This guest post is by Joe Stampone of A Student of the Real Estate Game. Joe is in his final semester at the NYU Schack Institute of Real Estate with a concentration in sustainable development.
The behavioral shift towards sustainable development that we’re experiencing has changed the real estate landscape, however the marketing benefits, performance guarantees, and incentives that accompany green development don’t come without legal risks. If you want to learn about these risks and issues there’s no better forum than GBLU. Chris has been the ‘go-to’ source for all green building legal issues. When I learned that he was accepting guest post submissions I couldn’t pass up the opportunity to be a part of such a great community.
Over the last decade there has been a heightened awareness of the environmental impact of new construction and the existing building stock that make up the built environment.
To minimize the environmental impacts of the built environment, cities have begun to develop a wide spectrum of green building policies which can shape the market from requirements such as Chapter 13C of San Francisco’s Building Code, which enforces large commercial and residential buildings to meet LEED Silver Certification to incentivizing exceptional performance and design.
This post presents a brief summary of the ongoing research on the various ways cities are incentivizing sustainable development. Based on my research, I found that there are 6 major incentives which are offered in different forms throughout various cities:
The objective of expedited permitting is to create an incentive for developers to incorporate green building practices and achieve specific local sustainability objectives by giving greater assistance and facilitation through the permitting process. This can shave significant time off the permitting process and lead to considerable cost savings. Of the cities I analyzed Chicago, Seattle, and San Francisco utilized an expedited permitting program while Salt Lake City has an expedited plan review. Each city used the LEED rating system as a benchmark.
However, it’s important to note that emerging alternatives and a growing demand for performance-based metrics may shift policy structures in the future.
Offering free publicity to green projects is a cheap way for cities to promote sustainable development. However, to be effective, it requires an aggressive and resourceful marketing effort to get projects noticed in a market cluttered with green projects.
Washington D.C. is the best example of giving free marketing to private green projects. They have an interactive map and website that highlights environmental points of interest throughout the city including LEED buildings, green roofs, energy star buildings, geothermal sites, wind energy sites, solar energy sites, etc. (www.green.dc.gov/map).
Washington D.C. is also in the process of creating an interactive “dashboard” providing metrics for measuring the effectiveness of green building and initiatives that looks at how each project is contributing to the goals of their Climate Action Plan.
Many cities are experimenting with or considering ways to financially incentivize green building, however as most cities are resource-constrained this is not a viable option. Portland Oregon’s recently completed Green Investment Fund is the best example of a financial incentive. They awarded grants to projects that exhibited a wide range of innovative green building practices from energy efficiency and on-site renewable energy generation to water harvesting and recapture. In addition to the Green Investment Fund, Portland has considered the implementation of a Feebate program; however it has experienced push-back from the development community.
The objective of a density bonus is to create an incentive for developers to incorporate green building practices and achieve specified local sustainability objectives by permitting additional floor space above the allowable zoning for qualified projects.
Currently, Pittsburgh, Seattle, and Arlington, Virginia offer additional FAR for projects which meet a specific level of LEED Certification. In Pittsburgh, an additional 20% of floor area is awarded for projects that meet LEED Silver Certification while in Arlington various bonuses are associated with each level of LEED Certification.
Green Building Code Mandates
The objective of the Green Building Mandate is to use a required Green Building Standard as an adjunct to the Building Code to raise the requirements for all aspects of a building’s design that could affect energy performance.
The best examples of this are Washington D.C.’s Green Building Act of 2006 which requires public buildings to meet LEED Certification and San Francisco’s Chapter 13C of the Building Code which requires large commercial and residential buildings to meet LEED Silver Certification. Austin, Denver, Santa Fe, and Portland among others have green building mandates for public buildings.
Green Building Codes
The objective of a Green Building Code is to redefine the building codes to require all new construction and major renovations to meet green building requirements, including specific requirements for all aspects of a building’s design that could affect energy performance. The best example is California’s recently introduced CALGreen Code.
CALGreen is the first statewide green building standards code in the nation. It went into effect on January 1st, 2011 and has a number of mandatory and voluntary environmental measures such as planning and design requirements, energy efficiency, water efficiency and conservation, material conservation and resource efficiency, and environmental quality.
Also, the International Code Council recently released public code version 2.0 of the International Green Construction Code (IGCC) which allows jurisdictions to use their administrative powers to exercise the flexibility inherent in the code. I know Chris and the GBLU team will talk more about the IGCC going forward.
Incentives, mandates, and codes offer cities a great opportunity to encourage green building; however I think it’s necessary to determine the optimal mix of incentives and regulations that balance efficiency goals with constrained municipal budgets.
Finally, a detailed cost benefit analysis must be conducted to see which incentives and regulations will fit the framework of your city.