This question comes from Meg in New Canaan NY.
Hi Victor
Hope all is well with you and your family. I have a question with regard to sustainable building practices in real estate investment projects.
We have been designing our homes using more sustainable building practices for the past several years. Here in NY, the requirements for clean energy are set to get even stricter and, on top of that, we have a moratorium on new natural gas lines in our area that I don’t envision the state lifting in full. For residential, natural gas is not supplied to a development unless there is already gas on site and upgrades to the existing meter are not allowed. For commercial projects it is similar although I don’t know all the specifics.
I was wondering how you are handling the call for clean energy, energy reduction, and sustainability in your projects. As well, are you seeing any appreciation from the buyers/renters/investors for your efforts to provide cleaner energy and more sustainable, energy efficient buildings? Are people willing to pay more rent in these types of projects or willing to purchase for more of a premium? Do you have more or less investors interested in these types of projects?
Thank you for your time. I always appreciate your perspective.
Meg,
This is a great question. There are two ways to answer this question.
- Don’t develop in NY State. There are so many easier places to develop with less overhead, less bureaucracy, lower taxes, stronger demand, better profit margins, and on and on.
But that’s not a very good answer to your question.
2) If natural gas is no longer permitted for new installations, you could comply by putting in an electric system and simply pushing the environmental problem onto the electric utility. The old resistive systems are very inefficient and among the most costly to operate. Still, NY has access to relatively cheap power.
New York State gets 44% of its electricity from burning natural gas. 30% comes from nuclear, and tt buys 18% of its electricity from the James Bay hydroelectric project in Northern Quebec and Labrador. This environmentally friendly alternative to burning fossil fuels flooded 4,500 square miles of forest causing incalculable ecological damage to this ancient boreal forest. But since there were only about 5,000 native indigenous people living in the area, the impact was deemed acceptable and the project got pushed through and built with no environmental assessment. NY state still has four coal fired electric power plants in operation. Natural gas is among the cleanest burning fuels in existence. It’s a bit hypocritical that they’re converting coal fired plants to natural gas at the same time as they’re telling homeowners they can’t use it.
We have not found a meaningful metric that would make the benefit of a low emissions system attractive to tenants.
We have found that achieving energy efficiency requires a number of changes to the design. In fact, it has more to do with choice of materials than anything else. This includes more expensive, more highly insulated windows. Naturally, each of these choices increases the cost. Closed cell foam insulation is more effective than other forms of insulation. But again, it costs more.
By far the most effective and cost effect method of providing heat to a property is by using a geothermal system. This is like a heat pump, except that the heat source is the thermal mass of the ground rather than trying to extract heat from the winter air that is potentially very cold. These systems require a fair bit of land or a deep well in order to gain access to a meaningful heat source.
