Sustainable Housing: Energy and affordability

Posted Wednesday, April 25, 2012 in Sustainable Maine

Sustainable Housing: Energy and affordability

by Paul Kando

The price of a home is one thing; what it costs to live in it is another. In addition to the rent or mortgage payment, taxes, insurance and maintenance, it includes the price of energy to keep comfortable and transportation-related costs to and from work.  

A 30-year fixed rate mortgage at 4.01% translates to a monthly payment of $4.78 for each $1,000 borrowed. The monthly payment on a $200,000 mortgage, for example, works out to be $956. Taxes and insurance may come to $4,000 per year or $333.33 per month. If the house consumes 1,000 gallons of oil at $4 per gallon, that will add another $4,000 per year or $333.33 per month. Add another $5,000 for the cost of financing, insuring, licensing and maintaining a car, a total of $10,000 for a two-car family, or $833.33 per month. So far our monthly “housing costs“ total $2,456.

Depending on the distance from work, we must now add the fuel cost of commuting. At $4 per gallon, a typical commuter traveling 36 miles per day in a typical car getting an average of 18 miles to the gallon will spend $240 per car or $480 per month for two, bringing the total monthly bill to $2,936. Tolls and parking, if any, are additional.  

There has been much talk about “affordable housing” and programs to finance it. Yet it is increasingly clear that affordability does not primarily depend on the purchase price of a home: Still self-sufficient seniors on fixed incomes, for example, are often denied the chance to stay on in their own homes, even though the mortgage has been fully paid off.

In the above example the mortgage, taxes and home insurance represent only 44 percent of the total cost of occupancy; 28 percent is spent on energy and the remainder mostly on the two cars, without which it would not be possible to commute to work and, therefore, live there at all. If we want affordability, there is not much we can do about mortgage, taxes and insurance. Our opportunities lie in minimizing the cost of energy and transportation.

A hundred dollars per month saved on the energy bill would make $100 more available for mortgage payments. Even ignoring the mortgage-interest tax deduction, an additional $100 a month ($1,200 per year) could pay for as much as  $21,000 worth of energy conservation, without affecting the monthly mortgage payment. Therefore building a new house without maximizing energy efficiency — i.e. meet the passivhaus standard and reduce home energy consumption by 90 percent compared to the average home — makes no economic sense, even if oil prices remain flat. However, if long-term predictions of an average 6.8 percent increase in oil prices hold true, fuel oil costing $100 today will cost close to $800 by the end of a 30-year mortgage.

Nor does it make sense to buy an existing house based on its “affordable” purchase price when energy and commuting costs are likely to account for a far larger part of future occupancy costs than the mortgage payments. Whether retirees or first-home buyers, investors or growing families, home buyers all face a two-part challenge:

The first part is to minimize energy consumption and thus vulnerability to energy-cost fluctuations, without compromising indoor comfort. Whether you build or buy, it behooves you to understand how energy, air and moisture interact in a house. The tools and techniques of construction are by now well known: air-seal, insulate, provide ventilation without wasting heat, avoid thermal bridges in the structure, use energy-efficient windows. The devil, however, is in the details: how well, how knowledgeably each of these measures is implemented. And the only way to know that is to have the house tested.

Builders of super-energy-efficient homes already test their houses and can predict their energy consumption. There is absolutely no good reason why anyone should buy an existing house without knowing its energy performance either. An energy audit doesn’t cost much, especially when compared to the worth of a home. Before you buy, demand to see a detailed, professional report prepared by an independent auditor with no financial stake in any potential remediation work. Understand what you read and the basics of building science. Take a class, attend a homeowner energy clinic, schedule and participate in an energy audit. The knowledge you gain will help you improve your house yourself if you choose. It will certainly help you avoid being taken in by the under-qualified. Remember: Building science is a new field for most contractors too.

The second part of the affordability challenge is to minimize the cost of transportation between home and workplace, our subject for another day.

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