State of the Building Industry: Trends to Note

Green Builder Media’s annual State of the Industry report revealed some important trends.

Sifting through COGNITION Smart Data about the state of today’s building industry offers some clues to the environment builders will be operating in throughout 2024 and beyond. Here are three trends to note.

Momentum for Decarbonization

Our economy is quickly decarbonizing as countries, companies, and individuals find ways to reduce their environmental footprint and minimize carbon emissions. The process is facilitating innovation at an unparalleled scale, unleashing potential for colossal capital gains across all sectors of the economy.

In the building sector, the conversation is quickly shifting from net zero energy, which measures the ongoing operations of a home or building, to net zero carbon. This takes into account the embodied carbon from material extraction, transportation, manufacturing, installation, operations, all the way through to end-of-life-use for the products and materials. 

COGNITION data shows that consumers are a central force in driving the transition to decarbonization. Consumers believe that companies with decarbonization strategies have positive brand equity, are more innovative, create more loyal employees and customers, and mitigate risk better than those without.

Consumers are actively taking steps to decarbonize their own lifestyles by driving EVs, increasing the energy efficiency of their homes, reducing waste, converting their homes to all-electric, and installing solar.

Consumers say that they’re willing to pay more for packaging, vehicles, apparel and even homes that are decarbonized.

What does that mean for homes? It means that they’re purchasing products and materials that will increase energy efficiency: high-performance insulation, windows, doors, roofing and building envelope systems, electrification technologies such as heat pumps for HVAC, water heating and dryers, and induction cooktops. They will also demand side energy management systems, as well as EV chargers.

Rise of Net Zero Carbon Homes

According to the International Energy Agency (IEA) 2023 Net Zero Roadmap, which outlines scenarios to keep the planet under 1.5 degrees Celsius warming, demand for a decarbonized built environment can’t grow fast enough. The report highlights the need to double the annual rate of energy efficiency improvements for homes and buildings and dramatically increase the pace of electrification of homes and buildings through the adoption of heat pumps and other advanced technologies.

Net zero homes such as The Cove community in Sacramento are also stylish and affordable—two key traits that attract new home buyers. Credit: Courtesy Beazer Homes

Fortunately, the topic of net zero carbon homes seems to be creeping into the vernacular of many leading builders—not just the hardcore greenies such as Thrive Home Builders, but some national production builders as well, such as KB Home, Meritage, Beazer, and Pulte.  

Net zero carbon homes include:

• High performance building envelope systems insulation, windows, doors and roofing to optimize energy efficiency.
• Renewable energy, namely solar plus storage.
• Electrification technologies such as heat pumps for HVAC, water heating, and clothes dryers, and induc tion cooktops.
• Demand-side energy management systems that help manage energy usage with peak load shifting and >time of use pricing to reduce grid stress and save money

Today, getting to net zero carbon requires a painstaking process of meticulously implementing best sustainable design, construction and building science practices, specifying materials with low embodied carbon and Environmental Product Declarations (EPDs) or equivalent certifications, and, at least for now, purchasing high-quality carbon offsets.

No doubt, the process of creating a net zero carbon home is intricate at best in today’s market. But, just like green building has evolved over the years, so, too, will decarbonizing the built environment. The more builders set out on the journey, the less opaque the process will become. 

The ESG Imperative

Beyond decarbonization, consumers—and investors—are pulling through commitments to Environmental, Social and Governance (ESG) strategies. 

COGNITION data shows that 60 percent of consumers believe that companies with strong ESG strategies are more likely to have greater long-term financial success than those without, and nearly 75 percent have stopped purchasing products from a company because of concerns over their sustainability practices.

More than 75 percent of consumers also indicate that they are more likely to choose a home or residence from a company with strong ESG commitments, and interestingly, customers now believe that companies with stalwart ESG practices have higher quality products than those without.

Builders are adopting ESG practices at unprecedented rates, primarily to increase their access to capital and respond to mushrooming consumer and investor demand.

Fifty-five percent of builders report that their lenders are now requiring ESG policies when they apply for financing.

An increasing number of builders are now requiring that their suppliers and vendors have ESG strategies and practices in place, mostly so that those builders can access accurate and reliable data for their own reporting and disclosures. They can also access more innovative products and solutions, prevent greenwashing claims and increase transparency, and respond to growing external pressure from investors and consumers. 

Read the Top 10 Issues That Will Impact the Building Industry in 2024 for more information on this topic.