Green Builder Media CEO Sara Gutterman explains why the price-per-square-foot metric penalizes high-performance homes and makes the case for shifting the industry to a value-per-square-foot framework built on seven pillars.
00:00:01:11 - 00:00:38:20
Sara Gutterman: Across our entire economy culture. There's this quiet inconvenience that's really becoming impossible to ignore, and that is that we are valuing the wrong things. And nowhere is that misalignment more tangible and really more destructive than in the housing sector. So we are tied to this concept of price per square foot. And this concept of price per square foot effectively towers builders that build high performance, resilient, healthy energy, independent homes.
00:00:38:22 - 00:01:09:22
Sara Gutterman: Because really all price per square foot does as we know it tells us how big a house is and what it costs today. But it does not include resiliency and energy independence and wellness and performance. And in so doing, what has happened is that we're actually burdening homeowners with higher operating costs. We are increasing their risk, and we are in some cases decreasing their quality of life and peace of mind.
00:01:09:24 - 00:01:38:17
Sara Gutterman: Along with this whole value equation, we're actually making it harder for other stakeholders like lenders like appraisers, like insurers, like utilities and policymakers to actually implement real value in our housing. And just by the way, in case you don't know, this price per square foot, it's a metric that was fabricated, after the SNL crisis in the 1980s.
00:01:38:17 - 00:02:07:24
Sara Gutterman: So prior to that, here in the US, the builders and I come from a line of builders and my husband is a builder. So even though I am not a builder, I kind of speak the language. But, prior to that, builders would largely work with local banks and local arsenals to finance their projects, and they would build homes for families, and those families would move into their community, and they would become a good community member and became this very virtuous cycle.
00:02:07:27 - 00:02:56:13
Sara Gutterman: However, when the snow crisis happened in the 80s, Wall Street basically came into the housing market and turned housing into commodities and really came this rise of this concept of price per square foot. It's neat, it's clean, it's tidy, it fits in the spreadsheets, but it really makes housing, which is very personal, very depersonalized. But we're going to call it we're hunting people that and what we if any of you read our content, you have seen what we're really trying to do is facilitate a conversation around shifting the valuation metrics from price per square foot to value per square foot, value per square foot.
00:02:56:15 - 00:03:22:05
Sara Gutterman: It's the kind of nuanced and layered, and it's a little complex, we know. So this is going to be a long term conversation and an evolving concept. The value per square foot effectively has seven pillars. We all know what those pillars are. Energy. It's water. It's resilience. It's wellness. It's it's, community. It's investment and equity and it's decarbonization.
00:03:22:08 - 00:03:47:08
Sara Gutterman: And I think, again, we all know those are you have any questions about any of those pillars? Come find me at the end. We can talk some more about them, but price per square foot, by ignoring those seven pillars it systematically devalues the higher performance homes. And if you think about it, when price per square foot became the main metric that we value, homes might think about the fact that how the housing stock wasn't all that different, right?
00:03:47:14 - 00:04:09:28
Sara Gutterman: Whereas today we have a wide range of housing stock, we have homes that are built to code that, especially in markets where the code isn't very rigorous, but you perform to a certain level. And then we have homes that are, you know, net zero passive, you know, really on the other end of the spectrum. So it makes sense that this valuation metric is no longer applicable today.
00:04:10:01 - 00:04:50:17
Sara Gutterman: The other systemic problem with the price per square foot valuation metric is that consumer expectations have changed. We know from our cognition smart data, 80% of home buyers factor sustainability into decision making processes. Today, we have a whole litany of data that corroborates that fact. We also know that over the past couple of years, the four generations that we tracked through cognitions of numerous millennials, exercises that are influencing the housing market now look more at total cost of homeownership and full value of homeownership, as opposed to just first class when making home buying decisions.
00:04:50:19 - 00:05:17:18
Sara Gutterman: Now that changes, right? And then serving our consumer audience for 21 years now, just over the past couple of years, have all four generations now consistently told us that they're looking more at total cost, as opposed to just personal? That's right. So while consumer expectations have changed our lending practices, our appraisal practices, our insurance practices, our actuarial calculations have not yet changed.
00:05:17:20 - 00:05:28:21
Sara Gutterman: So clearly, as building professionals, we have a responsibility, a duty, maybe an honor to shift the narrative and shift the conversation.