Is Net-Zero Living Up to the Hype?

Builders say the future is now for homeowners beset with high heating and cooling costs. Their frustration, along with improved technologies and green building materials, has led to a housing option known as net-zero energy.

It might sound like hyped marketing buzz, but as long as builders carefully incorporate systems and materials with the home’s location and orientation, it’s entirely possible for buyers to purchase a new or rehabbed home that produces as much energy as it uses. With growing concern about energy conservation, it’s smart to understand this technology and how it impacts both buyers and sellers in the real estate transaction.

What Net-Zero Is all About

First, understand the terminology. Many studies combine net-zero and “net-zero–ready” properties for the sake of simplifying research. But it’s important for your clients to know that net-zero–ready homes are highly efficient spaces that haven’t yet integrated an energy-harvesting mechanism such as solar panels or geothermal heating. The Net Zero Energy Coalition—a group of industry leaders looking to accelerate the adoption of these new building techniques based in Richmond, Calif.—notes the sector is growing rapidly. The group estimates that, as of the end of last year, there were 8,200 zero-energy and zero-energy–ready homes or apartments, representing a 33 percent jump above the prior year.

According to Navigant Research, which covers emerging technologies, the total North American net-zero building industry is expected to increase 38.4 percent between 2014 and 2035. This trend is being driven primarily by two factors:

• First, more building professionals—custom, production, and multifamily—now work in this niche, says Ryan Shanahan, a senior green building consultant with Earth Advantage, a Portland, Ore.–based nonprofit that encourages better building and offers green certification.
• Another reason is that states are beginning to mandate energy conservation. California is in the midst of a five-year plan that requires all new homes to be net-zero by 2020, and Washington state has a similar goal for 2031. Although no other states have replicated this goal, more than 275 cities, counties, and states have taken on initiatives that increase the environmental and health performance of their communities through new building codes and programs, according to the U.S. Environmental Protection Agency.

And even though net-zero technology is cutting-edge, finished results don’t usually resemble the Jetsons’ homestead. WonderGroup developer Jacqueline Nunez designed a complex of sleekly elegant townhomes and condos that have a modern flair yet aren’t too futuristic for the historic West Roxbury neighborhood in Boston. It will be the city’s first net-zero residential project. Also in New England, designs by BrightBuilt Home in Portland, Maine, represent a more varied mix of modern and traditional styles.

How to Help Sellers

If you’re the listing agent on a net-zero or net-zero–ready home, the good news is that there’s a huge target of interested buyers. They come primarily from three cohorts:

• The first is the young, hip Dwell magazine generation, which wants to curtail costs and consumption and leave a smaller carbon footprint, says Ed Gorman, founder of MODUS Development in Phoenix. His company built the eight-unit MZ Townhomes, the first zero-energy housing project in Arizona, four years ago.
• The second cohort is young families seeking healthy, comfortable homes to put down roots, says Parlin Meyer, director of BrightBuilt Home.
• A third group, Meyer says, is boomers seeking to reduce energy bills and better project fixed expenses as they head into retirement.

Selling points: There are benefits besides energy savings that you can share to promote a net-zero listing. Due to the systems and materials and how the houses function, net-zero homes may offer a healthier environment with fresher filtered air, more comfortable indoor temperatures, less noise, better moisture control, and sturdier construction that can better withstand severe weather, says Joe Emerson, founder of Zero Energy Project, a nonprofit educational organization in Bend, Ore. But before you make any of the above claims, be sure you can back them up with evidence—or at least have testimonials ready from the current owners explaining why they like living in a net-zero home.

Persistent challenges: Despite the many positives, pricing this type of home can be tricky. In many neighborhoods, comparable properties are hard to find. However, green residential appraisals are eager to help determine the true value of this new market segment, says Meyer. Certifications from the U. S. Department of Energy and the International Living Future Institute can also help verify homes’ efficiency, says Stacey Hobart of the New Buildings Institute in Portland, Ore., which tracks and certifies net-zero homes.

What Buyers Should Understand

Buyers considering new construction should be aware of the typical process builders undertake to predict whether a property will indeed produce enough energy to offset its usage. Before construction, energy modelers feed data into a software program to check if the energy-harvesting elements will provide sufficient fuel when combined with the energy-saving systems, such as insulation, HVAC, appliances, and lighting.

Of course, what results from this modeling is just an estimate. Most commonly, the Home Energy Rating System index by RESNET, a standards-setting industry organization, is used to approximate energy production and consumption used by a typical family. This modeling indicates if changes should be made before construction to meet the desired energy efficiency, says Gorman. A low score means that a home is more efficient than a typical house. Similarly, a high score may indicate inefficiency and the need for a better insulated envelope or more solar panels to reach the desired HERS score. If a family includes heavy users of electronics, lights, and HVAC systems, the modeling predictions won’t apply, says Emerson. “Every building project brings its own set of challenges, and this is why modeling needs to be done up-front,” says Greg Goss, an Arizona-based contractor who’s worked with Gorman.

Whether buyers are looking for a new home or a retrofitted one, the area’s climate plays an important role. Cooling systems have to work harder in warm climates, but the extra sun can make solar panels more productive than they are in cooler climes, says Joseph Vigil, an architect based in Boulder, Colo. The site and orientation also influence results. If a home is located in an open field, solar panels will produce more energy than in a dense forest where tree canopies block sunlight, says Shanahan.

Other considerations for buyers:

• Technological obsolescence. Many are looking forward to seeing advancements such as Tesla’s solar roof shingles hit the market. But what happens to a home’s equity when the next generation of panels cuts the price of net-zero enhancements, asks FitSmallBusiness real estate analyst Emile L’Eplattenier. Many experts think an older net-zero home will hold its value because it still curtails energy consumption and costs, even if it’s not to the same degree as the latest generation of products. “We know new ones are more efficient, but the older ones still work,” says Vigil. Gorman adds that when listing a net-zero home, sellers should always share how long the warranty extends, if applicable.
• Higher costs. Most net-zero experts estimate net-zero homes cost between 5 and 15 percent more than traditional ones, depending on what systems are selected. But the costs keep coming down, especially for solar panels, says Shanahan. Equally promising is that the payback begins immediately if buyers consider their energy bills. “From the day homeowners move in, they’re saving,” says Meyer. It’s hard to overestimate the importance of a tight envelope and efficient HVAC. Shanahan says retrofitting older homes can prove prohibitively costly if building parts and systems are terribly inefficient.
• Availability of tax credits. In recent years, numerous incentives have been available for buyers investing in a net-zero home. But concern is brewing as some utilities, municipalities, and states begin to rethink such credits, according to a recent Bloomberg report. Gorman thinks the tide won’t reverse. “Solar costs are dropping so low and batteries have become a cost-effective storage solution. This will drive savvy customers to go completely off-grid,” he says.