114 million ways the AI is helping green building

“What’s the use of investing in a green building if you won’t get the benefit of any added value from the green features?”

That question presumes two things: 1) that green features always cost more, which is not true and a topic for another day, and 2) that the market does not accurately differentiate the financial benefits that green buildings add to the owner’s bottom line. At the present time, this is very true.

I don’t know anyone who hasn’t pointed out how hard it is for investments in green building and energy efficiency retrofits to scale up without the appraisal community providing that crucial feedback loop — property valuations that consider green strategies in place. Without this, banks and other capital providers have a hard time deciding how (much) to lend on and invest in sustainably built real estate.  That perpetuates the status quo — wasting resources, capital not flowing towards green real estate and continued community decline.

Here’s a first step towards addressing that problem on the residential side with potentially huge impact. The Appraisal Institute has just released a Residential Green and Energy Efficient Addendum, to help structure the way that appraisers can consider many typical green and energy efficiency features within their valuation of residential properties. While this is probably a first step in the AI addressing green residential valuation issues, when you think about the fact that we have 114 million residential structures in the US, this “little” form can help the trillions of dollars of US housing and mortgage market investors actually see the impact of their decisions (or non-decisions) about energy efficiency and green design features.

I know that similar efforts have been underway for commercial real estate valuation, too, for quite some time. We’ll keep sharing the word on that, but in the meantime, let’s appreciate the progress the AI has made with this closely linked milestone.

P.S.–> Go to the EIA’s Residential Energy Use Explained (the source for today’s image) for good download on energy use in the residential sector. 114 M residential structure estimate taken from 2009 RECS data tables.