Relative Cost of a ‘Sustainable’ House

Cost is regularly raised in the literature as a major barrier to sustainability in construction.

Interviewees were asked to elaborate on their understanding of the costs of a

‘sustainable’ home to draw out the extent to which cost was an issue, and whether it actually was a barrier.

It was certainly a topic that tended to elicit quite detailed responses. Overwhelmingly, there was consensus amongst all that sustainability added to the cost of a home, although there was some disagreement as to how significant the difference was. Given the small sample size, it is difficult to draw correlations between how the answers provided

correlated with their expected level of expertise of costs. Generally speaking, those who were likely to be more informed about such matters were more likely to attempt to quantify a cost difference, while others tended to answer the question more in term of generalities.

When asked to estimate what the actual added costs might be, answers varied greatly, and obviously depended on what was included in their definition. Several interviewees attempted to place a dollar figure on the cost, but it was based on specific assumptions, typically for ‘bolt-on’ features, such as the cost of adding a rainwater tanks. By contrast several interviewees estimated a percentage increase range, which varied between 0-5%, 1%, 3-8% and 5-10%. However, given they were not necessarily basing this on the same inclusions, as the question was asked in general terms, the variation in responses is not necessarily surprising. Some of the interviewees noted that the cost differences were probably not as significant as portrayed and that with some effort, something close to cost neutrality could be achieved. Company B interviewees in particular tended to see the increased cost as relatively minimal, but this was because their responses tended to be based largely on defining a “sustainable” house as simply being 5 star energy rated, relating to their own experiences.

An increase of around one per cent, or around $5,000 plus or minus a couple of thousand dollars, was raised by several interviewees who might have been expected from their roles to be more knowledgeable about this topic. However, these estimates seemed to really only cover the costs of achieving a 5 star rating (specifically providing rainwater tanks and solar hot water systems). Several estimated higher, with two suggesting an extra $5,000-$10,000 and one suggesting an extra $10,000-$20,000 for meeting compliance costs (taking into account extra building and (unspecified) infrastructure

costs). One interviewee only discussed the costs of extra insulation, and did not consider any other factors.

One interviewee claimed not to know about housing cost differences, but cited US research showing that the costs of LEED-rated commercial buildings increased by between zero and five per cent.

Reasons for any increased costs were attributed to factors including:

 Additional requirements, such as rainwater tanks, photovoltaic cells, water recycling systems, or additional insulation (typically installed to meet regulatory requirements) would by necessity cost more than not including such products;

 Double-glazed windows would always cost more to manufacture because they had more glass, more materials and more effort to manufacture them. It was also noted that if they were damaged on-site (including by vandalism, a problem that was raised by interviewees in more than one company) they were much more expensive to repair as because of the seals they had to be sent back to the factory. It should also be noted that the importance of designing a home in such a way as to avoid the need for double glazing was stressed as an important cost minimisation strategy. One

interviewee suggested that double-glazed windows alone might add $4,000-$5,000 to the cost of a home.

 Additional research and design costs associated with changing practices (in the words of one “…you can't just photocopy your old plan and stick it down…”)

 Additional labour costs associated with changed techniques. For example, it was noted that the Cairnlea Ecohome project apparently required extra coats of paint when using the water-based low-VOC paint, adding to the painter’s labour costs. Similarly, the installation of the HDPE pipes in place of PVC plumbing had taken longer for the plumbers to install, adding to labour costs in particular; and

 The costs associated with “buying a project” (that is, increasing the likelihood or speed of council approval by making it more attractive through inclusion of sustainability features), for example by installing bioretention cells in estates at significant cost.

It seemed that almost all answers provided were in the context of a product very similar to what their company already produced, rather than a more holistic definition of a

sustainable house. One noted that it was easy to design for minimal cost increase when building on a concrete slab, but noted that this was not the case otherwise. There was

certainly almost no mention of factors such as whether a house could be smaller, or have simpler finishes and less features, and therefore be less expensive.

However, sustainability features were not always perceived to cost much more. A good example provided by one interviewee was:

“…water saving in the home at the grand cost of 15 cents an outlet I think it is to put in a flow control valve”.

Significantly, there was a distinction made by more than one interviewee that

sustainability features seemed to add significant cost when they were treated as ‘bolt-on’

features:

“…to get your prescribed rating you can always achieve it, but what you have to do is just throw things at the house. So everything is an addition to that house. So it is double glazing for the windows, it is increasing all your insulation, to that particular dwelling...and then there's all the sealing and caulking around all the windows to seal all the cracks and gaps to the dwelling”.

Another identified that the problem was an unwillingness to think laterally within the industry, noting:

“The building industry general, and maybe not so much the development side of the building industry, but the building industry general, takes the approach of there's some change, I just need to add it on. Rather than go back to square one and rethinking the whole process”.

This person went on to elaborate:

“…when 5 star came in there were all these figures going around to what extra it was going to cost, but once again that's the bolt-on solution, you've got house model x and you want to take it from what it is down to 5 star, there's a few tools you can use but eventually you had to start getting into double glazing and double glazing adds a lot of cost. So if you design the house from the ground up or

redesigned the way you do things, you can minimise or totally remove the need for double glazing, so that’s an example of, you know, the two different approaches.”

Their suggested solution was:

“…you build it into the project upfront, you can wrap things around it, you can start feeding off it by doing something you might save somewhere else or you might have an impact on something else that might actually add value… If you address the issues right up front you've got a better chance of building them into the project and maximising other benefits from it”.

Another issue with regard to cost is that it is often more expensive to deal with the scenario of a single house than it would be if costs could be spread across a number of houses. At a larger scale again, the importance of economies of scale in driving costs down through increased production, but also increasing supplier competition, was noted by more than one interviewee. As one put it:

“I think the main [reason for cost differences], it’s probably just economies of scale. Like some of the different materials out there that might have a lower embodied energy or something like that, it’s probably as much, I mean there may be some fundamental differences but quite often it’s just economies of scale that make traditional Portland cement so much cheaper than anything else you can get that might do a similar job. Probably the same for most of the stuff out there.”

This phenomenon of falling prices for sustainability products as a result of increasing markets was already generally perceived to be occurring. Reductions in the prices of products such as rainwater tanks, double-glazed windows, solar hot water services, insulation and AAA rated (water efficient) taps were reportedly already being observed, a trend that was generally expected to continue as higher volumes were manufactured.

Only two interviewees raised the importance of taking a longer-term approach when weighing up the costs, with one specifically mentioning the life cycle costs. The other asserted:

“The costs of a sustainable house should be marginal if you financially analyse it the right way in terms of, you know, you know you can do your net present value on calculations so there isn’t a huge cost if you analyse it properly. If you take it on capital value yes, you might find there’s some discrepancies and if you factor out the moral value you won’t get anywhere but if you analyse it properly I think you’ll find that the differential is really marginal over the long run”.