, third-party verification by a certified Home Energy Rater is required. This rater works closely with the builder throughout the construction process to help determine which energy-saving equipment and construction techniques should be used. The rater also needs to conduct and document the required on-site diagnostic testing and inspections to be eligible for the Energy Star label.

Additionally, many towns in Massachusetts – approximately 53% as of October 2014 according to the Department of Energy Resources – have adopted the stretch energy code. The stretch energy code is an optional appendix to the Massachusetts building energy code that allows cities and towns to choose a more energy efficient option. The stretch energy code appendix offers a streamlined and cost-effective route to achieve approximately 20% in improved energy efficiency in residential and commercial buildings compared to the base code. The stretch code was developed because some towns wanted the ability to adopt their own, stronger energy code. When communities adopt the use of the stretch code, it allows them to take meaningful action on energy use and climate change, and both residents and businesses realize savings in their energy costs.

So how do assessors capture the impact of high performance homes? Homeowners and potential buyers prioritize saving money on energy bills and preserving natural resources, but does that really mean these homes are actually worth more than standard-built homes as a result of lower utility bills? These homes can certainly cost more to construct, but currently it is difficult to generalize how much more. Some builders and other experts say five to ten percent more per square foot, while others suggest up to 30%. Much of the cost also depends on specific requests of the end user. Usually, these types of homes are custom built for a specific buyer. During our visit, Mr. Wright noted that his company must invest more in both hard and soft costs and be content with a smaller profit margin in order to achieve the high performance results. It is also worth noting that most of the homes and all the attached and flat homes within Village Hill are speculative, which is rare within this niche but something that seems to be gaining popularity as noted in a recent article.