Justifying Your Sustainable Capital Improvement

Recouping the first-cost of an investment in sustainability features is easy IF you know how to market them to potential homebuyers


The cost of buying and owning a new car is not just the upfront purchase price. There are added expenses such as insurance, fuel, and periodic maintenance and parts replacements that add to the total cost of the vehicle over its operational lifespan. The same is true with homes.

The initial purchase price is just the tip of the iceberg in terms of the costs a homeowner will incur. There are also inevitable costs just under the surface: utility costs, regular maintenance, repairs, and inevitable replacement and disposal of the old equipment.

How do you as a homebuilder show to a potential buyer that the sustainable upgrades and improvement to a home can benefit them in the long term, especially if they have some sticker shock? By providing homebuyers with a Total Cost of Ownership (TCO) analysis, homebuilders can justify the higher first-cost investment if the energy and operating cost savings over time balance out the initial upfront cost.

TCO is often referred to as lifecycle cost analysis (LCCA) or ‘cradle to grave’ accounting in sustainability industry literature. In a nutshell, TCO calculates the total costs of owning, operating, and disposing of an asset over its operational lifespan. Analysis can be done with various levels of complexity that can range from a quick back of the napkin calculation for smaller projects to software applications that can process multiple variables and evaluate the environmental and social benefits of a project. ENERGY STAR® and WaterSense provide tools, resources, and training to homebuilders to maximize energy and water efficiency improvements and even offer whole home certification for a more comprehensive strategy. For this article, I am going to focus on simple evaluations you can do as a homebuilder and how you can market your sustainable improvement to potential homebuyers.

While LED technologies have come a long way with a drop in the cost and improvement in both durability and color options, even with the help of utility rebates the upfront cost is still sometimes double the cost of a comparable CFL bulb. But while initial purchase of the LED bulb may be double the cost of the CFL, so is its lifespan. The average U.S. household has 45 light bulbs; who would not want to spend a little more upfront for that extent of savings?

By purchasing an LED bulb, the homebuyer can rest assured that it will be a long time until they have to replace any bulbs in their new home and would save more than $600 over 10 years by using LEDs.

Appliances are not any different. The average home appliance lasts for 10 to 15 years, and an ENERGY STAR ®-certified appliance will use less energy and water over the lifetime of the appliance.

On their user-friendly website (www.energystar.gov/products/appliances), you can compare models and even search for rebates that may help with the purchase of a more efficient model that may have a larger upfront cost, but a lower operating cost and a longer operating life expectancy.

ENERGY STAR® water heaters use about 10 percent less energy than standard gas water heaters. Household fixtures should also be more efficient to maximize the benefits of this type of system, so be sure to use US EPA’s WaterSense labeled products. Recirculating systems are an additional improvement that homebuilders should consider. Recirculating systems quickly provide hot water, eliminating the loss of water down the drain and time wasted. This improvement requires the installation of pumps and sensors and additional piping for the recirculating loop, but if it is designed properly, it can be the most water efficient hot water delivery system.

These are a few examples of how homebuilders can implement sustainable features into their homes and market them to potential homebuyers, showing them that the small upfront cost will more than pay for itself in the years to come.

Michelle McFadden is the Principal at ReGen Consulting and has over 15 years of industry experience. She provides support to organizations that require technical knowledge of sustainable practices in the areas of energy, water, and operations and are interested in the triple bottom line (people, planet, profit) of their investments. She can be reached at michelle@regenconsulting.com.