How to Consider Costs and Benefits for High-Performance Residential Buildings
The initial cost of a residential building is a primary calculation for builders, but what happens if that is comingled with considerations of the total cost of ownership, opportunity costs or other hidden values? These could include decreased number of doctor visits because of improved indoor air quality or fewer days of work missed from being sick.
Tradeoffs occur when designing various features; opportunity cost is the potential profit loss when one option is chosen over another alternative. What costs and profit losses might occur when you choose to not build green? Evaluating costs and benefits can be multifaceted, so choosing one method over another might depend on a buyer's priorities.
Take multifamily residential buildings, for example. Turnover and recruitment of tenants can be expensive, including money lost when units are left vacant, money spent to clean and prepare a space when someone moves out, and investment in marketing/advertising to recruit new occupants for the space. Incorporating high-performance practices and features can positively impact the occupant's experience, which could increase the chance that a renter will stay longer and reduce turnover costs.
Investing in high-performance construction strategies may come at a premium as you learn the specifics of green design, but many of the costs can be recouped. This case study — an above-code high-performance retrofit — demonstrated that savings per square foot from the following features made it less expensive to operate, off-setting initial costs:
- The tight building envelope with insulation and air sealing reduced the required size and, therefore, cost of the HVAC system due to energy efficiency improvements;
- Strategically placed operable skylights and windows and other daylighting techniques lessened the need for artificial lighting, which cut down on electricity usage and utility costs;
- The exterior insulation provided more useable rental space; and
- Building materials that help limit harmful chemicals, increase thermal comfort, reduce noise pollution and improve acoustics also enhanced the quality and comfort of the units and added significant value to the above-market rent.
Increased occupant health and comfort associated with the highlighted strategies may also include decreased allergies, lower instances of asthma and increased productivity if the resident is working from home. Builders can learn more about how to clearly communicate these benefits by exploring Home Performance Counts, a new joint initiative from NAHB and the National Association of REALTORS®.
For more information about NAHB's sustainable and green building programs, contact Sustainability and Green Building Program Manager Anna Stern. To stay current on the high-performance residential building sector, follow NAHB’s Sustainability and Green Building team on Twitter.
Latest from NAHBNow
Jun 23, 2025
How Taylor Swift's Music is Influencing an NAHB PWB CouncilTaylor Swift's music is resonating with members of an NAHB Professional Women in Building (PWB) Council thanks to a new leadership seminar diving in the deeper meanings of her lyrics.
Jun 20, 2025
NAHB Announces Latest Round of Legal Funding for HBA LawsuitsAt the 2025 Spring Leadership Meeting, the Legal Action Committee reviewed several funding requests that reflect the growing complexity and urgency of legal threats facing the home building industry and awarded grants in three cases.
Latest Economic News
Jun 23, 2025
Existing Home Sales Edge Higher in MayExisting home sales rose 0.8% in May but remained near historical lows, according to the National Association of Realtors (NAR). Despite the modest increase, this marks the slowest pace for May since 2009. The sluggish sales suggest higher mortgage rates and elevated home prices continue to sideline buyers even with improved inventory conditions.
Jun 20, 2025
Single-family Construction Loan Volume GrowsCredit conditions for builders and developers eased in the first quarter of 2025 as the level of outstanding 1-4 family residential construction loans rose for the first time in two years, according to data released by FDIC.
Jun 18, 2025
The Fed Pause ContinuesReflecting most forecasters’ expectations for the June FOMC meeting, the Federal Reserve continued its post-2024 pause for federal funds rate cuts, retaining a target rate of 4.5% to 4.25%.