Last month, FA Green reported on a new study of the 10 largest U.S. homebuilders by Calvert Asset Management Co. A Green Recovery for America's Homebuilders? A Survey of Sustainability Practices by the Homebuilding Industry found the sector has made improvements since 2008 but sustainability efforts remain a huge challenge. We've since spoken in greater detail with co-author and Calvert sustainability analyst Rebecca Schlesinger Henson.
"The industry is definitely behind the curve in sustainability issues," says Henson, who focuses on climate change, renewable energy and energy efficiency.
Here's a look at the five key areas of analysis in the study: land use, building materials, energy, water and climate change. Each was given equal weight, though more data points were available in building materials and energy efficiency.
Metrics examined here included conservation of open space and infill development of areas that are no longer in use or could be redeveloped for better use. Such smart growth makes sense from an environmental standpoint, says Henson, since there's a greater likelihood of public transportation in infill areas and ultimately less greenhouse gas (GHG) emissions.
Six of the 10 homebuilders (Meritage Homes, Ryland Group, NVR, MDC Holdings, Lennar and DH Horton) received a 0% rating in land use, with the other four (Pulte Homes, Standard Pacific, Toll Brothers and KB Home) scoring approximately 10% to 20%. All four have commitments aimed at increasing infill development.
Still, Calvert hasn't observed any progress with regard to programs that avoid developing in wetlands or other sensitive habitats, or near local water tributaries, says Henson. "Even the leading companies have a lot more to think about."
Homebuilders received an average score of 16%, led by KB Home (just over 80%) and Pulte Homes (approximately 55%). These No. 1 and No. 2 overall-ranked companies use timber that goes through the Forest Stewardship Council's rigorous certification process, says Henson. KB Home is working to implement waste reduction standards and a companywide performance tracking system. It uses pre-constructed panels and pre-engineered roof trusses, which minimize waste and reduce timber needs. Using recycled and salvaged materials, part of LEED certification, is an important way for a homebuilder to reduce its footprint and save money, she says. Low-VOC paint (low volatile organic compounds) is standard in all new homes built by KB Home and Meritage Homes.
The Calvert study urges all homebuilders to pursue more aggressive waste management practices and make sustainable options standard features.
All 10 homebuilders have some commitment or initiative related to energy efficiency, but the average company score is still just 30%. Leaders KB Home (over 80%), Meritage Homes (roughly 60%) and NVR (around 35%) have national commitments to build all new homes to Energy Star standards. More than 1 million Energy Star homes have been built in the U.S. and they're typically 20% to 30% more efficient, says the U.S. Environmental Protection Agency (EPA) and U.S. Department of Energy (DOE). Henson is waiting to see what Pulte will do here because Centex Homes, which it acquired in 2009, had an Energy Star policy.
Homebuilders should indicate on their Web sites and in their marketing materials which efficiency features they offer, and in which markets, says the Calvert study.
Homebuilders aren't adequately assessing water risks or disclosing how they'll overcome water challenges through meaningful policies and programs, concludes Calvert. KB Home is the only company to disclose its water policy. It has also built some new homes with the EPA's WaterSense certification and looks at landscaping in water-stressed areas, says Henson. Other companies have very limited water efficiency programs. Calvert would like to see the industry more fully embrace WaterSense through nationwide commitments.
Currently, KB Home is the only U.S. homebuilder which produces a comprehensive sustainability report--something roughly four-fifths of the world's largest companies do, according to KPMG's International Survey of Corporate Responsibility Reporting 2008. KB Home and Pulte Homes, responders to the Carbon Disclosure Project (CDP), are the only homebuilders that report their levels of GHG emissions, although both are in the early stages of capturing and disclosing this information, the study found. Standard Pacific has also disclosed key climate change risks and opportunities.
The remaining seven companies didn't report any significant information on their climate impact or their climate-related risks and opportunities, the study reports.
As consumer interest and policymaker incentives for green homes increase, some homebuilders that haven't integrated sustainable design and construction principles into their operations may be at a competitive disadvantage, concludes the Calvert study.
Consumers are already seeking green home benefits. A J.D. Power survey cited on the Meritage Homes Web site, which Calvert noted in its report, found that 94% of respondents who purchased a green home did so because of expected savings in their power and heating bills; half said they believe their home's value was increased because it was "green."
Additionally, just 48% of new-home owners responding to the J.D. Power 2010 U.S. New-Home Builder Customer Satisfaction Study said their builder didn't identify their home as green, down from 65% in 2009. Approximately 61% of new-home owners in 2010 perceive their home as environmentally friendly, versus only 31% in 2009, found this J.D. Power study.
The Calvert study didn't look at smaller homebuilders, but Henson believes these mostly private companies will play a crucial role with regard to best practices. Lenders, insurers and the government can also increase progress by expanding their green focus beyond retrofits to "new homes that get it right from the beginning," she says. The Fireman's Fund insurance company already offers optional green upgrade coverage.
Meanwhile, U.S. homebuilders and investors could learn a little from green homebuilders overseas. Henson and her colleagues were happy to hear about a recent best practices sustainability report released in November by NextGeneration, an organization consisting of the United Kingdom's largest homebuilders. "Generally, homebuilders in the U.K. have been talking about the environmental impacts of their homes longer than what we've witnessed in the U.S," she says. That study's top-rated homebuilder, the publicly traded Berkeley Group, has been producing sustainability reports since 2002.