Page 296 - The Green Building Bottom Line The Real Cost of Sustainable Building

274 CHAPTER 9

other on-site generation facilities. Developers need to be prepared to persuade local gov-
ernments and owners’ associations that green building features are beneficial.
Problems like these should become less common over time; building codes and
other laws are likely to be revised to incorporate energy efficiency, water efficiency,
and other sustainability requirements. In fact, this trend is already underway. For
example, many state and local governments now require that their own buildings be
LEED certified. The District of Columbia and Pasadena, California, for example, go
further, mandating that certain private development projects meet the requirements for
LEED certification. California recently passed a law requiring electric and gas utili-
ties to keep consumption records for all nonresidential buildings and, starting in 2010,
for building owners to disclose that data and the building’s EPA performance rating (a
rating calculated by evaluating the building’s attributes and comparing them to other
similar buildings in a national survey) to prospective buyers, tenants, and lenders.
Municipalities including DeKalb County, Georgia are exploring ways to ensure that
when homes built prior to a certain date are sold, their plumbing fixtures are updated.
In Chicago, homebuilders developing to the city’s unique green program are fast-
tracked through the permitting process.
Beyond simply dictating that privately owned buildings be more sustainable, more
and more governments are offering incentives to encourage green development. At the
federal level, tax deductions already exist for energy-efficient building equipment. Tax
credits are available for certain renewable energy equipment. Various incentives to
install energy-efficient and renewable energy facilities are also in place in California,
Minnesota, Washington, New York, and other states. Seattle allows projects in certain
areas to increase their size and height if those projects achieve a LEED Silver rating.
Since buildings account for such a large percentage of greenhouse gas emissions
(approximately 40 percent of total emissions in the United States), green building
would have to be a focus of any national climate change policy. A cap-and-trade pro-
gram could give developers who construct very energy-efficient buildings the oppor-
tunity to sell energy savings on the open market. One expert has noted that carbon
trading could account for from 3 to 8 percent of a building’s cash flow. 3
The legal landscape will change rapidly in the coming years. Developers planning
to build green must be aware of that landscape’s roadblocks and opportunities.

Financing

The emergence of green building does not appear, at this writing, to have significantly
affected the legal issues related to financing commercial real estate, but we note here a
couple of items to consider when negotiating a loan related to a green building project.
The first is appraisals. The amount an owner will be able to borrow against a green
building depends on the appraisal. Green buildings, because of lower operating costs
and expected market demand, will be more valuable than comparable buildings that
are less efficient. To make sure this premium is considered, owners should try to have
appraisals performed by appraisers with experience evaluating green buildings.