The upfront costs for upgrades such as solar roofs with battery storage, air ventilation systems and electric vehicle charging stations can be out of reach for homebuyers and cost-prohibitive for builders outside of luxury homes.
Still, a handful of companies are rushing to get ahead of the curve as energy policies and technology rapidly evolve. They’re after a market they believe will not only grow but could someday become the norm in a range of housing.
“I saw there was an opportunity to build homes of better insulation, better indoor air quality and more energy efficiency without breaking the bank for homeowners,” said Vicrum Puri, president and co-founder of Tysons Corner, Virginia,-based August Homes, which plans to build 11 “energy independent” homes in Woodbine in western Howard County by 2027.
August is among those pursuing “Zero Energy Ready” certification from the U.S. Department of Energy. Others include Atlanta -based national builder Beazer Homes and regional custom builders such as Rockville -based Mitchell & Best.
The 19 new, $700,000-and-up, single-family homes at Beazer’s Holly Farms off Cub Hill Road in Parkville all come with solar panels, access to electric vehicle charging, air ventilation systems and state-of-the-art insulation and follow new standards in design, wiring and building materials.
It’s the second Beazer development in Maryland where all homes will carry the DOE certification, part of a corporate strategy to have 100 percent of its new construction meet the more stringent standards by the end of next year.
Fight Over Affordability Continues
The expansion of ultra high-efficiency homes in Maryland comes at a time when the state is navigating a transition away from fossil fuels. A 2022 law aims to cut greenhouse gas emissions 60 percent by 2031 and reach net-zero — nearly eliminating the state’s carbon footprint by 2045.The measure stopped short of banning fossil fuel-based heating systems in new buildings as environmentalists had hoped. It does not apply to single-family homes, but calls for residential and commercial buildings larger than 35,000-square-feet to reach nearly zero net direct greenhouse gas emissions by 2040.
The bill was opposed by former Gov. Larry Hogan, who ultimately withheld a veto, while some Republican lawmakers had argued that residents and businesses would bear the expenses of upgrading energy systems with little benefit.
“With inflation surging and energy prices at record highs, this is the absolute worst possible time for policies that raise costs for consumers,” Hogan had said. “Our focus right now should be on increasing domestic energy production and lowering costs — not raising them.”
Allan Merrill, CEO of Beazer, and others in the real estate industry acknowledge that homebuyers are often skeptical of the need to make such investments.
“The first association people make with energy efficiency is sacrifice,” and having to adjust the thermostat up or down for the heat or the cold, Merrill said in an interview Tuesday while unveiling a model home in the community of brick single-family homes. “These homes don’t require it.”
So far 12 of the 19 Parkville home sites have sold. Beazer completed an even more upscale “Zero Energy” development last year in Ellicott City.
During a tour of the 4,000-square-foot Parkville model home, Taylor Oakley, Beazer’s Maryland director of sales, showed off features she said would keep the average utility bill to under $200, compared with $500 to $600 for a comparable older home.
The Energy Star -certified design also promises no air leakage, solar panels to lease or purchase, efficiencies in heating and cooling and an outlet to support electric vehicle charging.
Few builders in Maryland are going to similar lengths, but that’s likely to change, some experts say.
“It’s not something that’s necessarily as easy to do or cost-effective to do for smaller builders and for a lower price point,” said Lori Graf, CEO of the Maryland Building Industry Association. “For a townhouse that you’re going to try to sell to entry-level buyers, it’s just not cost-effective to do net zero, right now.”
She said more energy-efficient housing is being developed but described the Beazer homes as “out in front” of what’s happening in the industry.
“Eventually, I think a lot of it will get there, but they are certainly ahead of the curve on what the industry is able to do,” she said.
The Pressure to Reach New Energy Standards
The Zero Energy Ready program started in 2013 to accelerate innovative energy-saving technologies, said Carolyn Snyder, a deputy assistant secretary at the Energy Department.“These are not ideas on the shelf in a national laboratory, but market-ready technologies that consumers will want and pay for,” Snyder said during Tuesday’s event. As the nation addresses challenges in energy security, electricity system and affordability going forward, she said, “We need efficiency more than ever.”
A national builder trade group said that while it supports voluntary sustainable new home construction and certifications to achieve those goals, Zero Energy presents challenges.
“The … program is overly prescriptive in some aspects, including the building thermal envelope and requirements for electric appliance-ready homes,” Paul Karrer, a program manager for energy, codes and standards at the National Association of Home Builders, said in an email. “This limits the options and flexibility builders need to find cost-effective solutions.”
He said it’s too early to tell if and when the tax credit incentives will move the housing market.
Beazer officials hope to convince consumers that their form of state-of-the-art building and efficiency methods will not only save residents money but improve their quality of life, eliminating drafts, buffering them from outside noise, and improving air quality and health.
“We’ve eaten the cost, and I look at that as an investment we’re making in our future, and to create a differentiated value proposition,” which includes a sharp reduction in energy bills, said Merrill.
The builder constructed more Zero Energy Ready homes than any other builder in the U.S. last year and also beat the total number constructed since the energy department started the program.
“It isn’t easy,” Merrill said. “Consumers today don’t fully understand what it is that we’ve done.”
Will Wider Understanding Increase Demand?
To be certified as Zero Energy Ready, homes must meet certain standards or be equipped to meet them in the future. Homes must be certified for builders to be eligible for federal tax credits, while homeowners can receive state or county credits.Revised federal tax credits included in the Biden administration’s Inflation Reduction Act offer $5,000 for qualifying single-family homes as well as a $5,000 credit for qualifying manufactured homes in a separate version of the program.
Under energy department guidelines, a single-family home must be well-insulated, equipped with LED lighting and contain Energy Star appliances, energy-efficient windows, high-efficiency water heaters and fresh air ventilation systems.
Homes must use high-efficiency heating and cooling technologies, and they must be constructed using low-emission materials that meet industry standards for paints, carpets and low-formaldehyde manufactured wood products.
Homes also must be ready for the next generation of energy technologies. That means including infrastructure to install an electric vehicle charging station now or in the future, being ready for current or future installation of heat pump technology and, if not installing rooftop solar panels to lease or purchase, being “solar ready. ” That allows for the necessary wiring and space to add rooftop solar in the future.
August Homes has taken the concept further. The company is building a 4,000-square-foot custom home in Alexandria, Virginia, with a solar roof and battery backup system that he said will allow the home to power itself within a year. And it expects to break ground by 2026 in Woodbine on its “energy independent” community.
Puri argues that DOE Zero Energy requirements can be met with no more than a 5 percent increase in construction costs for those experienced in the methods and says higher costs can be recouped in energy savings.
“There’s definitely people that are becoming more aware of energy savings in general, so there are people that ask for it,” said Greg Dalgarno, director of builder services with lender Embrace Home Loans in Timonium. “The majority of people don’t have the best understanding of it yet.”
Laurel Peltier, a Baltimore consumer energy advocate, said it makes sense to design housing and new technologies at the same time.
“This is like a dream because everybody else who doesn’t have a new home is retrofitting an old home to upgrade to these way more energy-efficient and climate-friendly things,” Peltier said. “This is exactly what the U.S. should be doing.”
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