Asked by Christina Griffin AIA LEED AO
November 22, 2010
You’re right, this is an extremely common question. Most people investigating LEED-H want a straightforward answer regarding the incentives available for earning a LEED certification for their home.
It sounds like you have already reviewed the article here on Green Home Guide that provides an overview of incentives available. (Readers who have not yet seen the article can click here .)
Let’s dive a bit deeper into some of these resources and highlight a few points.
- First, there are no direct federal incentives at this time for certifying a home under the LEED for Homes program. While the program has close to 40,000 projects registered and growing, it still represents a small portion of the market.
- I believe that as LEED-H grows, so too will the opportunity to link federal incentives directly to the certification process.
- However, there are still many decisions that can be made as part of the LEED for Homes program that will help you qualify for federal, state, and local incentives.
Federal Tax Incentives
Opportunities: $1,500 for home improvement and a 30% rebate for renewable energy and geothermal systems.
A great starting point for a project is to have the client or potential homebuyer review their opportunities to take advantage of the federal tax credits that are available. I recommend the advice come from a tax professional for legal reasons. Each tax return is different, and you would not want to promise a tax break for purchasing or building a home when that incentive does not benefit the client. However -- despite the legalese -- many clients will in fact benefit.
There are two federal tax credits available at this time :
- Home Energy Efficiency Improvement Tax Credit
- Residential Renewable Energy Tax Credit
Home Energy Efficiency Improvement Tax Credit. This credit provides a 30% rebate for existing homes only up to $1,500. As a result, it does not apply to new construction or home purchases. However, for those who may be completing a LEED-H gut rehab, you may qualify for this credit, and you can model the energy savings by plugging your home information into the energy savings calculator provided by the U.S. Department of Energy.
Please note that the Home Energy Efficiency Improvement Tax Credit is scheduled to expire on December 31, 2010.
Residential Renewable Energy Tax Credit. This credit is quite extensive. It provides a 30% credit for installation of renewable energy systems (wind, solar and fuel cell) in addition to geothermal HVAC systems. The price for geothermal HVAC has decreased significantly in recent years. This tax incentive of 30% significantly lowers the return on investment (ROI) for installing a geothermal HVAC system when compared to a typical system. Recent comparisons demonstrate an ROI of 6-10 years.
If you are considering installing geothermal or renewable energy systems in your home as part of a LEED-H project, qualifying for these credits will provide significant cost relief and bolster your score in the EA section of the rating system.
I find the Energy Star website to be the best resource for understanding what is available from these tax credits, and I recommend you read the complete descriptions there.
State and Local Incentives
Opportunities: Tax incentives, utility rebates, grants, loans, net metering availability.
This step can be crucial in identifying significant incentives, but
it has to be thoroughly reviewed early in the process for many of the programs. One point of note is that the requirements are stringent and must be adhered to as you are moving through the construction process. At the end of the day, it is expected that you have to work to get free money. I find the most comprehensive site for finding these incentives is the Database of State Incentives for Renewables and Efficiency (DSIRE) .
Tax Incentives: These incentives range from property to state tax rebates taken typically in the year construction or occupancy occurs.
Utility Rebates: The incentives range from funding for renewables to cash payments for generating electricity, conserving energy, or purchasing green power.
Home Loans: The major incentive here is to receive more money than is typical for purchasing or constructing an energy efficient home. The logic is that you will have more spendable income because your utility bills will be lower.
Net Metering Availability: The ability to get credit and/or cash for generating power from your renewable energy system is crucial. In addition to understanding the opportunities, many opportunities exist to earn money from SREC programs.
Pursuing LEED could provide several smaller incentives that add up to a significant source of funding for a project. Knowing what is available in advance is crucial to the decision process. Making decisions that pay you back is the goal and the DSIRE database provides opportunities to pick some low-hanging fruit off the money tree.
Future Incentives: Unexpected cost savings down the road
It is obvious that the energy efficiency of a LEED-certified home will save you money, given the almost predictable increase in energy costs in the future. What isn’t obvious are the many other benefits a LEED home could provide down the road.
Future incentives cannot be calculated as simply as the incentives currently available. The fact is that they may never exist. However, given the climate and municipal economic trends, they can’t be ruled out.
Stormwater Management and Water Conservation. There have been interesting developments in municipal regulations which imply that owning a LEED-H home will provide benefits in years to come. Over the past five years, many municipalities have developed fees and creative separate taxation of stormwater management. The amount of precipitation has increased by 5% over the past 50 years. Is this coming soon to your municipality?
Similarly, the incidence of heat waves and drought has increased, making the ROI on items such as rainwater collection and water conservation suddenly faster should these trends continue.
Durability. The durability incentive is not often communicated when considering LEED. Regardless of the certification level, each LEED home requires the builder develop a durability checklist to ensure that regional home construction issues are addressed and inspected for quality control during the building process. A third party verifies the items on this list and inspects to ensure compliance with the durability plan.
In closing, perhaps the best source of information that is not published to the Internet is the wealth of knowledge that can be provided by your LEED for Homes provider. These organizations have their fingers on the pulse of information flowing from the incentive providers.
My experience with LEED-H providers is that the information and assistance they can provide in finding and applying for incentives for a LEED-H project will more than likely cover the cost of certifying your home.
Good luck on your project.
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