Call it The Norman Conquest of local regulator-home builder dynamics.
Here is a story, featured in our sibling Journal of Light Construction, whose simple facts matter on a multitude of levels for home builders and remodelers.
The who, what, where, when, and why are straightforward.
An Oklahoma city, Norman, is exploring a new way to lower its energy use by, for all intents and purposes, paying builders to build better.
Using RESNET’s HERS scores, the city, starting July 1, is discounting its building permit fees on a progressive scaled basis, for homes that achieve a HERS Index Score of 65 at a minimum. A HERS rating of 55 will get the builder a full 100% discount on the building fee. A report in the Norman Transcript newspaper notes:
The Transcript quoted city council member Bill Hickman, “We wanted to incentivize builders to build a better quality product of energy efficient homes,” It has an environmental benefit, but knowing that it costs more money, the incentive was a way to encourage them to do it.”
“We’ve gotten overwhelming support from the building community and the largest homebuilders in town, like Ideal Homes and Home Creations,” Hickman said. “It’s a rare opportunity when we can bring forward a policy that has support from the building community and the environmental community. So I’m very excited and thrilled about this.”
Here’s at least three critical take-aways of why this matters.
- First, it’s a clear instance of collaboration rather than opposition in the relationship between local regulatory officials and builders.
- Secondly, the initiative reflects an astonishing embrace of “beyond-first-costs” value creation, with a crystal clear set of mechanics as to who invests what and how each party’s “skin in the game” can produce an outcome that everybody can agree on is a net greater value.
- Third, and perhaps, most important of all, given the intensified sense of stubborn intractability in how localities deal with would-be residential developers and builders, is the role of education–learning–in how Norman’s city council came to the conclusion that a win for builders is a win for Norman.
Now, at a moment when costs–their volatility, their supply-and-demand dynamics, the influence of intensifying global trade conflict, their relation to immigration policy, and their ties, to the tune of 25 cents on the dollar of each new home’s ultimate price tag, to local, regional, and national regulatory measures, fees, taxes, etc.–are foremost on builders’ minds, this matters. As builders try to bring new home orders through construction pipelines to completion and delivery, this story is a bright spot, because, ultimately, it’s about value–real-world economic value–trumping initial cost.
On the first point, the Norman initiative highlights a simple thought that can get lost in the noise of local activism, entrenched anti-development interests, or inertial malaise that sets in, making local officials feel as if they’re doing good if things in their municipality or jurisdiction aren’t getting worse.
The simple thought is that when builders build better value increases, period. Building better is building more durable, more sustainable, more aesthetically valuable, and higher-performing homes where people who live in them feel safe and feel they can prosper.
This, the city officials of Norman recognize, is good for the city of Norman, which is good for the city officials of Norman. A lower HERS score is not an add-on. It’s building better. It means lower energy use, which means lower operating expense, and lower cost to the city’s resources as well.
Lower HERS scores happen intentionally, requiring design, materials, and quality construction. They’re not simply a by-product of assembling structures of a certain square footage and then hanging out a for-sale shingle. HERS scores, like an MPG rating, tell everybody the same thing as far as how much a home should cost to operate, and do so in a comparative way relative to other homes on different parts of the HERS spectrum.
This translates into dollars and cents, and more and more people–home buyers, city officials, and designers and builders alike–are starting to get that building better is not so much about tree-hugging Mother Earth environmentalism as it is about plain, common-sense financial decision-making. So, the Norman pilot–and lets hope it turns into more than a pilot–reflects great strides in one of the more materially important challenges builders face today, which is to pivot off selling “first costs” as an entry-way into homeownership, toward selling “total cost of ownership” as a pathway to the American Dream.
The third point clearly evident in the Norman experiment is the role of learning, discovery, and education as a challenge for residential builders and developers today.
Builders and developers have made great strides in educating consumers–would-be customers–on what they can have and what they should expect new homes to be, how much they should cost, etc.
There are two areas builders and developers have their work cut out for them, and there’s no moment like mid-Summer of 2018 to apply brilliance to how to solve for them.
One is in educating young people to desire what a home builder has, does, and aspires to. Efforts like the venture Norbord and HBI have teamed up on, to open the construction trades training program in Houston, are a start. Young people are susceptible to being educated, to being inspired, to being motivated to start a career that will ground them in purpose, in opportunity to grow, and in day-to-day sense of accomplishment. You know that’s what home building is about. The more young people get to see, hear, and experience people who’re passionate about how jobs in construction fulfill them, the more they’ll be drawn in.
The second is almost even harder, because it involves educating people who are, for the most part, not young, not impressionable, and often, not open-minded.
Still, when you look at how local decision-makers in the city of Norman, Okla. approached leveraging a basic tool–the building permit–to create a win-win for both the city and for builders, there’s hope and reason to expect that more towns, more cities, more local jurisdictions will consider that 25% that regulation adds to the price tag of a new home as an opportunity area for improvement.
