When it comes to housing, today’s homebuyers are looking for a blend of attainability and sustainability. Affordability is certainly top of mind, but they also want the most sustainable home possible that lowers their total cost of homeownership. They’re willing to forgo fancy bells and whistles and even extra space in favor of upgrades that will lower monthly utility bills, keep them healthy, and enhance the resiliency of their homes.
Green Builder Media’s COGNITION Smart Data shows more than 50 percent of consumers now look at total value of homeownership rather than lowest upfront cost when purchasing a home. Younger generations are more willing than older generations to invest in sustainability upgrades to enhance energy efficiency, electrification, healthy home, water conservation, and resiliency if those upgrades will reduce ongoing costs over time.
Roughly 75 to 85 percent of millennial and Generation Z consumers surveyed for COGNITION indicated that they would pay more upfront for sustainability upgrades if they lower the ongoing cost of homeownership over time. This poses a question for building professionals: How do they meet this shift in consumer demand for enhanced sustainability?
One answer: Green certifications.
The Federal government has two primary home certification programs for energy efficiency: ENERGY STAR and Zero Energy Ready Home (ZERH). Both programs are designed to promote the construction of high-performance, healthy homes, but they have different goals and requirements.
ENERGY STAR, which is administered by the Environmental Protection Agency (EPA), focuses primarily on reducing energy consumption through efficient design and technology. The program utilizes building science best practices to reach specific performance targets.
ZERH includes all of the ENERGY STAR requirements, but it goes further to prepare homes to be able to produce as much energy as they consume (i.e., net-zero energy) through the integration of renewable energy systems. It also requires Indoor airPLUS certification, and some water conservation and efficiency elements.
The goal of the ENERGY STAR for Homes program is to enhance energy efficiency, reduce energy consumption, increase occupant comfort, and decrease operating costs.
ENERGY STAR certified homes meet stringent energy efficiency standards through use of high-performance building envelope systems, windows, doors, roofs, insulation, HVAC systems, water heaters, lighting and appliances. Homes that meet ENERGY STAR 3.2 standards are at least 10 percent more efficient than homes built to the 2021 IECC, resulting in lower energy bills for homeowners.
These homes are also designed for healthy indoor air quality, with rigorous requirements for ventilation, air exchange, moisture control and toxin control.
ENERGY STAR certified homes are eligible for a variety of rebates and incentives at the federal, state, and local levels, as well as from utility companies, which can offset the cost of upgrades. Builders that construct ENERGY STAR 3.2 certified homes can qualify for $2,500 per home in tax credits under Section 45L of the Inflation Reduction Act.
ZERH certification indicates that a home is so energy efficient that a renewable energy system could offset most or all the house’s annual energy use. ZERH homes must meet advanced levels of energy efficiency and be designed to accommodate renewable energy systems like solar photovoltaics and smart electrical panels.
ENERGY STAR and Indoor airPLUS certifications are prerequisites for the ZERH certification, but ZERH homes have additional requirements, such as advanced moisture control, enhanced indoor air quality, non-toxic materials, and renewable energy readiness. Homes built to ZERH v2 are at least 20 percent more efficient than homes built to the 2021 IECC.
ZERH homes are designed with climate responsiveness in mind, with construction practices that augment the durability of the home, reduce maintenance needs and enable homes to withstand extreme temperatures and climate events.
Homes that achieve ZERH certification often have a higher market value because of their energy efficiency, healthy indoor air quality and ability to integrate future technologies and renewable energy systems.
As with ENERGY STAR homes, ZERH certified homes are eligible for a variety of rebates and incentives. Builders that construct ZERH certified homes can qualify for up to $5,000 per home in tax credits under Section 45L of the Inflation Reduction Act.
There are a variety of administrative and implementation requirements for both the ENERGY STAR for Homes and ZERH programs. For example, a few of the ENERGY STAR Residential New Construction requirements include:
Requirements.
“For both ENERGY STAR and ZERH, a home is not eligible for the tax credit until it is actually acquired,” explains EPA ENERGY STAR Residential Branch Supervisor Jonathan Passe. “The difference comes in defining which version of the program requirements the home must be certified to in order to earn the credit.”
For the purposes of 45L, for ENERGY STAR, the minimum eligible program version is determined based on the dwelling’s acquisition date. But for ZERH, it is the permit date that governs the eligible version.
For example, if a builder constructs a home in 2024 that meets our v3.1 requirements and the home is also acquired in 2024, it can earn the tax credit in 2024 (because v3.1 is what is required in the legislation in 2024), Passe notes.
However, if the same home is acquired in 2025, then it would not earn the tax credit at the v3.1 level (because the legislation specifically calls out that v3.2 is required for homes acquired in 2025).
“For this reason, we’ve encouraged our partners to be mindful of their build-out schedules, especially as they get toward the end of a year where there will be a known transition in the 45L requirements (as is the case from 2024 to 2025),” he says.
In the case of ZERH, however, the required minimum version is established when the home is permitted, and the version required at the time of acquisition does not matter. So, a home can earn the tax credit using ZERH v1 even if, by the time it is acquired, ZERH v2 would otherwise be required.
“It is also important to note that, in some cases, a home may be certified as ENERGY STAR using a version of the program requirements that is not eligible for the 45L credit,” Passe says.
“For example, even though in 2025 earning the 45L tax credit will require that a home be certified to v3.2, in most states, EPA will continue to allow homes to be certified as ENERGY STAR using v3.1. Also of note, for ENERGY STAR certification (outside of 45L), the required version is defined based on the permit date.”
Other differences include specific requirements in the ZERH program that aren’t in ENERGY STAR, such as:
Beyond home certifications, demand for low carbon products, verified by Environmental Product Declarations (EPDs), is soaring.
An EPD is a standardized document that communicates the environmental performance and human health impacts of a product over its lifetime. EPDs are based on a product’s life-cycle assessment (LCA) which measures potential environmental impact from natural resource acquisition, through the production and use stage, and ultimately to end of life disposal or recycling.
EPDs are derived from product category rules, or PCRs, which outline how data is collected for specific types of products. As a result of having PCRs, EPDs enable a standard of comparison between different products in the same category, taking into account the most significant environmental aspects of a product, and showing objective and verifiable information about the environmental impact.
In a very short timeframe, EPDs have transformed from obscure to vital. According to a recent COGNITION survey:
This new COGNITION data is important for building professionals and manufacturers alike. For builders, offering homes that have low carbon products backed up by EPDs is an excellent way to differentiate an offering, enhance its brand reputation, justify pricing, and add value to buyers.
For manufacturers, EPDs are becoming a baseline necessity for builders and other product specifiers, as well as for states like California and municipalities like Boston that are beginning to require that homes and buildings reduce embodied and operational carbon emissions.
Interested in learning more? Green Builder Media’s COGNITION Academy has robust courses on green building programs like Energy Star, ZERH, Indoor airPLUS, WaterSense, and HERS ratings, as well as EPDs and other green product fundamentals. Visit the COGNITION Academy microsite for more information.
Publisher’s Note: This content is made possible by our Today’s Homeowner Campaign Sponsors: Whirlpool Corporation. Whirlpool Corporation takes sustainability seriously, in both their products and their operations. Learn more about building and buying homes that are more affordable and less resource intensive.