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"Architecture 2030" Plan to Revive Economy
 

June 17, 2009
by Craig Severance

Message to Washington: You're not getting it - we're still out of work.  WInd farms and energy efficient public buildings are important, but what about the housing industry?   The recession started with the housing industry -- and can end if we bring back construction -- so lets focus on the real problem.

That's the heart of the message to Congress and the Obama administration from a group of architects and builders who are promoting a plan to end the recession by revitalizing America's housing industry.

Architecture 2030, founded by renowned architect Edward Mazria, is advancing a "One Year 4.5 Million Jobs Investment Plan" to help Americans build new energy efficient homes and renovate our existing homes to make them more energy efficient.  

Private Construction Key to Economy.  Mazria says the private building sector is "the key to reviving the U.S. economy", as building construction alone accounts for approximately 10% of U.S. GDP. 

The construction industry creates demand in every sector of the economy, from wholesale to retail, distribution, manufacturing and construction to professional services, banking and development.  Products used include steel, lumber, rubber, glass, insulation, caulking, appliances, heating and cooling equipment, windows, metal, tile, fabrics and paint.  Many of these supporting industries employ large numbers of American workers (as opposed to relying upon imports), so when construction goes down, the impact is felt all across America.

Building Sector Reeling.  Architecture 2030 notes "in March 2009, construction of residential buildings was down 48% from March 2008 and a staggering 66% down from March 2007, with no end in sight."

According to the U.S. Bureau. of Labor Statistics, over 1.7 million construction workers are still out of a job.  Mazria notes construction unemployment rates are running at an alarming 20% -- more than double overall U.S. unemployment.  These were well paying jobs, as the average salary for a residential construction worker is around $35,000,  Many more job losses have also occurred in all the supporting industries to the construction industry. 

Stimulus Bill Missed the Boat.  Except for a temporary tax credit for first time homebuyers, the massive $787 Billion Stimulus Bill passed in February did little to help the housing industry.

Click here to read full Article.



Keeping Cool Part 1: Put Your Shades On

Eric Severance

Keeping The Sun Out In the First Place

June 5, 2009
by Craig Severance

As Congress considers new energy building codes to require a 75% decrease in energy consumption for new buildings by 2032, many wonder how this can be done without expensive new technologies.


Getting better buildings, however, begins with remembering simple things we may have forgotten.   These simple things don't cost much, but can make us more comfortable and achieve very large energy savings.  

40% of Cooling Load.  Roughly 40% of our cooling load comes from direct sunlight coming through windows. That's an average number.  However, many "stupid buildings" are built so thoughtlessly that major window areas face the summer sun, causing well over half of total summer heat gain. 

Keep the Sun Out.  The most important simple thing to keep us cool in hot weather is to keep powerful sunlight from streaming in through windows.  I don't mean closing the drapes -- because once the sun has already come in through the window, most of the heat is going to stay in the building (though a white surface on the outside of drapes will help reflect back some of the visible light).

Simple methods -- on the outside of windows --  can reduce summer sunlight through windows by up to 80%, cutting our total cooling needs over 30% (with more savings if you live in a "stupid" building with a lot of glass facing the summer sun). 

Click here to read full Article.



Better Buildings Soon?
Energy & Climate Bill Would Set National Energy Codes
 

May 26, 2009
by Craig Severance

It's important to "get things right" when a new building is constructed.  More so than perhaps anything else we create, new buildings will be with us for a very long time. 

Mistakes We Have to Live In.  Our gas guzzler cars and trucks will rust away to the scrap heap in little more than a decade.  Appliances and machinery share a similar fate.  This quick turnover assures us our mistakes of the past will not stay with us very long. 

Not so with buildings -- an energy hog building will likely still be around a hundred years from now.  Thoughtlessness in design and orientation of buildings creates inefficiencies that are often impossible or prohibitively expensive to fix.  As energy costs rise, such buildings will be a burden to their owners and renters.

Almost Half of Our Energy Use. While it is fashionable to talk about wind farms and hybrid cars, buildings are the "elephant in the room" seldom discussed, though they are responsible for almost half of U.S. energy use. 

Climate scientists have concluded we must cut global warming emissions by at least 80% within just 40 years, or face catastrophic climate disasters.  If we don't start making better buildings now, we have no hope of meeting this goal. 

Stop Doing Things Wrong.  For all of these reasons, strong measures are urgently needed to stop new buildings from being built the wrong way, when we know how to build them right.  

I know many builders who would like to build better, more energy-efficient houses.  They don't do it, because "the builder down the street" is not doing it.  Most energy efficiency measures are literally invisible. Since the added advantages don't "show well", they are not perceived by buyers to add value. No builder can add extra features without recovering the cost, so we keep "building stupid buildings" even though we have known for 30 years how to build smarter.

Getting All the "Builders Down the Street" On Board.  The way improvements in building technology achieve widespread adoption is through building codes.  If everyone has to do it, everyone does it.

When the Waxman-Markey comprehensive energy & climate bill (which is also known for its "Cap and Trade" program for greenhouse gases) was first introduced as a Discussion Draft on March 31st, many criticized its failure to take strong action on buildings.   Though the draft called for a national "model" energy building code that states should adopt, it had no teeth. An arduous campaign would have ensued for adoption in all 50 states, where special interest lobbying campaigns would likely stop or delay many.  If someone like Alaska Governor Sarah Palin wanted to grandstand and oppose requirements for better energy efficiency in buildings, there was then nothing in the bill that could be done about it.  Pockets of America would continue with no advancements in building energy codes. 

This might be acceptable if there were no overarching national and global crisis. However, global warming now threatens to inundate our coastlines and turn vast stretches of fertile American farmland into dustbowls. 

The Committee "got it" and strengthened the bill.  The bill (H.R. 2454) that passed the full House Energy & Commerce Committee last week  no longer speaks of a national "model" energy building code.  Instead, it establishes enforceable "national energy effficiency building codes" for new residential and commercial buildings.  States and local governments will be required to adopt the new national codes, or codes that achieve equal or better energy savings.  Noncompliance will result in loss of significant funding.  If they still do not do so, the Federal government itself will step in and enforce the national energy efficiency building codes.  (Nobody actually wants that to happen, but you have to be willing to do it to enforce compliance.)


Click Here to read entire Article



Now is the Time for Energy Makeover
They're Handing Out the Money - Time to Get In Line 



April 30, 2009
by Craig Severance

Thinking about a title for this story was difficult.  Every title I could think up that expresses the true spirit of what I want to say sounds like one of those junk e-mails we all get.  You know:

  • Get Your Stimulus Money Now!
  • The Time Has Never Been Better!
  • Sign up for Your Rebate Now!
  • Best Loan Terms Ever!

You see what I mean.  All of the above actually applies to this story, so please don't tune out..  The factors coming together right now are making this the best time ever to do a Total Energy Makeover on your home.  I will spell out exactly how all this can work. 

Lower Your Overall Housing Costs Per Month.  Very importantly,  refinancing your home loan at today's very low interest rates can be a big cost saver,  This presents a unique opportunity to do a major Home Energy Makeover -- i.e. get everything done -- and that Energy Makeover will drastically cut your utility bills. 

The Energy Makeover -- which will increase the value of your home significantly -- can produce lower total monthly housing costs than you are paying right now, PLUS give you thousands of dollars in up-front Federal Tax Credits. 

Perfect Package.  In the middle of the Perfect Storm for our economy, government and utility companies have now responded by creating a host of incentives that add up to a Perfect Package for homeowners:

  • Lowest Mortgage Interest Rates in Decades
  • Utility Rebates for Energy Conservation Measures
  • Utility Rebates for Solar Energy
  • Federal Tax Credit for 30% of First $5000 for Energy Saving
  • Federal Tax Credit for 30% of Cost of Solar Hot Water Heating
  • Federal Tax Credit for 30% of Solar Electric

They are literally "handing out the money" right now, for a brief period  to stimulate the economy and encourage people to save energy.  Most of these incentives will expire after a set time period. 

Where Else?  Another reason to invest in your own home right now is to shore up the home front against the economic storm, by cutting your overall housing costs.  Preventing future energy cost increases from affecting your family may be one of the best things you ever did.  Cutting your tax bill also lowers your family budget.

How To Put This All Together.  The key to making the cash flow work for a major Energy Makeover is to finance the improvement.   Refinancing your home mortgage, and including the Energy Makeover costs, converts the cost into a monthly payment.  The goal is  utility bill savings that are bigger than any increase in mortgage payments -- so your total housing costs actually go down.

Sample Home Energy Makeover.   Get everything done that can be done to your home to cut energy use (why wait?):

  • Energy Saving Improvements.  Have an Energy Audit done, and do everything recommended.  This will usually include insulating anything not already well insulated -- attic, walls, crawl space or basement -- and hiring a "House Doctor" to come in with a "Blower Door" to find and seal air leaks so the house is no longer drafty.  Other needed measures are likely to be a programmable thermostat,  new windows or perhaps insulated blinds for your windows, adding new south-facing windows if feasible for passive solar heat, exterior shading or summer screens to block summer sun on East and West windows, and upgrading your furnace and air conditioner to the best high-efficiency models.  Finally, new energy-saving appliances may also come into the mix.  Total cost in our example: $25,000 before tax credits and rebates.  Utility rebates add up to $1,000 and Federal Tax Credit is $1,500 so total net cost is $22,500.  Savings of a conservative 35% on electric and gas bills that had been runnng $2750/year.  Total annual savings in first year would be about $960 at today's utility rates. 
  • Solar Hot Water.   Solar hot water is now standard practice in many countries, and is more cost effective than solar electric. So save the first part of your roof for solar hot water.  Total cost in our example: $6,700 minus Federal Tax Credit of $2,000, so net cost is actually $4,700.   Total savings of 70% of what had been an average $45/month for water heating, for about $375/year savings at today's utility rates.
  •  Solar Electric.  Both the utility company and the government are paying a high percentage of the total cost of solar photovoltaic systems right now.  A good system can almost eliminate your remaining electric bill.  In our example, let's do a 5 KW home system costing $37,500.  Utlity rebate here is $17,500 and Federal Tax Credit of $6,000, so total Net Cost is $14,000. A 5 KW system in Grand Junction, CO can produce about  8,000 kWh/year for total savings of roughly $900 at today's utlity rates.

Total Monthly Housing Costs - NOW (WITHOUT MAKEOVER)
How Big is YOUR Bill?

Let's assume you had started paying a $200,000 loan several years ago, which now has a $175,000 home loan balance at 6.5% interest on your existing mortgage. 

Based on the original $200,000 loan, the principal & interest payments on your existing mortgage had been running  $1,265/month.

Your existing annual gas & electric bills are now running $2,750/year for average monthly utility bills equaling            $   229/month

We'll assume taxes & insurance escrow =   $   201/month

Total Monthly Housing Costs - Now   =          $1,695/month


New Refinancing With Total Energy Makeover Included

When you refinance, we'll assume you finance your share after utility rebates but you haven't received any Federal Tax Credits yet, so you have to finance your share before receiving any Federal tax Credits:

Everything Energy(minus Utility Rebates):   $   24,000
Solar Hot Water:                                                $     6,700
Solar Electric (minus Utlity Rebate):              $   20,000
Existing Mortgage:                                             $175,000
Loan Closing Costs                                          $      3,000

Total New Mortgage Balance                          $  228,700


Total Monthly Housing Costs - AFTER Home Energy Makeover
Shrink Those Bills!

At today's very low rates, at 5% interest for example, this $228,700 beginning loan balance would result in principal & interest payments on the new mortgage running not much more than the existing payment:

NEW Mortgage Prin & Int at about :              $   1,375/month

NEW Home Energy Bills Average:                   $      45/month

We'll assume taxes & insurance escrow =       $   225/month

Total NEW Housing Costs Per Month =          $   1,645/month

This is $50 LESS PER MONTH than total housing costs WITHOUT the Total Home Energy Makeover -- at Today's Utility Prices -- and does NOT include the Federal Tax Credits yet.

Note that a lot of this comes from the fact you were already assumed to be paying principal & interest amortized on a beginning loan balance higher than today.  This is pretty typical, though, and is one major reason why refinancings often are affordable.  If this doesn't apply to your situation, e.g. you just bought or refinanced your home very recently, your mortgage payment might go up slightly more than your initial energy savings, but consider the very nice Federal Tax Credits - below:

First Year Savings WITH Federal Tax Credits

Lower Total Housing Costs/month x 12 =         $   600 in 1st Year

Federal Tax Credit for Energy Savings =           $  1,500

Federal Tax Credit for Hot Water =                     $   2,000

Federal Tax Credit for Solar Electric =               $   6,000

TOTAL FIRST YEAR SAVINGS =                             $  10,100

2nd YEAR SAVINGS (if utility rates go up 10%) = abiout $800

Each new year's savings will be higher as utility rates go upward.


Conclusion:
  A major Home Energy Makeover can work to REDUCE your overall costs significantly, even when you include the big ticket items like windows and furnace and air conditioner replacement.  The low interest rates are a key right now, and the utility rebates and Federal Tax Credits provide up-front cash in your pocket as a reward for "doing the right thing".  You also end up with a much more comfortable and more valuable home. 

Can I start sendng out the mass e-mails now??



None of the above is specific tax or financial advice.  Consult your own tax advisor, mortgage lender, and financial advisor for specific advice for your own situation.  You will need an energy audit specific to your own situation to estimate your own energy savings.

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