Affordable Green Homes
by SSPENCE on JUNE 1, 2012 - 0 Comments in urban

China’s government just announced it will allow financial institutions to provide lower mortgage rates for buyers of environmentally friendly housing (see below for more detail).

Meanwhile in the USA there is a lack of incentives to encourage housebuilders to shoulder the extra cost of an eco-home. Developers pont to the absence of specific subsidies, tax breaks and supportive policies, it is difficult to add on the cost of making a sustainable structure.

After all, while buying a home in a ‘green’ building means multiple benefits in the form of lower maintenance costs, would that really convince a home seeker to pay a premium? While certain cities do offer a slight benefit in the form of a partial reduction or exemption on property tax, more is required to make it viable.

Developers point to the absence of specific subsidies, tax breaks and supportive policies, saying that without them it is difficult to add on the cost of making a sustainable structure.

After all, while buying a home in a ‘green’ building means multiple benefits in the form of lower maintenance costs, would that really convince a home seeker to pay a premium? While certain cities do offer a slight benefit in the form of a partial reduction or exemption on property tax, obviously much more is required to make it viable.

The cost could be slightly higher than a conventional building. But then, this needs to be seen with a different paradigm. The question is how do we compare the costs? There needs to be a baseline cost for all comparisons to be alike. The incremental cost is always relative and depends on the extent of eco-friendly features already considered during design. The incremental cost would appear small if the baseline design is already at a certain level of good eco-design; it would appear huge if the base design has not considered green principles.

The typical consumer needs to look at the incremental cost in relation to the life cycle cost. This kind of an approach could be revealing. Over its life cycle, the operating cost would work out to 80-85 % of the capital cost while the incremental cost which is a one-time cost is only about 8-10 %.

Due to substantial reductions in operational cost, the total cost of ownership of green buildings is invariably lesser than conventional buildings. The incremental initial cost for the first few green buildings in India and the declining incremental cost over the years are both evident.

Meanwhile China will improve financial services for “green construction” as part of the government’s energy-saving plans for the construction sector during the five-year period from 2011-2015, the Ministry of Housing and Urban-Rural Development said.

“Financial institutions will be allowed to offer appropriate preferential interest rates for buyers of ‘green’ homes,” the housing ministry said, without giving details on the preferential rates or the types of housing that would qualify.

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