Federal Tax Credits for Energy Efficiency

If you purchase an energy-efficient product or renewable energy system for your home, you may be eligible for a federal tax credit.  Existing homes and new construction for primary AND secondary homes are eligible for a 30% return on cost with no upper limit.

What the American Recovery and Reinvestment Act Means to You:

The American Recovery and Reinvestment Act of 2009 extended many consumer tax incentives originally introduced in the Energy Policy Act of 2005 (EPACT) and amended in the Emergency Economic Stabilization Act of 2008 (P.L. 110-343).

Department of Energy web site with a full description of the tax credits

Energy Star web site

Construction costs down 15% – 25%

Times have been tough for homebuilders these days.

Sales have fallen to their lowest level in decades. And the buzz of saws and staccato beat of hammers are sounds seldom heard as production rates drop to lows not seen since World War II.

But developers are benefitting from a little reported side-effect to the housing slump: It’s cheaper now to build a home.

Builders say construction costs are down 15 to 25 percent.

That translates into an average cost of $100,000 to $140,000 for just the “sticks and bricks” (without land) for a modest, 2,000-square-foot house.

That same house cost $140,000 to $190,000 to build during the peak of the housing boom just four years ago.

Builders from Fort Worth’s D.R. Horton to Arizona’s Meritage Homes and Newport Beach’s William Lyon Homes have crowed in recent earnings reports about improved profit margins due to construction cost savings.

The savings could benefit consumers as well when passed on through lower prices, some industry officials say.

But the news isn’t so good if you happen to be a subcontractor or a rank-in-file construction worker.

Thanks to cutthroat competition, these cuts are coming out of their hides.

“It’s supply and demand,” explained Rich Lambros, CEO for the Irvine-based Building Industry Association of Southern California. “When you have a productive housing market, subcontractors are busy. Now, it’s the opposite.”

Subcontractors, industry officials say, have reduced their overhead and streamlined their operations to stay in business.

To survive, the plumbing, framing and roofing firms also have laid off as many as 70 percent of their employees. And the workers still employed have seen pay and benefits slashed.

A lack of work means more subcontractors are bidding for fewer jobs, said Liesel Cooper, president of KB Home’s Arizona division

“You’ve got to worry you’re (not) going to put the subs out of business,” she said.

Mark Swain of DePinho Roofing in Orange said that he’s seen competitors submit bids that were below his company’s direct costs.

“We’ve reacted to the market,” Swain said. “We’ve seen that our competitors have lowered their labor rates, and we’ve done to same to stay competitive.”

Hammer-and-nail types aren’t the only ones affected.

John Hogan, CEO for the engineering and planning firm Hall and Foreman of Tustin, noted that architects, engineers, planners, designers and landscapers all have felt the pressure to get prices down.

Hogan said that during the building boom, builders focused on schedule; price was secondary. Since then, however, the emphasis has been increasingly on price cuts.

To deal with a 75 percent drop in revenue, Hall and Foreman has laid off about half its workers, closed two of its six offices, diversified beyond homebuilding and foregone all fee hikes for five years.

“We have pared down our costs,” Hogan said.

Scott McKernan, president of Joseph Holt Plastering in Corona, said his goal has been to keep his profit margin around 7 or 8 percent after cutting prices by as much as 28 percent.

“I’ve been lucky to get 3 percent (in profits),” McKernan said. “This year, I won’t get any.”

Subcontractors had to do more than cut pay and reduce profits. They’ve had to examine their entire company structure, some said.

Those who have survived the downturn say they’ve learned to be more efficient by doing more up-front planning, closely watching schedules and reducing the time it takes to finish a job. Sophisticated subcontractors keep a close eye on their costs before submitting a bid.

But cuts in labor remain the key element.

Company matches for 401(k) retirement plans have been “suspended.” Employers no longer pay 100 percent of health insurance costs.

And in some cases, hourly wages have been shifted to “piece work” rates, under which workers get paid for the amount of work completed, not the hours worked.

“A typical laborer used to make between $150 and $180 a day,” observed McKernan. “Now (he or she is) making $60. Yeah, it’s sad.”

Builders note that they haven’t gotten much relief from government impact fees and other development charges.

Scott Stowell, chief operating officer for Standard Pacific Homes of Irvine, said that when all the costs of homebuilding are taken into account, “we’re just above break-even on a net basis.”

But homebuilders have benefited from more than construction cost savings. Falling land prices, government tax benefits and staff cutbacks in their own shops all have helped them boost margins lately.

Price drops for materials like lumber and drywall have helped some, but not much, industry officials say. And there have been reports that drywall costs could rise as much as 25 percent in coming months.

Costs for nails have doubled thanks to rising steel prices.

Ganahl Lumber’s purchasing Vice President Pete Meichtry says that overall material costs are down – at best – 5 to 10 percent.

Builders got more benefits by designing smaller, more economical homes, he said.

For example, builders may use 2.5-inch or 3.5-inch baseboard molding instead of four-inch strips. Or they build a straight-forward ridge instead of a more elaborate – and more costly – hip roof. Windows have shrunk by about 10 percent. These changes are subtle, but add up to big savings.

“It’s a combination of things,” Meichtry said. “The customer’s going to get a little less than he was a few years ago, but is not going to notice it.”

From > Builder Online

Ups and downs continue for residential construction

Signs of strengthening conditions in the housing industry emerged in the final months of 2010. November’s new-home construction and sales data released by the U.S. Census Bureau—while a mixed bag of declines and increases—were mostly positive, reflecting on-going economic volatility within the broader recovery along with housing’s slow return to health. Existing-home sales and pending home sales also increased, according to the National Association of Realtors (NAR).

Overall residential construction permits and completions declined in November by 4 percent and 14.1 percent, respectively, while overall housing starts increased by 3.9 percent to a seasonally adjusted annual rate of 444,000. Single-family permits rose by 3.0 percent, and starts of single-family residences jumped by 6.9 percent to a rate of 465,000. Completions of single-family homes dropped by 10 percent, however, to a rate of 436,000.

New single-family home sales rose 5.5 percent in November to a rate of 290,000, but this is still 21.2 percent below the same period last year.

Multifamily construction remains depressed across the board, registering a 24.2 percent drop in permits for units in buildings of five or more units since October; this is 11.3 percent lower than in November 2009. Starts of multifamily units declined 18.2 percent in November, while completions plunged 30.5 percent since October—more than 73 percent lower than the same period last year.

However, according to the American Institute of Architects’ most recent Architecture Billings Index (ABI), the multifamily design sector led the way in November in terms of improving health, scoring an ABI of 54.3. Any score above 50 indicates an increase in billings by architecture firms.

When compared with November 2009, this November’s new and existing residential activity lagged significantly. But late 2009’s high levels were a result of the new home buyer tax credit, which had builders and customers bent on securing contracts and completing projects in time for the original Nov. 30 deadline.

Due in part to improved home affordability, existing-home sales rose 5.6 percent in November, according to the NAR, and Pending Home Sales increased 3.5 percent. Although there is still a 9 1/2-month supply of existing homes on the market, NAR’s chief economist, Lawrence Yun, predicts the excess inventory will be worked off gradually as unemployment declines, mortgage rates remain favorable, and lenders return to more normal lending standards. Yun expects the market will trend up to healthy, sustainable levels during 2011.

> From Custom Home Online 

Level of finish vs. quality

With budget being the driving force of new construction these days, more than once have I been asked the question “What kind of quality will I get for the budget?”

The answer is quite simple and always the same –

The level of finish is a direct reflection of the budget; the quality is a direct reflection of the builder, regardless of the budget. Your budget will dictate the level or type of finishes your home will have: tile vs. granite, carpet vs. wood, drywall vs. plaster, etc. The quality will be dictated by the builder, his or her selection of subcontractors and protocol for managing the project and materials installation.

Do your homework and qualify your bidders, ask for references, and always ask to view a couple of completed homes with difference levels of finish – the quality should be the same.

10 Green Building Trends for 2011

Green building is going mainstream, no doubt. But exactly how is building science evolving, and where are eco-minded builders and consumers likely to focus their attention in the year ahead, in light of current economic conditions? The nonprofit Earth Advantage Institute, which to date has certified more than 11,000 sustainable homes, makes some predictions for 2011 in its annual forecast of green building trends.

Affordable green. Many consumers typically associate green and energy-efficient homes and features with higher costs. However, the development of new business models, technologies, and the mainstreaming of high-performance materials is bringing high-performance, healthy homes within reach of all homeowners. Leading the charge are affordable housing groups, including Habitat for Humanity and local land trusts, now building and selling LEED for Homes- and ENERGY STAR-certified homes across the country at price points as low as $100,000 (in the case of land trusts, homeowners do not own the land their homes are built on). In the existing homes market, energy upgrades are now available through new programs that include low-cost audits and utility bill-based financing. Through such programs as Clean Energy Works Oregon, and Solar City’s solar lease-to-own business model, no up-front payment is required to take advantage of energy upgrades.

Sharing and comparing home energy use. As social and purchasing sites like Facebook and Groupon add millions more members, the sharing of home energy consumption data – for rewards – is not far behind. The website Earth Aid lets you track home energy usage and earn rewards for energy savings from local vendors. You can also elect to share the information with others on Earth Aid to see who can conserve the most energy. When coupled with other developments including home energy displays, a voluntary home energy scoring system announced by the Department of Energy, and programs such as Oregon and Washington’s Energy Performance Score, a lot more people will be sharing — and comparing — their home energy consumption.

Outcome-based energy codes. Existing buildings are responsible for most energy use and associated carbon emissions, but the prescriptive energy codes used in commercial remodels don’t encourage effective retrofitting. Compliance with energy codes is determined at permit time, using prescriptive or predictive models, and actual post-construction performance may never even be reviewed. Heating and cooling equipment could be faulty or improperly controlled, with significant energy and financial implications. Under outcome-based energy codes, owners could pursue the retrofit strategy that they decide is most effective for their building and its tenants, but they would be required to achieve a pre-negotiated performance target through mandatory annual reporting. The City of Seattle and the New Buildings Institute have teamed up with the National Trusts’ Preservation Green Lab to pioneer a framework for just such a code, for both new and existing buildings.

Community purchasing power. Neighborhoods interested in renewable energy will increasingly band together to obtain better pricing on materials such as solar panels and on installation costs. The Solarize Portland program was initiated by local neighborhood leaders who wanted to increase the amount of renewable energy generated in Northeast Portland by working together as a community. The program is structured so that the price of solar panel installation decreases for everybody as more neighbors join the effort. Group purchasing creates a 15-25% savings below current prices. This group discount, in addition to current available tax credits and cash incentives, gives participants a significant cost savings. In Philadelphia, the Retrofit Philly program leverages contests between residential blocks to get neighborhoods involved in energy upgrades.

“Grid-aware” appliances fuel convergence of smart grid and smart homes. While many residential smart meters have been installed, the customer interface that will allow homeowners to track energy use more accurately are not yet in place. In the meantime, manufacturers are increasingly introducing appliances that are “grid-aware.” These appliances are endowed with more sophisticated energy management capabilities and timers, offering homeowners machines that monitor and report their own electricity usage and that increase or decrease that usage by remote command. Many machines have timers and can already be manually programmed to run during off-peak hours. These developments will begin forging the convergence of a smart grid infrastructure and the control applications needed to manage energy savings in our buildings and homes.

Accessory dwelling units. Last year we discussed home “right-sizing” as a trend. However, with fewer people moving or building due to financial concerns, many have chosen to stay put in their favorite area and build accessory dwelling units (ADUs). These small independent units, which can be used for offices, studios, or in-law space, are the ideal size for energy savings and sustainable construction. As detached or attached rental units, they help cities increase urban density and restrict sprawl, while allowing homeowners to add value to their property. The cities of Portland, Oregon, and Santa Cruz, California, have waived administrative fees to encourage more ADU construction.

Rethinking of residential heating and cooling. Advances in applied building science in the U.S. and abroad have resulted in homes that are so tightly sealed and insulated that furnace-less, ductless homes are now a reality. The increasingly popular “Passive House” standard, for example, calls for insulation in walls and ceiling that is so thick that the home is actually heated by everyday activity of the occupants, from cooking to computer use. Even in ENERGY STAR-certified homes, builders are now encouraged to bring all ductwork inside the insulated envelope of the house to eliminate excess heat or cooling loss, and to use only small but efficient furnaces and air conditioners to avoid wasting power. Geothermal heating and cooling, where piping loops are run through the ground to absorb warmth in the winter and cool air in the summer, are another option gaining broader acceptance.

Residential grey water use. With water shortages looming in many areas including the Southwest and Southern California, recycling of grey water – any household wastewater except toilet water – is gaining traction. Benefits include reduced water use, reduced strain on septic and stormwater systems, and groundwater replenishment. Although many cities have been slow to legislate on grey water use, some communities have increased the amount of allowable grey water use for irrigation. Systems can be as simple as a pipe system draining directly into a mulch field, or they can incorporate collection tanks and pumps.

Small commercial certification. A total of 95% of the commercial building starts in the U.S. are under 50,000 square feet, but most of the currently certified commercial buildings tend to be much larger. This is in part because of numerous “soft” costs–commissioning, energy modeling, project registration, and administrative time–can be prohibitively expensive for small building owners and developers. To encourage more small commercial projects to go green, alternative certification programs have sprung up, including Earthcraft Light Commercial and Earth Advantage Commercial, which have found significant appeal through fully subscribed pilot programs.

Lifecycle Analysis (LCA). We know quite a bit about the performance of certain materials used in the construction of high-performance homes and commercial buildings, but the industry has just begun to study the effects of these materials over the course of their entire lives, from raw material extraction through disposal and decomposition. Lifecycle analysis examines the impact of materials over their lifetime through the lens of environmental indicators including embodied energy, solid waste, air and water pollution, and global warming potential. LCA for building materials will allow architects to determine what products are more sustainable and what combination of products can produce the most environmentally friendly results.

This article was written by Tom Bruenig at the Earth Advantage Institute.

Construction Material Prices Continue to Rise

The prices contractors must pay for many essential construction materials continued to increase in January, even as the amount they charge for completed projects remains flat, according to an analysis of January producer price index figures released today by the Associated General Contractors of America. Association officials noted that the price trends are cutting into already tight bottom lines for contractors, undermining chances for an industry-wide recovery in 2011.

“The last thing contractors need after two years of depression-like conditions is to pay more to make less,” said Ken Simonson, the association’s chief economist. “With margins continuing to shrink, few contractors are likely to benefit even if construction demand picks up this year.”

Prices for materials used in construction jumped 0.9 percent in January and 4.9 percent during the past 12 months, while price indexes for finished buildings barely changed during the same timeframe, the economist noted. He added that construction costs also outstripped the producer price index for finished goods, which rose 0.8 percent during the past month and 3.6 percent since January 2010.

Simonson said that prices soared at double-digit rates over the year for five key construction materials. Diesel fuel prices climbed 3.2 percent in January and 17.7 percent for the year; steel mill product prices rose 2.0 percent and 11.5 percent respectively; hot rolled boars, plates and structural shapes were up 2.2 percent and 14.3 percent; prices for steel pipe and tube rose 17.8 percent over the year and 2.8 percent in January; and prices for prefabricated metal buildings rose 5.2 percent in January and 12.0 percent for the year.

Weak demand for both public and privately-financed construction, which is driving up the number of contractors bidding on projects, is forcing contractors to hold the line on bid prices, Simonson said. The producer price index for new industrial and warehouse construction was virtually unchanged, inching up only 0.2 percent in the month and 0.6 percent (industrial buildings) and 0.7 percent (warehouses) for the year. Meanwhile, the producer price for new office construction was up only 0.2 percent for the year, despite a 1.0 percent increase in January.

Other items that contributed to the January climb included copper and brass mill shapes, 3.3 percent and 9.9 percent for the month and year respectively; lumber and plywood, 2.0 percent and 7.4 percent; aluminum mill shapes, 1.0 percent and 9.2 percent; and fabricated structural metal, 1.6 percent and 3.1 percent. Prices in January and the year were little changed, or down, for brick and structural clay tile, -2.4 percent and -2.4 percent; concrete products, 0.1 percent and 0.0 percent; and gypsum products, -3.3 percent and 0.5 percent.

From MDM.Com