A Greener House: The Sustainable Property Investor's Guide to Buying, Building and Renovating

By Richard Reed and Sara J. Wilkinson

How green should you go?

If you would like to make a positive impact on the environment but are concerned about the financial outlay, A Greener House is for you. Property experts Richard Reed and Sara Wilkinson will show you how to decide which sustainable measures are suited to your property, and evaluate the cost implications of installing them. You'll learn how to design a new home that exceeds the highest energy-efficiency ratings available, protect your property from obsolescence and outdating, and evaluate market trends in your neighbourhood.

If you own property and would like to increase its value, you can't afford to ignore sustainability. This book will show you how to reduce your environmental footprint while making the most of your greatest financial asset.

We all agree that we can't continue to consume the world's resources at the rate that we are now. We must start living more sustainably - and what better place to start than at home? Most of us want to play our part, but we're put off by financial concerns. But what if the cost of building or remodelling a greener house could be recovered in the value of your home when you sell?

• Language: English
• Publisher: Wiley
• Release date: Feb 14, 2012
• ISBN: 9781118319420

Book preview

Introduction

In a relatively short period of time, sustainability has become increasingly important to practically all members of Western society. This is evident in the media, and it can be commonly observed in our day-to-day lives. Few people would argue today that climate change is a myth, since we are given regular reminders of unusual climate and weather, including long-term droughts, floods, tsunami, rising sea levels and inexplicable weather patterns. We are constantly reminded about the importance of actively pursuing a sustainable lifestyle and leaving something for tomorrow’s generation.

There are many different ways to live a sustainable existence. One extreme is to become 100 per cent self-sufficient and contribute nothing harmful to the environment. At the other end of the sustainability scale, there are people who believe that simply using an energy efficient light bulb is adequate. In all reality, it isn’t feasible for everyone to adopt a 100 per cent self-sufficient lifestyle, but it is obvious that we do need to take more action than just replacing our tungsten light bulbs, if we want to make a significant positive impact on the environment.

The climate is changing

All buildings consume energy for lighting, heating, cooling, cooking, washing and so on. Usually this is in the form of electricity, which is not actually an energy source in itself, it is merely a medium for transporting energy conveniently to the point of use (our homes). The problem is that in Australia, most of our electricity is produced by burning fossil fuels such as coal and gas. These fossil fuels contain carbon, which is released into the atmosphere as the fuel is burned.

Carbon is one of the greenhouse gases that are trapping more of the sun’s heat in the atmosphere, thus warming the planet. This is known as the greenhouse effect, and leads to global warming. Global warming is leading to irreversible climate change. Scientists all over the world agree that climate change is underway, and that in order to slow it down (not stop it — they think it is too late for that!), we must make some big changes, especially when it comes to emitting carbon into the atmosphere. Some areas are higher offenders than others; regrettably, Victorians are the largest per capita emitters of carbon dioxide in the world. This is because of the high carbon content of the brown coal used in Victoria, and the amount of electricity Victorians consume. Scientists believe we need to find a new source of energy (importantly, not a non-renewable fossil fuel) in order to reduce carbon and greenhouse gas emissions and thereby slow down climate change.

There are many differing estimates of the impacts of climate change, from increased flooding, rising sea levels, displaced populations and mass migration of peoples, increased temperatures, increased desertification, increased rainfall and so on. The list is almost endless. What is clear is that the planet will not be anything like it is now by the end of the 21st century. It is this generation that needs to do something about this enormous problem.

A change of heart

Unless we change our behaviour rapidly, there will be even larger future consequences for humankind and the next generation. But how do we actually implement this change? It is worthwhile considering the ways in which changes in behaviour can realistically be put in place, as opposed to just talking about the effects those changes will bring about. Consider the introduction of unleaded petrol as an example. In this case, the Australian government had to legislate that all new vehicles from 1986 onwards must only run on unleaded petrol, forcing everyone who purchased a new car after that time to use unleaded petrol, while also paying a hefty cost for an expensive catalytic converter. It is extremely unlikely that everyone would have switched to unleaded petrol unless they were forced to via legislation. Unfortunately it is not possible to fully legislate for sustainability to be incorporated into housing, so there must be a different driver in this case.

An alternative approach in promoting sustainability is to rely upon a person’s social conscience. The rapidly changing perception in the eyes of the public towards plastic supermarket bags is a good example of this. In a relatively short period of time, free plastic supermarket bags have become a perceived blight on the environment and are now actively discouraged. Many supermarkets promote checkouts that are ‘plastic bag free’ in order to meet our altered perception. But how was this trend put in place so easily? A major catalyst was the fact that the financial outlay required to purchase reusable shopping bags was minimal. Therefore, using reusable bags instead of plastic ones was a way for households to ease their social conscience, without too much expense.

An example where social conscience hasn’t been enough to change behaviour is the heavy reliance on cars for transportation. Even though many cities have relatively good public transport systems, the use of cars for predominantly single-person trips is yet to be fully discouraged. Many urban areas have sought to promote bike riding and the associated healthy lifestyle, but non–environmentally friendly cars are still a popular transport choice. This means that a shopper may drive their car to the supermarket and take their reusable shopping bags, but the overall effect on the environment would be much more positive if the car was left at home. This type of rationale is often hard to understand from a sustainability perspective, since it is the human influence that has the largest effect here. However, most often the biggest driver behind a change in human behaviour is money.

It’s all about the money

Many people believe that sustainability comes at a great cost, but it really depends on how the initial outlay is measured. When weighing up the costs versus the benefits, there are many variables that have to be considered. For example, the timeframe or payback period is a major factor that can affect the decision of whether or not to take the sustainable option. Most often the initial outlay for a sustainable product will far outweigh a competing non-sustainable product, but if the initial cost of the sustainable product can be recouped in relatively short period of time the decision is straightforward. On the other hand, a hybrid environmentally friendly car is substantially more expensive than a conventional petrol-driven car, and it has a longer payback period. For many people this decision is harder to rationalise.

There remains resistance to paying the initial cost associated with the more expensive environmentally friendly items. Few people are content with their current level of assets, and they usually have additional demands (such as a new car or an overseas holiday) that directly compete with the cost of sustainability. Examples of this resistance can be commonly observed at the supermarket, where environmentally friendly products will rarely be the most popular if they cost only a few cents more than regular products. Most often, financial considerations strongly influence the final decision, and in many cases it all comes down to the initial purchase price. For example, even though solar hot-water systems provide free water heating from the sun, relatively few households actually have one. There is a desperate need for people to understand payback periods, and the value that sustainable items might bring to their property.

If it could be said that adopting sustainable measures saved money from day one, practically every household would embrace sustainability. More people are incorporating sustainability into their homes, but money is still a barrier. Many households are trying to reach a compromise somewhere between cost and sustainability.

The Building Commission Report (2004) talks about concerns over affordability, as well as the fear of additional costs among owners, which may influence attitudes towards green buildings. In the commercial sector, expensive design, construction and long payback periods are associated with sustainable buildings, and since owners of commercial buildings do not often pay operating costs, there is relatively little incentive to go green. However, private housing is very different. Owners do occupy houses themselves, so any benefits of lower running costs and added value are felt directly by them.

Fear and greed

An understanding of what drives us to make decisions will help us to fathom why so many households resist sustainability. Most decisions are made to either make a gain or avoid a loss; these types of decisions are commonly described as ‘fear’ or ‘greed’ decisions. For example, insurance companies sell insurance in order to prevent a loss—few people actually wish for a car accident but their fear of an incident is substantially reduced via insurance cover. In other words, we will actually pay to reduce fear.

Our main driver is the desire to accumulate resources, for retirement purposes or just for simple enjoyment. Marketers are fully aware of this and are skilled at increasing the demand for their products by creating and fuelling this desire, largely via the media.

But where does sustainability fit into the equation? Many would argue that sustainability would belong in the ‘fear’ category. In other words, we fear that if we don’t act now and start living more sustainably, the consequences could be catastrophic. However, there is a compelling argument that sustainability can be viewed not just as a cost item with no immediate benefits (like insurance), but that it can enhance our daily lives and provide a long-term cost-benefit to us and future generations. This belief is the concept that forms the foundation of this book —clearly sustainability and financial decisions are interrelated, but adopting sustainability should not be seen as a financial burden. Sustainability can certainly add value to your home.

A valuable family home

The largest single purchase for many households is their home. Homeownership, usually with the assistance of a large mortgage or loan from a financial institution, is a sought-after goal and a long-held tradition in Western society. Traditionally, the family home is used as a nest egg for retirement or potentially as part payment for a larger home if families need to upsize when children become part of the equation.

In recent times, we have observed a decrease in housing affordability, which has placed even more pressure on homeowners to increase the value of their home over the long-term. This desire to increase value is reflected in the media, where property value is a hot topic. Many decisions households make in regards to increasing property value will be done so on a cost-benefit basis; spending occurs when the benefits exceed the cost. For example, most people would not replace carpet in their home annually if it normally lasts for at least five years. In this case, annual carpet replacement is decided against because the purchase costs outweigh the benefits, but sustainability isn’t always considered in this way.

Sustainability and value

Surprisingly very little, if anything, has been written on the relationship between sustainability and house value. While sustainability has an increasingly high profile in society and many people are becoming familiar with how to incorporate sustainability into their homes, there is still relatively little said about how sustainable initiatives can increase the overall value of a home.

To fully understand the relationship between sustainability and housing value, there are three important aspects to consider. The first aspect is the concept of sustainability in the 21st century and how it affects housing. The second is housing value — what actually creates value, and how is housing value enhanced? Then, we need to take this knowledge one step further, and ask ourselves how the value of our home will be affected if we incorporate sustainable measures.

Overview of this book

This book has been written to increase your understanding about the relationship between sustainability and property value. There is a rapidly growing body of knowledge about sustainability, although often little or no consideration is given to the cost of implementation of sustainable measures. The intention is to provide readers with an insight into how to increase the value of their family home, while helping the environment at the same time. Value and sustainability should not be treated in isolation, although careful monitoring is needed to ensure you are up-to-date with recent trends and market perceptions. While there are different extremes of sustainability, at the same time there are varying extremes of value. Understanding and appreciating the relationship between sustainability and value will allow you to benefit from a ‘win-win’ scenario, where you can increase your level of sustainability and your property value at the same time.

This book is divided into nine chapters, which are grouped together into three separate parts. At the end of this book you will find a glossary, a decision-making flowchart, a sustainability checklist and a list of relevant websites.

Part I

The theory

Chapter 1

Understanding value

Most people are interested in what their home is worth, and the topic of making money via residential housing is a popular one to discuss. As opposed to other forms of investment (for example, shares or term deposits), housing provides the rare opportunity of also living in your investment. It also gives you some control over how much you can sell for, with any improvement that you make often being reflected in a higher sale price. Property gives you a high degree of control over your destiny.

There are other reasons for the hype about property value. Housing in some form or another affects everyone every day of their lives. Most people sleep somewhere for around eight hours every night, which requires the use of a safe and sheltered location for a preferably uninterrupted period. Think for a moment about how much time you spend inside your home — although it varies from person to person, usually most of your life is spent inside your dwelling. And like most things in life, there is a cost attached to having this level of access and exclusivity.

Depending on your current situation, you will have a particular level of interest in your home. A property’s value can be viewed from the perspective of:

a homeowner who has a long-term mortgage and wants to feel like they are ‘getting ahead’ financially. This is often achieved when the value of their home rises and their loan value decreases.

a renter or tenant who is hoping to eventually leave the rental market and buy a home, and therefore needs to keep abreast of the current cost of housing in order to save a sufficient deposit.

a homeowner who owns their