The construction industry plays a dominant role in sustaining U.S. economic growth. Construction is one of the largest individual contributors to GDP.
From the materials produced to construct buildings and the energy used to operate them, buildings consume vast amounts of resources and are responsible for nearly half of all greenhouse gas emissions. How do we confront this crisis?Generate sustained new demand for construction workers through energy efficient constructionAdd real value to the economy through enhanced productivity, greater efficiency, and improved asset value for real estate.
Energy efficiency, often regarded as “the lowest-hanging fruit” (or “fruit on the ground,” as Secretary Chu likes to say)A healthy economy relies on a healthy building sector. Creating a demand for deep energy reductions in buildings is a cost effective ways to generate new jobs and jumpstart the U.S. economyJOBS: The construction industry employs millions of workers, which cannot be outsourced. Energy savings free consumers to spend their money in more productive ways. This redirected spending has the potential to generate massive amounts of private investment,spending, and jobs.PROPERTY VALUES, REVITALIZE COMMUNITIES: Investing in building sector efficiency adds value to our building stock and establishes the foundation for public infrastructure projects and services by generating the tax revenue needed for these projects. UTILITY INFRASTRUCTURE:Costs far less than building new energy sources such as coal, natural gas and nuclear plants.
Reducing energy demand through building efficiency is significantly cheaper than producing the same amount of energy by coal or nuclear power.
Lower energy dependency & poverty / Resilience to future oil shocks
A sustainable building may cost more up front, but saves through lower operating costs over the life of the building. Highly efficient “green” buildings use less energy, attract higher rents,spend less time vacant, and command higher prices at the time ofsale.Investing in energy efficiency provides economic benefits in otherways:enhanced comfort, better health, and improved economic value.
While benchmarking and disclosure do not yield direct energy savings, they have significant potential to trigger a virtuous cycle of competition and motivate energy performance improvement and investment. Benchmarking is a proven tool to increase awareness about building energy performance among key real estate decision-makers, such as owners, operators, managers and tenants. Disclosure improves energy performance recognition among real estate stakeholders, including tenants, appraisers and investors, and facilitates greater competition in the marketplace based on energy efficiency.
We know that a homeowner who spends less on energy will have more money to make mortgage payments, yet mortgage lenders largely ignore these costs when qualifying a family for a home because they’re not part of standard mortgage underwriting criteria. The typical U.S. Household spends more than $2,300 in annual energy costs – more than the average cost of property taxes or homeowners insurance, two expenses that are routinely underwritten in a mortgage loan.Over the course of a 30-year mortgage, energy costs can accumulate to over $70,000. This is a huge cost, especially considering the median U.S. home price is around $175,000. The SAVE (Sensible Accounting to Value Energy) Act, a new proposal championed by Senator Michael Bennet (D-CO) with support from efficiency advocates and leading homebuilders, would seek to correct this energy “blind spot” in mortgage underwriting and appraisal.
The Role of Energy in High-Performance Buildings
The Role of Energy in High-Performance BuildingsCreate Jobs, Save Taxpayer Money, and Conserve Resources Cliff Majersik Executive Director, Institute for Market Transformation (IMT) HIGH-PERFORMANCE BUILDING CONGRESSIONAL CAUCUS COALITION --www.HPBCCC.org--
U.S. Building Industry Represents more than 50% of the nation’s wealth New construction and renovation activity amounts to over $800 billion annually Responsible for13% of the GDP Employs over ten million people (5% of total U.S. employment)
Today’s Realities New construction outlook remains weak Construction sector unemployment around 20% Buildings responsible for 42% of U.S. energy consumption; building energy use projected to grow $422 billion annual energy costs 70% of U.S. electricity consumption 39% of U.S. CO2 emissions To remain competitive and profitable we must reshape the efficiency of our building sector
“When it comes to saving money and growingour economy, energy efficiency isnt just lowhanging fruit; its fruit laying on the ground.” - Secretary of Energy, Steven ChuENERGY EFFICIENCY: Promotes job creation Reduces dependence and economic growth on fossil fuels Reduces consumer Ensures a stable & energy bills reliable electric system Strengthens property values, revitalizes Lowers greenhouse communities gas (GHG) emissions
MacroeconomicImpacts Energy U.S. GDP Expansion as a Function of Efficiency Improvements, 1970-2008 3.50 U.S. Gross Domestic Product 3.00 GDP Index (1970=1) 2.50 Productivity growth as a function of energy 2.00 efficiency improvements 1.50 Expansion of the economy, based growth 1.00 in labor, capital, and energy 1970 1980 1990 2000 2008 Source: Laiter, Skip. ACEEE adapting Ayres and Warr (2009) using BEA and EIA data.
Oil Imports, National Security Source: Center for American Progress, 2010
Economic Impacts Energy Jobs GDP CO2 savings Center for Retrofitting 40% of the U.S. Create 625,000 American building stock could: $500 billion $64 billion new jobs Progress (2010) Create By 2020, capturing the McKinsey & 500,000- $685 billion 720 economy’s full efficiency Company (2009) 750,000 new megatons potential will: jobs Total value of the green Supported 2.4 $1.3 billion construction market 2000– $173 billion 2008 million jobs USGBC (2009) Projected value of the Support over green construction market 7.9 million $554 billion $6 billion 2009–2013 jobs
HighPerformanceBuildings:Benefits to Lower utility bills, Marketing/PROwners, operating expenses value Benefits beyond Increase workerTenants energy savings: productivity Increase in building Reduced employee value sick days Higher rent Enhanced ability to premiums attract and retain employees Increased occupancy rates
Small Businesses and Job CreationBuilding Energy Rating and Disclosure 11
Small Businesses and Job CreationA Virtuous Cycle When performance is measured, performance improves. When performance is measured and reported back, the rate of improvement accelerates. One result: Exceptionally cost-effective peak load reductions 12
U.S. Policy OverviewPolicy Impact Projections Annual Policy Impact Projection on Building Annual Policy Impact Projection on Number Area (in Square Feet) by Jurisdiction of Buildings by Jurisdiction Approximately 4 billion square feet More than 3x the floor area of every Walmart, Target, Home Depot, Barnes & Noble and Costco store in America 14
Policy Requirements by JurisdictionWhy ENERGY STAR Benchmark? Nearly 270,000 buildings ENERGY STAR benchmarked • Economies of scale; already widely used among building owners for energy tracking • Free, readily available online, relatively easy to use • Delivers energy performance metrics based on utility data • Supported by the US EPA 15
Small Businesses and Job CreationJobs First report documenting job growth from energy benchmarking policies Profiles of small businesses adding staff and increasing client bases KEY TAKEAWAY: Financing not the key barrier. Primary issue is demand. 16
Small Businesses and Job CreationJobs “As a Silicon Valley venture capitalist … I tell our green startup companies to focus on San Francisco or New York City. That’s where the action is going to be.” - Elton Sherwin, venture capitalist, senior managing director, Ridgewood Capital “The Greener Greater Buildings Plan has spurred the New York Market to interest and activity around energy efficiency. Over the past year, we have begun working with over 75 million square feet of real estate in New York and over 400 new clients.” - Lindsay Napor McLean, COO, Ecological “When an owner sees a benchmarking score that is lower than expected, they’re a little more receptive to improvements to bring the score up, which in turn lowers their utility costs.” - Kevin Dingle, president, Sustaining Structures 17
Energy and Job Impacts of Benchmarking & Disclosure Project advisory panel of leading real estate industry experts Jobs analysis by IMT and the Political Economy Research Institute at the University of Massachusetts Hypothetical policy: Annual energy benchmarking and public disclosure Commercial properties 25,000 SF and greater Multifamily residential properties 20 units and greater 2015 2020 Energy Savings (cumulative, $3.8 $18.2 in billions) Net New Jobs 17,098 59,620 www.imt.org/energy-disclosure-and-job-creation
Incorporating Energy Efficiency into Mortgage Underwriting Aligning mortgage policy with energy efficiency Energy costs now exceed property taxes and insurance, which are accounted for in mortgage underwriting. A homeowner who spends less on utilities will have more money to make mortgage payments For a typical house : o Median home price - $175,000 o Average 30-year commitment to energy costs - $70,000
Incorporating Energy Efficiency into Mortgage Underwriting Mortgage Underwriting: • Borrower capacity is adjusted for energy costs. • Value of the home reflects the energy cost savings. The Three C’s of Underwriting Capacity Collateral Borrower’s ability to pay the Appraised value of the Credit monthly mortgage home Debt-to-Income Test Loan to Value Ratio Energy “blind spot”
Incorporating Energy Efficiency into Mortgage Underwriting • SAVE Act (S. 1737) introduced by Senators Bennet (D-CO) and Isakson (R-GA) • SAVE Act would create 83,000 jobs and $1.1 billion in savings to Americans energy bills in 2020 Annual Annual Energy Year Jobs Bill Savings* 2015 16,000 $95 million 2017 50,000 $380 million 2020 83,000 $1.1 billion Source: 2011 study by the American Council for an Energy-Efficient Economy (ACEEE) and the Institute for Market Transformation (IMT). www.imt.org/SAVE_Act
Incorporating Energy Efficiency into Mortgage Underwriting The SAVE Act: S. 1737 Leading business, industry, and environmental support the proposal.
Cliff MajersikExecutive DirectorInstitute for Market TransformationWashington, DCcliff@imt.org202-525-2883Twitter: @IMTCliffwww.imt.org