Why are some builders more successful than others?

Although it's certainly easy to blame the ongoing economic malaise for trying times in the building industry, there are still some builders who are actually doing pretty well -- relatively speaking.

So what's their secret? Ridiculously cheap prices? Creative architecture? Mind control? According to Erik Cofield in the video below -- and who heads up North American sales for Buildtopia, a widely used web-based management software for builders -- it's a combination of both old-fashioned advantages such as a strong foundation (including funding, land and product), a well-oiled and evolving sales machine, and the ability to leverage technology.

July column for Builder & Developer now online

My column for the July 2011 issue of Builder & Developer magazine is now posted online.

For this issue, entitled "Tracking Shadow Inventory," I've been recently working on a project for a multi-family client to track non-traditional apartments in Southern California such as REO units, sales of non-owner-occupied homes and compare both the cost of ownership versus these apartments as well as what the new owners could rent them for and break even. Since the subject seemed so timely, I thought it was well worth covering it in more detail.

From the column:

...For apartment builders and owners, today's low interest rates means that potential tenants can often find a nicer and larger home for close to what they would otherwise be paying to live in a typical apartment. In some cases - such as when putting 20 percent down and borrowing the rest at 4.5 percent or so for 30 years - the monthly payment for both attached and detached homes plus taxes and HOA fees (when applicable) could still up to 25 percent less than what a tenant would pay for a traditional apartment...

To read the entire column, click here.

To read the entire July 2011 issue in digital format, click here.

Multi-family goes green

Although multi-family housing is currently the healthiest among the various real estate sectors, it has not necessarily been on the forefront of the green building revolution which has characterized single-family homes. Although that is quickly changing, there still remains a great deal of confusion about current standards, costs and regulations that are starting to emerge from various cities across the U.S.

Multi-Family Enjoys Sustainable Advantages

Fortunately, for builders and operators of multi-family projects, higher unit densities, smaller square footages and shared common areas or services make them substantially more sustainable than their single-family counterparts -- even before any green building techniques are employed. For example, a recent study funded by the EPA found that a typical apartment uses 38% less energy than a green single-family home. For those households looking to move from a typical single-family home in a far-flung suburb to a green multi-family building adjacent to mass transit options, the energy savings could exceed 70%.

LEED Being Replaced by Other Standards

However, simply building to green standards does not automatically generate cost savings, in large part because standards such as LEED don’t actually guarantee lower energy bills. Instead, they cover a wide range of environmental issues such as selecting specific building sites and using sustainable materials that may in some cases actually cost more to operate.

To address that issue, a number of municipalities and building owners – including the U.S. Army -- are instead turning to metrics which sync more easily with building codes. In California, CALGreen is slowly replacing LEED requirements, while other cities and states nationwide are reviewing adoption of the International Code Council’s own Green Construction Code. The general idea is that LEED can return to its roots as a voluntary set of standards for those developers wanting to go the extra mile, as opposed to a system adopted for establishing mandates.

Still, LEED continues to be very influential, having recently introduced its program for multi-family buildings with a height of four to six stories. And, although the National Green Building Standard started by the NAHB in 2007 has mostly been oriented towards single-family homes, a growing pipeline of multi-family certifications is beginning to gain traction.

The Rise of Benchmarking

One major stumbling block for multi-family operators seeking to obtain green credentials or tax incentives is minimizing energy use, and for that they’re increasingly turning to benchmarking. With benchmarking, operators regularly monitor energy use to determine whether a building is improving in comparison to itself, other buildings in a portfolio, and against similar structures. Yet even as cities are starting to mandate benchmarking using tools such as the EPA’s Portfolio Manager, the wide disparity in energy use for garden, mid-rise and high-rise multi-family buildings has made it difficult to create universal standards. Moreover, because the use of energy by individual tenants is protected by privacy laws, most energy audits remain focused on major building systems and common areas. Until individual energy usage is shared between utilities and the Department of Energy or local jurisdictions, benchmarking for multi-family buildings will remain incomplete.

Tax Incentives Remain Largely Unclaimed

For now, the federal government is continuing to offer tax-related incentives to multi-family developers and operators. Besides 451 federal tax credits, which provide $2,000 for each energy-efficient unit (as determined by a third party) built over the past three years, applicants can seek a 179D tax deduction of up to $1.80 per square foot for the design of new and retrofitted mid- and high-rise energy-efficient buildings. Still, due to the application process or lack of awareness, both of these programs remain underutilized. In the long run, however, building owners will increasingly be asked to provide energy use data to the ultimate arbiter – their prospective tenants.