EPA Joins the Green Building Party


By Richard Reep

Well into the last decade, green design and smart growth operated as two separate and distinct reform movements. Both were widely celebrated in media, academic and planning circles, seeing themselves as noble causes albeit underdogs in the struggle against the mighty capitalistic enterprise of real estate development. Starting in 2009, the frozen credit market has kept private development moribund, and these two movements are somewhat moot as development takes a cease-fire.

Yet now the two movements appear to be joined at the hip, a move encouraged by a federal bureaucracy and an Administration that embraces both groups’ agenda. In the process, what was once seen as an alternative to conventional development appears to be well on the way to becoming federally-mandated regulatory policy. The EPA, DOT, and HUD recently signed a memorandum of understanding to start making policy around green design and smart growth, turning these choices into federal standards.

The standard bearer for green building, LEED certification, is the U. S. Green Building Council’s definition of energy efficiency and green design. A reform-focused movement, LEED established criteria by which a building’s energy and water use could be measured against a baseline, and the USGBC awards credits to the building when energy efficiency measures are achieved. LEED increases a building’s construction cost but reduces the building’s life cycle cost – monthly electric bills – and real estate developers, who gain nothing from lower energy costs, were slow to become interested in this choice. LEED was the domain of owner-operators like governments, who have a vested interest in keeping their future costs as low as possible, and was adopted as a criterion for capital expenditures by the GSA as well as many cities and counties by the close of the last millennium.

Smart growth’s official champion is the Congress of the New Urbanism, which offers a design style choice for real estate developers. Developers, being profit oriented, historically have been loathe to tinker with what sells, and thus only in a few areas has New Urbanism gained a foothold. At its best, new urbanism represents a choice for homeowners who prefer dense, mixed-use communities that resemble traditional American towns, accentuating walkability and reducing residents’ dependence upon the car. In this key feature, Smart Growth advocates lobbied the U. S. Green Building Council to create a special category of LEED for Neighborhoods.

Both movements promised reform. Both movements increased cost. Neither program was particularly effective at penetrating the real estate development market as long as the investment community favored large, formula-driven, profit-oriented real estate developers, and innovation consisted of product cost-cutting. The cost premium associated with each movement left them largely the playthings of boutique, niche-oriented developers aspiring to nobility while protecting their bottom line.

Changes afoot in the last several months, however, are combining these two movements into one powerful force that turns these laudable movements away from choice and towards a prescriptive, and ultimately restrictive policy. Beginning in 2006, the Environmental Protection Agency encouraged communities to build walkable, energy-efficient growth within their boundaries, rather than continue spreading out – a surprising focus for an agency created to reduce pollution. Little else happened until late 2009, when suddenly the EPA began linking Energy Star (a Department of Energy program) to New Urbanist values such as walkability and mixed-use development. The EPA, which regulates pollution, has suddenly moved front-and-center into regulating growth, as if it were another type of pollution.

At the same time, the U. S. Green Building Council yielded to heavy lobbying by the New Urbanist movement to create a new criterion, LEED Neighborhood Development. A developer may now submit a new land plan for certification to this LEED standard, and “smart growth” is being codified and standardized into a checklist and formula to be measured against a baseline. Like LEED for New Construction, these standards will also increase the cost for the developer desiring to build to these standards.

Investors and developers may, on the surface, appear to have lost these dramatic battles. In the bigger picture, however, while the economy retools itself, it is not unusual to see regulation increase. If anyone remembers the S&L crisis of 1990-92, one of the biggest regulatory acts to affect real estate in modern times hit developers right between the eyes: The Americans with Disabilities Act. This reform removed physical barriers for all citizens with disabilities, but as a cost burden to developers it pales in comparison to the premiums that will be paid to meet the smart/green regulations currently being formulated by the Feds.

Banks – hardly institutions with widely popular standing – stand to gain the most, because a developer who borrowed $10 million for a project in 2006 will probably need to borrow $11 or $12 million for the same project by the time bankers get around to discussing credit again. Developers also stand to gain, because as the cost goes up, so does the price. Coming out of the Millenial Depression, new construction will be faced with higher energy performance requirements, the higher costs associated with urban development, and a longer regulatory review process than ever before seen.

The losers, of course, will be the vast majority of Americans who work hard and earn modest incomes. New home prices will increase, and renters will have to pay their landlords more to cover the increased costs of politically sanctioned development. While the affluent will be able to enjoy the benefits of a green, urbane lifestyle, the grocery store cashiers, dry cleaner clerks, housekeepers and artists who make up so much of our community will be forced out by the sheer cost of this movement – out to the suburbs, out to the exurbs, and out to the trailer parks beyond them. No green for you: your commute time just got much longer.

Technology, of course, will eventually decrease in price and become more affordable; like VCRs and DVD players, the early adopters pay the freight until the appliance becomes a commodity. The same is likely true for exotic solutions like photovoltaics or low-voltage lighting as the marketplace sorts out what works from what doesn’t. So the impetus to go green will impose a crushing cost burden on new construction, which may gradually, over time, be absorbed into the mix.

An affordable starter home in a low-cost subdivision, however, may be as doomed as leaded gasoline, and the American Dream will likely shift away from the landowner-based society once vaunted by Thomas Jefferson. The walkable lifestyle, now being exercised by free will, is well on its way to becoming federal government policy in a grand effort to incorporate reform and regulation into our lives from above.

Whether or not this achieves the EPA’s mission to reduce pollution will only be discovered in the decades ahead as we incorporate the next hundred million Americans into the urban boundaries we have already set upon the land. It may be entirely possible to reach some of these goals without prescriptive overly burdensome regulation, yet this may only occur if political realities begin to reign in the current regulatory onslaught.

Richard Reep is an Architect and artist living in Winter Park, Florida. His practice has centered around hospitality-driven mixed use, and has contributed in various capacities to urban mixed-use projects, both nationally and internationally, for the last 25 years.

Photo by eng1ne

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Before the bubble burst,

Before the bubble burst, developers were more than happy to tout their projects as 'sustainable/green/LEED certified' in order to give themselves a marketing edge up. Now with credit difficult to come by and sustainable building regulations turning mandatory, the marketing edge will probably end up being lost - becoming just another burden for developers.

For architects, 'green building' regulations means more work - more analysis and code checking. This can't be good for architects unless they are able to convince their developer clients that it is a service worth paying for. Indeed, some architects have been able to find a way to do this and others have even started their own 'LEED Consulting' firms.

In the end though, as Richard said, it will probably end up being banks that will be the winners from the new green building regulations. Local governments will stand to gain as well as they use LEED and other mandates to force developers to pitch in for 'green' infrastructure improvements. What a shame - especially at a time when the real estate development industry is in a deep freeze.

Adam Mayer

Just some comments

About 3 years ago I wrote in Sustainable Land Development Today magazine that LEED was tied to the CNU - I was attacked in direct E-Mail and in reader feedback that I was wrong - the CNU and LEED were not at all related --- well I guess I was right!

Anyhow developers will likely NOT profit from the extra costs - the massive infrastructure increase in development - with both architectural elements and landscaping needed to make a Smart Growth development work can only increase the developers profits if that developer happens to own the paving company, the earthwork contractor, the landscape company, the architectural firm, and the various other components which require subcontractors - all needing to profit. In fact there is a distinct possibility the profit to the developer will decrease.

When the markets crashed I approached financial institutions asking how developers could recover - ALL those that I talked to (100%) said that the term "green" would have a negative impact on the decisions to finance a development in this economy. They threw "sustainability" in with green. Unless the EPA, HUD, and DOT have answers to those barriers to financing developments this "agenda" will have some huge negative impacts on the development community at a time when they need less control - not more!

You are right about the cost of housing increasing - that will drive even more people to more rural areas - especially with the new era of the internet. Light manufacturing and professionals that can performs their businesses remote of an urban core will opt to move OUT not IN. This will fuel a resurgence in sprawl - not reduce it!

Rick Harrison