How affordability challenges, climate stress, AI demand, and changing consumer priorities impacted the housing sector in 2025, forcing a new definition of value in 2026.
2025 will go down, at least in my mind, as the year the cracks in our housing system stopped being theoretical. They showed up in blown transformers and rolling outages.
In flooded neighborhoods and redlined insurance maps. In data-center proposals that promise jobs and tax revenue, but quietly lock communities into soaring energy bills and unsustainable water demand. In builders deciding to step away from sustainability commitments due to sunsetting federal incentives. In families who can “afford” a mortgage on paper but not the actual cost of living in their homes.
And yet, beneath all of the uncertainty and pressure, 2025 was also a year of profound clarity and innovation.
Two Steps Forward, One Step Back
Federal incentives for energy efficient, electric, solar powered homes put in place by the Inflation Reduction Act (IRA) were eliminated with the passing of the One Big Beautiful Bill (OBBB), but the demand for high-performance, healthy, decarbonized homes continued to accelerate.
It has been a tale of two types of builders: the sunsetting of 45L has caused some large builders to step away from sustainability commitments and performance standards, reverting to building the cheapest homes they can while still meeting code to control costs.
Meanwhile, others are finding new ways to enhance the sustainability of their projects while maintaining affordability. They’re leveraging resource efficiency, energy independence, resiliency, wellness, and cost savings as major factors of differentiation.
It has become clear this year that sustainability solutions should not rely on federal incentives, which ebb and flow with administration changes. Rather, these innovative solutions should be able to stand toe to toe with conventional solutions—market forces, not incentives, should be the real engine of progress.
Additionally, while federal incentives wane, state and local governments have advanced robust environmental standards. California and Massachusetts are leading the charge in mandating comprehensive greenhouse gas (GHG) emissions disclosures for building projects, emphasizing transparency and accountability. States like New York, New Jersey, Oregon, Washington, and Colorado are following suit.
On the code front, the 2024 International Energy Conservation Code (IECC) introduces significant updates, including requirements for operational carbon rating and energy reporting.
Because of these advancing codes and regulations, new risks are materializing for stakeholders throughout the building industry, such as non-compliance fines, permitting delays, and reputational damage.
Keep Calm and Carry On
Even in the face of sunsetting incentives and market uncertainty, many leading builders are not raising alarm bells, nor are they walking back from sustainability commitments.
The general consensus for these builders: yes, market conditions are tough, but sustainability is helping to reduce costs, increase profitability, boost competitive advantage, and meet buyer demand.
Green Builder Media’s annual State of the Industry survey recently revealed the struggles and successes that builders experienced in 2025.
Approximately 43% of builders believe that the economy is getting better. 35% believe it is getting worse.
Builders report that the top three factors impacting their ability to sell homes in 2025 have been materials prices, mortgage rates, and labor shortages. This largely echoes the sentiment in 2024, with marked improvement with respect to land cost, land availability, and mortgage challenges they faced in 2023.
To navigate market uncertainty, nearly 80% of builders are exploring new products, namely townhomes and multifamily units, to augment single family home offerings and provide a wider spectrum of choices that meet today’s homebuyers’ budgets.
Reflecting the ethos of the market in the face of intensifying climate events, nearly 70% of builders claim that they are promoting their homes as resilient, up nearly 10% from 2024. Perhaps the increased interest in resilient structures stems from the fact that almost 70% of builders claim that climate events have impacted their ability to get insurance for their projects—a dramatic increase from last year’s 35% response rate.
Climate Stress and the AI Boom
This year more than ever before, we witnessed the collision between resource scarcity and the explosive growth of AI data centers, memorialized as drought-stricken communities and revenue-starved municipalities have been asked to host massive energy- and water-hungry facilities at the exact moment their budgets and infrastructure are buckling.
That’s not an abstract concern. Climate-exacerbated drought already represents an estimated $760 billion climate risk to U.S. municipal bonds (a number that is more than hurricanes and wildfires combined.)
At the same time, a recent analysis from Western Resource Advocates projects that data centers could drive a 55% surge in U.S. electricity demand by 2035, enough to power dozens of cities the size of Las Vegas.
This theme—hidden risk, misaligned incentives, and fragile systems—is pervasive in the conversations that we’re having with builders, developers, and manufacturers.
From water-stressed towns struggling to maintain basic services to city budgets destabilized by climate disasters to community projects delayed or canceled due to climate events, it is becoming evident that when we ignore climate risk in our financial systems, insurance risk analysis, and housing valuations, it doesn’t disappear. It just shows up later as crisis.
And homeowners are in the crosshairs—with energy costs project to increase by up to 25% in some markets for the average American family by 2030, our voracious appetite for data may be the last straw in the affordability crisis.
New Energy Model
Homeowner confidence in the grid is rapidly eroding. A recent survey conducted by Sunrun reveals that:
80% of homeowners worry that AI data centers will drive up their electricity costs.
68% doubt their utility can keep up with rising demand.
81% experienced at least one power outage in the past year.
Only 11% felt “very prepared” for their last outage.
But the survey also revealed something hopeful: 91% of homeowners believe home solar + storage solutions strengthen the grid, and 92% say they’d be willing to share excess energy with neighbors during peak demand.
In other words, homeowners don’t just want to be protected; they want to participate. They’re ready to move from energy consumers to energy collaborators.
Distributed solar + storage turns anxiety about unreliable, expensive power into stability, resilience, and independence. In some cases, Virtual Power Plants (VPPs) can even become a revenue source for homeowners.
That mindset shift—toward shared resilience, local generation, and interactive grids—is going to define the next decade of housing as consumers demand increased safety, security, peace of mind, and empowerment.
Resiliency Rising
2025 also brought living proof that resilience is not a buzzword—it’s a smart business model that leads to reduced risk and lower costs.
We now live in a world where a water shortage can trigger a municipal bond downgrade, where wildfire smoke can shut down cities hundreds of miles from the flames, and where a single hyperscale data campus can absorb the electricity needs of an entire region.
Climate events regularly impact balance sheets. For the first time in modern memory, local governments are experiencing climate-induced credit pressure. Utilities are forecasting dramatic load increases. Insurance markets are constricting or retreating entirely from certain markets. And builders and consumers alike, already squeezed by affordability pressures, are now staring down rising costs from all directions.
Climate volatility is requiring new performance standards—extreme heat, flooding, wildfire smoke, and drought demand new resilience approaches in design, infrastructure, and community planning.
Generational shifts are driving demand for resiliency: COGNITION Smart Data shows clear preferences from younger buyers for grid-interactive homes, local resilience, and climate-conscious neighborhoods.
Drastic Times Call for Commanding Leadership
We’ve seen a growing gap this year between leading and laggard builders and developers. Trailblazers like Beazer Homes, Sekisui House, and Kitson & Partners are moving beyond incremental improvement and toward intentional, integrated planning across energy, water, transportation, communications, and housing systems.
These progressive builders and developers are:
Designing homes that maintain livability during outages.
Accelerating electrification paired with onsite generation and storage.
Prioritizing water efficiency, reuse, and drought-smart landscaping.
Ensuring IAQ, thermal health, and wellness are baselines, not luxuries.
Partnering with municipalities and utilities on community-scale energy, water, and waste solutions.
Embracing transparency and community engagement in development decisions.
Planning for — and pricing — climate risk appropriately.
The results can be transformational: microgrid neighborhoods, circular-water communities, net-positive homes, climate-adaptive streetscapes, and digital infrastructure designed to strengthen, not strain, local systems.
Babcock Ranch in Florida has become a national symbol of what climate-ready, master-planned communities can look like in practice. Designed around solar, hardened infrastructure, smart water systems, and nature-based strategies, it has repeatedly kept the lights on and avoided major flooding while neighboring communities have suffered devastating storm impacts.
The lessons from Babcock Ranch and other resilient communities are straightforward: resilience protects lives and property, stabilizes long-term operating costs, and protects tax bases.
Unfortunately, the financial system hasn’t caught up. Too many resilient homes still don’t qualify for lower insurance premiums. Too many lenders, appraisers, and rating systems still treat high-performance, resilient homes as niche upgrades instead of an essential strategy for risk mitigation.
From Price Per Square Foot to Value Per Square Foot
2025 was the year when the Green Builder Media team initiated the effort to shift from the obsolete valuation of price per square foot to value per square foot.
We are still pricing homes as if size is the primary proxy for value. But the families moving into those homes are living in a fundamentally different reality, with soaring insurance premiums, volatile utility bills, and mushrooming climate risk.
COGNITION Smart Data confirms what many high-performance builders are saying: across generations, buyers are finally prioritizing full cost of ownership—including utilities, insurance, maintenance, and resilience—over simple first cost and price per square foot.
Changing times call for changing valuation metrics. Value per Square Foot accounts for:
Decarbonization (embodied and operational carbon, regulatory and market risk)
Energy performance (efficiency, renewables, independence, predictable bills)
Health & wellness (IAQ, materials, mental health, sleep, acoustic comfort)
Water (efficiency, reliability, quality, rising scarcity)
Community & access (mobility, services, social cohesion, nature)
It’s time to correct a distortion at the heart of how we value homes—and, in many ways, how we value people.
Housing is one of the most visible places these contradictions show up. A home can be designed to heal, protect, and empower its occupants—or it can quietly drain their finances, erode their health, and expose them to escalating climate and infrastructure risk. Yet in our spreadsheets and pro formas, those two homes may look nearly identical.
Looking Ahead
On the surface, the housing headlines for 2026 look cautiously optimistic. Fannie Mae now projects that U.S. home sales will rise to about 5.16 million in 2026, with mortgage rates easing toward 5.9% by late 2026—their lowest level since 2022.
The Mortgage Bankers Association expects total mortgage originations to grow from roughly $1.85 trillion in 2025 to $2.3 trillion in 2026, driven by both purchase and refi activity as rates come down.
We’re likely leaving the “frozen” phase of the housing market and entering a period of thaw and re-engagement.
Based on COGNITION Smart Data trends we’ve been tracking throughout 2025, here’s what we expect to intensify in 2026:
Resilience as affordability: More buyers will equate resilience upgrades (backup power, hardened envelopes, fire and flood mitigation) with long-term cost stability.
Operational cost obsession: With utility and insurance volatility fresh in people’s minds, monthly “all-in” housing costs (PIETIM: principal, interest, energy, taxes, insurance, maintenance) will become a primary decision driver.
Health as a baseline: Demand for healthy-home features such as IAQ, low-toxic materials, moisture management, acoustic comfort, and sleep quality will continue to climb, especially among Millennial and Gen Z buyers.
Verification and transparency: Certifications, third-party ratings, and clear, simple performance metrics will matter more than ever. Consumers are increasingly skeptical of vague “green” claims—they want proof.
Distributed energy participation: As more utilities roll out demand-response, VPP, and DER programs, homeowners will expect their homes to be grid-interactive, not passive. They’ll ask not just “What’s my bill?” but “How does this home perform when the grid is stressed?”
In 2026, the Green Builder Media team will be leaning into a few key questions:
How do we make Value per Square Foot more than an idea—how do we turn it into a practical framework that lenders, insurers, appraisers, and builders can actually use?
How do we mainstream grid-interactive, resilient homes so that they become the default in every climate-exposed market?
How do we integrate climate-risk analytics into project planning in ways that improve both equity and profitability?
How do we align messaging and metrics so that what we say we value—health, stability, resilience, community—actually shows up in how we measure, finance, and reward housing?
We look forward to exploring these topics, and many others, in 2026 and beyond.
What are the most pressing topics on your mind? Write to me at sara.gutterman@greenbuildermedia.com and let me know what you’re thinking about and working on.
As cofounder and CEO of Green Builder Media, Sara is a visionary thought leader and passionate advocate for sustainability. A former venture capitalist, she has participated in the life cycle (from funding to exit) of over 20 companies, with an emphasis on combining sustainability and profitability. She lives in Lake City, Colo., with her husband, where she is an avid long-distance runner, snowboarder, and Crossfit trainer. She is also on the Board of Directors at Dvele, runs the Rural Segment for Energize Colorado, and is a former County Commissioner.
2025 in Review
How affordability challenges, climate stress, AI demand, and changing consumer priorities impacted the housing sector in 2025, forcing a new definition of value in 2026.
2025 will go down, at least in my mind, as the year the cracks in our housing system stopped being theoretical. They showed up in blown transformers and rolling outages.
In flooded neighborhoods and redlined insurance maps. In data-center proposals that promise jobs and tax revenue, but quietly lock communities into soaring energy bills and unsustainable water demand. In builders deciding to step away from sustainability commitments due to sunsetting federal incentives. In families who can “afford” a mortgage on paper but not the actual cost of living in their homes.
And yet, beneath all of the uncertainty and pressure, 2025 was also a year of profound clarity and innovation.
Two Steps Forward, One Step Back
Federal incentives for energy efficient, electric, solar powered homes put in place by the Inflation Reduction Act (IRA) were eliminated with the passing of the One Big Beautiful Bill (OBBB), but the demand for high-performance, healthy, decarbonized homes continued to accelerate.
It has been a tale of two types of builders: the sunsetting of 45L has caused some large builders to step away from sustainability commitments and performance standards, reverting to building the cheapest homes they can while still meeting code to control costs.
Meanwhile, others are finding new ways to enhance the sustainability of their projects while maintaining affordability. They’re leveraging resource efficiency, energy independence, resiliency, wellness, and cost savings as major factors of differentiation.
It has become clear this year that sustainability solutions should not rely on federal incentives, which ebb and flow with administration changes. Rather, these innovative solutions should be able to stand toe to toe with conventional solutions—market forces, not incentives, should be the real engine of progress.
Additionally, while federal incentives wane, state and local governments have advanced robust environmental standards. California and Massachusetts are leading the charge in mandating comprehensive greenhouse gas (GHG) emissions disclosures for building projects, emphasizing transparency and accountability. States like New York, New Jersey, Oregon, Washington, and Colorado are following suit.
On the code front, the 2024 International Energy Conservation Code (IECC) introduces significant updates, including requirements for operational carbon rating and energy reporting.
Because of these advancing codes and regulations, new risks are materializing for stakeholders throughout the building industry, such as non-compliance fines, permitting delays, and reputational damage.
Keep Calm and Carry On
Even in the face of sunsetting incentives and market uncertainty, many leading builders are not raising alarm bells, nor are they walking back from sustainability commitments.
The general consensus for these builders: yes, market conditions are tough, but sustainability is helping to reduce costs, increase profitability, boost competitive advantage, and meet buyer demand.
Green Builder Media’s annual State of the Industry survey recently revealed the struggles and successes that builders experienced in 2025.
Climate Stress and the AI Boom
This year more than ever before, we witnessed the collision between resource scarcity and the explosive growth of AI data centers, memorialized as drought-stricken communities and revenue-starved municipalities have been asked to host massive energy- and water-hungry facilities at the exact moment their budgets and infrastructure are buckling.
That’s not an abstract concern. Climate-exacerbated drought already represents an estimated $760 billion climate risk to U.S. municipal bonds (a number that is more than hurricanes and wildfires combined.)
At the same time, a recent analysis from Western Resource Advocates projects that data centers could drive a 55% surge in U.S. electricity demand by 2035, enough to power dozens of cities the size of Las Vegas.
This theme—hidden risk, misaligned incentives, and fragile systems—is pervasive in the conversations that we’re having with builders, developers, and manufacturers.
From water-stressed towns struggling to maintain basic services to city budgets destabilized by climate disasters to community projects delayed or canceled due to climate events, it is becoming evident that when we ignore climate risk in our financial systems, insurance risk analysis, and housing valuations, it doesn’t disappear. It just shows up later as crisis.
And homeowners are in the crosshairs—with energy costs project to increase by up to 25% in some markets for the average American family by 2030, our voracious appetite for data may be the last straw in the affordability crisis.
New Energy Model
Homeowner confidence in the grid is rapidly eroding. A recent survey conducted by Sunrun reveals that:
But the survey also revealed something hopeful: 91% of homeowners believe home solar + storage solutions strengthen the grid, and 92% say they’d be willing to share excess energy with neighbors during peak demand.
In other words, homeowners don’t just want to be protected; they want to participate. They’re ready to move from energy consumers to energy collaborators.
Distributed solar + storage turns anxiety about unreliable, expensive power into stability, resilience, and independence. In some cases, Virtual Power Plants (VPPs) can even become a revenue source for homeowners.
That mindset shift—toward shared resilience, local generation, and interactive grids—is going to define the next decade of housing as consumers demand increased safety, security, peace of mind, and empowerment.
Resiliency Rising
2025 also brought living proof that resilience is not a buzzword—it’s a smart business model that leads to reduced risk and lower costs.
We now live in a world where a water shortage can trigger a municipal bond downgrade, where wildfire smoke can shut down cities hundreds of miles from the flames, and where a single hyperscale data campus can absorb the electricity needs of an entire region.
Climate events regularly impact balance sheets. For the first time in modern memory, local governments are experiencing climate-induced credit pressure. Utilities are forecasting dramatic load increases. Insurance markets are constricting or retreating entirely from certain markets. And builders and consumers alike, already squeezed by affordability pressures, are now staring down rising costs from all directions.
Climate volatility is requiring new performance standards—extreme heat, flooding, wildfire smoke, and drought demand new resilience approaches in design, infrastructure, and community planning.
Generational shifts are driving demand for resiliency: COGNITION Smart Data shows clear preferences from younger buyers for grid-interactive homes, local resilience, and climate-conscious neighborhoods.
Drastic Times Call for Commanding Leadership
We’ve seen a growing gap this year between leading and laggard builders and developers. Trailblazers like Beazer Homes, Sekisui House, and Kitson & Partners are moving beyond incremental improvement and toward intentional, integrated planning across energy, water, transportation, communications, and housing systems.
These progressive builders and developers are:
The results can be transformational: microgrid neighborhoods, circular-water communities, net-positive homes, climate-adaptive streetscapes, and digital infrastructure designed to strengthen, not strain, local systems.
Babcock Ranch in Florida has become a national symbol of what climate-ready, master-planned communities can look like in practice. Designed around solar, hardened infrastructure, smart water systems, and nature-based strategies, it has repeatedly kept the lights on and avoided major flooding while neighboring communities have suffered devastating storm impacts.
The lessons from Babcock Ranch and other resilient communities are straightforward: resilience protects lives and property, stabilizes long-term operating costs, and protects tax bases.
Unfortunately, the financial system hasn’t caught up. Too many resilient homes still don’t qualify for lower insurance premiums. Too many lenders, appraisers, and rating systems still treat high-performance, resilient homes as niche upgrades instead of an essential strategy for risk mitigation.
From Price Per Square Foot to Value Per Square Foot
2025 was the year when the Green Builder Media team initiated the effort to shift from the obsolete valuation of price per square foot to value per square foot.
We are still pricing homes as if size is the primary proxy for value. But the families moving into those homes are living in a fundamentally different reality, with soaring insurance premiums, volatile utility bills, and mushrooming climate risk.
COGNITION Smart Data confirms what many high-performance builders are saying: across generations, buyers are finally prioritizing full cost of ownership—including utilities, insurance, maintenance, and resilience—over simple first cost and price per square foot.
Changing times call for changing valuation metrics. Value per Square Foot accounts for:
It’s time to correct a distortion at the heart of how we value homes—and, in many ways, how we value people.
Housing is one of the most visible places these contradictions show up. A home can be designed to heal, protect, and empower its occupants—or it can quietly drain their finances, erode their health, and expose them to escalating climate and infrastructure risk. Yet in our spreadsheets and pro formas, those two homes may look nearly identical.
Looking Ahead
On the surface, the housing headlines for 2026 look cautiously optimistic. Fannie Mae now projects that U.S. home sales will rise to about 5.16 million in 2026, with mortgage rates easing toward 5.9% by late 2026—their lowest level since 2022.
The Mortgage Bankers Association expects total mortgage originations to grow from roughly $1.85 trillion in 2025 to $2.3 trillion in 2026, driven by both purchase and refi activity as rates come down.
We’re likely leaving the “frozen” phase of the housing market and entering a period of thaw and re-engagement.
Based on COGNITION Smart Data trends we’ve been tracking throughout 2025, here’s what we expect to intensify in 2026:
In 2026, the Green Builder Media team will be leaning into a few key questions:
We look forward to exploring these topics, and many others, in 2026 and beyond.
What are the most pressing topics on your mind? Write to me at sara.gutterman@greenbuildermedia.com and let me know what you’re thinking about and working on.
Publisher’s Note: Green Builder's 20th Anniversary celebration is sponsored by: Carrier, Trex, and Mohawk.
By Sara Gutterman
As cofounder and CEO of Green Builder Media, Sara is a visionary thought leader and passionate advocate for sustainability. A former venture capitalist, she has participated in the life cycle (from funding to exit) of over 20 companies, with an emphasis on combining sustainability and profitability. She lives in Lake City, Colo., with her husband, where she is an avid long-distance runner, snowboarder, and Crossfit trainer. She is also on the Board of Directors at Dvele, runs the Rural Segment for Energize Colorado, and is a former County Commissioner.Also Read