How much does it cost to “go green?”

Building green developments towards a zero carbon standard costs an additional £20 per square foot (psf), according to new research from CBRE Hamptons International.

The leading property advisor’s new report, entitled “When Does Green Mean Go?”, investigates the costs of green residential design and construction by creating and evaluating a theoretical green building designed by leading architects Lewellyn Davies Yeang. The development includes such features as a combined heat and power system, a sky garden, natural ventilation and lighting, and energy efficient appliances, among many other green components which were also evaluated.

The research illustrates that there is still a question of how and when we reach a tipping point for the development of zero carbon homes on a mass scale to become standard. It requires the convergence of public sentiment, legislation and technology acting toward the goal of CO2 reduction.

Some of the key findings from the report include:

The Green Premium

Analysis of CBREHI’s model green development reveals a green premium of £20.63 psf, or around 12.5%. Using standard building costs of £162.65 psf, the cost of building a 650 sq ft flat is therefore £105,700. This represents an increased cost of £13,400 on the same 650 sq ft flat.

Lower End of the Market Absorbing the Premium

The stamp duty exemption for zero-carbon homes is a start, but it is insufficient and does nothing to address green developments which fall short of this standard. In addition, it is also inequitable.

The buyer of a “green” 650 sq ft flat in London will see an increased cost of £13,400. If this flat were to be valued at £200,000, the tax duty exemption would only total £2,000, and the buyer will have to absorb approximately 85% of the green premium. However, the same flat in a more affluent area of London, costing £400,000, will see a stamp duty exemption of £12,000, leaving the buyer to pay only 10% of the green premium.

Consumers Willing to Pay … But Not Necessarily Enough

“When Does Green Mean Go?” also included recent survey results completed at St James’ Kennet Island development in Reading. Prospective purchasers at the show home were given an explanation of the “environhome1” concept, including the cost of installing key green features.

While 30% of consumers indicate a willingness to pay over £10,000 for a fully-fitted envirohome, a majority valued the envirohome at a level well below its full cost. It is clear that the goodwill of consumers, while significant, is insufficient for adoption of green technology at current prices. Without a recognized cost savings from adopting green technology, consumers consistently undervalue the true cost of these features.