EPA Tips for a Healthier Home

I've written a number of blog entries on the importance of healthy indoor air, but because I'm a professional interior designer and LEED Accredited Professional most of my focus has been on sustainable design and construction.

The United States Environmental Protection Agency (EPA) has useful information about everyday measures to protect indoor air quality in your home.  The Indoor Air Quality House on the EPA site provides a room-by-room tour.

Appraising the Value of Green

I met real estate appraiser Tim Runde when we were both speakers at the recent GreenBuildingsNY show at the Javits Center, and I was pleased to learn of his analytical market-based method for establishing the value of green buildings and green improvements to existing buildings. Tim takes the recognition of green building as evidence of a new market force (sustainability) and describes how one can quantify its value impact. He was kind enough to share with me an article that he and Stacey Thoyre wrote for the Journal of Sustainable Real Estate (JOSRE) called "Integrating Sustainability and Green Building into the Appraisal Process." I am briefly summarizing some of the salient points in this blog entry, as well as including a link to the full article below.

Sustainability means many things to many people. Tim and Stacey suggest the following definition of sustainability for applied real estate valuation: "Sustainability is the principal of seeking to avoid, minimize, and/or mitigate adverse current and future social, environmental and economic impacts (externalities)."

The authors emphasize that green buildings and green features are more valuable in areas with sustainable orientations and present a three-step Sustainability Valuation Model that can be used to guide appraisers in valuing real property, both green and brown, now and as market conditions with respect to sustainability change. Such a model can help to (a) identify and measure ways in which sustainability impacts market value, and (b) price the impact.

Assessing the Market Uptake of Sustainability

A not surprising but often overlooked aspect in determining the value of green real estate is location, location, location. The impact of green building on asset value has a direct correlation to whether the market in which it is located is Sustainability-Oriented (SO) or Not Sustainability-Oriented (NSO).  Green buildings and green features are worth more in an SO market than in an NSO one.  Relating a building's level of greenness to its market's sustainability orientation is important so that the appraiser knows whether to adjust the subject building and its comparables for green (or brown) features.

Key indicators of the degree to which a specific market values and practices sustainable principles include:

• Regulations and incentives, especially at the local level
• Voluntary implementation of green beyond the compliance level by building owners and landlords
• Prevalence of green buildings beyond those that might be mandated (such as government buildings)
• Demand for green buildings by tenants and owner-occupiers
• Active local USGBC chapter and/or other NGO's concerned with sustainable initiatives
• Evidence of community uptake, such as triple waste stream recycling, hybrid cars and farmer's markets

The authors emphasize that studies using small-scale data sets designed to capture the nuances of specific markets can be more relevant than those reflecting mega-trends.

The Green Building Opportunity Index created by Cushman & Wakefield and BetterBricks provides valuable insight into the sustainability orientation of major real estate markets. It focuses on the primary factors that influence successful development, retro-fitting, leasing and sales of investment grade "green" office buildings in the 25 largest U.S. Central Business Districts and compares a market's relative position to its peers in six categories: Office Market Conditions, Investment Outlook, Green Adoption and Implementation, Local Mandates and Incentives, State Energy Initiatives and Green Culture.

Green features that add value in one market might not in another one. Markets can differ in their uptake on specific aspects of sustainable building due to factors such as scarcity of particular resources and differences in operational costs, like utility rates and waste removal. A cutting-edge green building in an SO market might include features that do not increase its asset value, and an otherwise brown building in an NSO market might incorporate certain green features that can increase its assest value.

Assessing the Building

For purposes of valuation, green features must be independently verifiable, and actual results must be consistent with modeled performance. The most commonly occurring categories of green building features are the following:

• Energy Efficiency: Reduction in use of energy, especially non-renewable
• Resource Use Efficiency: Water, materials and waste stream reduction
• Site Efficiency: Location specific characteristics, such as proximity to transit and infill development
• Quality of the Interior Environment: Daylighting, low emitting materials, green cleaning, etc.

Analysis of green features can be used to determine if the features add value (for example, by eliminating or significantly reducing energy demand from the grid), incur additional cost (for instance, by requiring replacement or special ongoing maintenance) and/or enhance marketability.

Assessing the Risk

Assessing potential risk is an important function of any appraisal. So in addition to the characteristics of the local and the individual building, the appraiser should consider the impact of any specific sustainability-related risks related to Resource Use, Obsolescence, Transparency, Externalities (ROTE) and make any necessary adjustments. ROTE risks like escalating energy costs and materials costs respond to global market forces and will adversely affect all properties, irrespective of the local market's sustainability orientation. Obsolescence risk can arise from outside the local market as well, due to state and federal legislation, and could affect the market by setting a new minimum standard for new construction, thus creating implied obsolescence for the existing building stock.

Valuation of Green Retrofits

Brown buildings in an SO market like New York City risk obsolescence. Tenants and buyers who are unwilling to pay a premium for green might demand a discount for brown. When there is clear evidence that the market is moving in the direction of green, a building might need certain features in order to meet the market standard, and the highest and best use analysis may need to include the financial feasibility of "greening up." The value of green retrofits in an SO market can include differentials in occupancy rates, rental income and sale prices, all of which may present a more compelling argument for green retrofits than the more commonly used method of focusing on ROI and payback periods for such improvements.

Proper Valuation Can be a Moving Target

The sustainability orientation of a market, and the "greenness" of a building's peers, will change over time and require monitoring, along with traditional market fundamentals like supply and demand, occupancy, net absorption, and rent levels. The important difference with sustainability is that the rate of change is rapid and can be sudden and unexpected. Information monitoring can be focused on the "big picture" rather than the primary local market and specific subject property. Examples of larger issues that should be considered are the new real estate sector-specific Global Reporting Initiative reporting requirements and proposed Federal legislation.

For Additional Information
The original article upon which this article is based is in the Journal of Sustainable Real Estate

 

Green Cleaning and Greenwashing

I recently read an article in The New York Times entitled "As Shoppers Reduce Spending, Green Loses Allure," which turned out to be about shoppers' growing reluctance to pay a premium for cleaning products that have green labels but that are produced by major manufacturers of non-green products. The article goes on to say that smaller companies that offer exclusively green products are actually gaining market share. So perhaps what we're dealing with is at least partially a growing consciousness of greenwashing and distrust of unsubstantiated green labels. I'm not suggesting that major manufacturers are not reducing toxic chemicals in their greener products, but since the "recipes" for such products are proprietary, they are really asking potential buyers to take that on faith. Endorsements of cleaning products that are not based on tests by independent laboratories (or on full disclosure and scientific analysis of every ingredient) are meaningless, regardless of the prestige of the organization providing such endorsements, and are considered greenwashing. Although specialty brands might also keep certain things private, the fact that they make nothing but green products tends to inspire trust.

Green cleaning for commercial and institutional buildings is widely accepted, and the trend to use green cleaning products is growing. It's not because the owners and operators of such buildings care more about their occupants' health and well-being than people care about their families. It's because manufacturers of commercial cleaning products can, and do, voluntarily submit their products to highly respected independent laboratories for testing. Purchasers of products approved by Green Seal or Greenguard are assured that specific potentially harmful ingredients do not exceed certain levels.

For decades, if not longer, mothers of small children have said "Don't put that in your mouth; you don't know where it's been." As I pointed out in an article that I wrote for Sustainability: The Journal of Record, the old adage can be applied to what we put in our interiors, as well as our mouths. To a large extent, it is possible to clean house with things like baking soda, vinegar and lemons. So why pay a lot of money for something that you can't also use to prepare a meal?

As a professional interior designer who has always been concerned with the health and safety of my clients, I have often put locks on under-sink cabinets when there are small children in the home. But as a LEED Accredited Professional who specializes in indoor environmental quality, I now realize that highly toxic cleaning products do not belong in a home.

Saving Money by Saving Energy

The payback period for energy efficiency is getting shorter and shorter, and every parameter that we normally use to calculate it should probably be reevaluated. Typically, we calculate the payback period on energy efficiency as follows:

Payback Period = Cost of Improvement / (Kilowatts Saved * Cost Per Kilowatt)

The way in which this calculation is typically done may not include the following considerations:

1. Most of our energy is still produced using fossil fuel, and the cost per kilowatt can be expected to escalate steeply.
2. The total kilowatts saved by an energy efficiency improvement includes not only the watts saved directly by the new equipment, but also those saved by reducing the load on the air conditioning system because wasted watts generate heat.
3. Reducing the air conditioning load can save money in two ways.  It can definitely reduce the cost of operating the existing equipment by saving energy. And it might also reduce the cooling capacity required in (and the cost of) new equipment.  
4. When the energy efficient improvement involves replacing equipment that is toward the end of its useful life, we should not use the entire cost of the new system in calculating payback, but only the difference between the cost of the efficient system and a less efficient one.