C.R. Herro provides insight on the innovative approach Meritage Homes has taken in green building and where they plan to go from here
Green Home Builder: What were some successes for Meritage in 2018?
C.R. Herro: The big initiative with Meritage has been responding to the challenges and opportunities in the marketplace, and there are probably three big challenges. One is that the U.S. has recognized a lack of affordable housing, so we’ve really been focusing on streamlining and creating high value, but low drama, first time home buys. The second piece is that technology is rapidly changing. We’ve really been focusing on how we can support consumers with the opportunities from this [new] technology. The last piece is recognizing that the world is changing in how we build things. The work force that built American houses in the past 10 or so years is retiring, and they’re not really being replaced by young people. We have to look at how we build our houses to address lack of skilled trade in the workforce in the future.
GHB: Why do you think more builders have not jumped on the green bandwagon?
C.R.H: I was also really befuddled by the same question. It’s so much better so why don’t consumers demand this from any homebuilder?
Throughout the country, the last remaining barrier isn’t the ability to built green homes, the barrier is to promote the appraisal and transaction process to validate that to the consumer when they buy it.
Requiring a home to be zero net energy is the right thing to do. [But] Until you create consistent transactional labels to help value these zero energy homes, the average buyers will still look at the price tag of a home built in the 70’s and, because it doesn’t include all these things and the price tag is lower, inadvertently, the average consumer will buy an inefficient home because they don’t have the tools to help them choose these zero energy homes.
Realtors, and the average buyer, need to be aware of how much more they can have. Builders can certainly build it; it’s not difficult to do what Meritage does on a national scale in any other home. It just requires the investment, and the discipline to design and to allow yourself to those trades to have high performance construction material. We’re able to cost-effectively compete with professional homes because our homes cost the same when you buy them, but cost tens of thousands of dollars less to operate them.
We have to do a better job at educating our buyers about what the true cost of a home is. It’s not just what you pay for, it’s what it costs every month with the mortgage, the maintenance, and the operating cost.
We’ve been supporting legislative changes to enable buyers to get that information, to include energy efficiency and reduced operating cost in the real estate transaction, to better builder education and appraiser education to support this sort of change. It does require a change in the transaction that recognizes the economic benefit of these homes to really make the average buyer make better decisions. As soon as the buyer is hip to the game, the whole market will change.
GHB: Stocks are being depressed by a lack of construction labor, rising interest rates, and tariffs on lumber; what is your impression on this?
C.R.H: There are two good solutions: One is to make better use of lumber. Reduce waste, be smarter about engineering, be smarter about design, use advanced framing and off-site panelization, all of which are things that Meritage is looking at to be more efficient and build better homes with the lumber that we’ve purchased. The second is a little bit more advanced but is something I’m very supportive of: reduce the amount of dimensional lumber in homebuilder construction. We build quite a lot of homes that don’t use lumber in the walls. Instead they use materials such as concrete in insulation, which is stronger and more durable. There is less cost to build a house with these alternative materials other than lumber and they perform better. So were really trying to see the industry and get enough of a scale to move a large portion of our construction away from conventional lumber and move to alternative materials.
GHB: Why do you think building green is important and why have you made it part of your brand?
C.R.H: It’s easy on the building side to build better, it’s different when you’re trying to inspire consumers to buy better. I’m very proud of our company, especially our CEO who supports this initiative to step away from the herd to say, “Our customers deserve better and we’re going to practice better building practices to make them more comfortable, keep them healthy, save them money on energy, and make the planet better.”
We do it because it’s the right thing to do, and, as homebuilders, this is how we build our homes. We understand that it’s important enough to the world that we work with the entire industry to try to pull the rest of the industry along with us.
GHB: What’s coming up for Meritage in 2019?
C.R.H: To continue to inspire and enhance home innovation in our homes is a big initiative of 2019. The transition to non-lumber, panelized construction is also a big initiative in 2019. Even though we’ve been building zero energy homes for the last 10 years, now that California is pushing it as a standard, we’re really optimizing zero energy homes for California and other markets, which is another big opportunity for us in 2019 as well.