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Can Green Building Go Mainstream?

Ratings War

APARTMENT FINANCE TODAY • May/June 2009

Opinions are divided over the future of the LEED ratings system with the emergence of the new National Green Building Standard.

BY Jerry Ascierto

FOR YEARS, developers have complained that the flagship LEED for New Construction (NC) pro-gram—originally developed for high-rise commercial structures—was a bad fi t for the multifamily industry, particularly for low- and mid-rise developments. Today, the National Green Building Standard (NGBS), developed by the NAHB, should go a long way in driving green development. Released in February, the standard was developed in conjunction with the International Code Council and is the only green building rating system approved by the American National Standards Institute (ANSI). Unlike LEED, NGBS works well with existing building codes, offering jurisdictions a guideline for enacting mandatory green building requirements.

“If you’re a designer or contractor trying to read LEED, you need that LEED-National Multi Housing Council, which helped develop the standard. “But if you can read building code, you can read NGBS.”

Some developers—such as Highlands Ranch, Colo.based UDR, which has eight LEED-certified developments currently under construction— view the NGBS as a sea change.

“It fits our program much better than what we’ve had available, and I expect a lot of our peer group to adopt the standard,” says Doug Walker, UDR’s vice president of asset quality and green initiatives. “LEED is the flavor of the day in large part because there was no other flavor to pick from. But I’m not sure LEED is going to be the front-runner forever.”

The cost of LEED certification can be a real barrier for many developers, especially on smaller projects that don’t allow the cost to be spread over the total cost of development (TCD). For smaller developments, LEED certification costs could run 7 percent or 8 percent of the TCD, while larger projects can get that cost down to 3 percent or less.

“For a 120-unit project, you’re probably adding $1,000 to $1,500 a unit just for the certification,” says David Ravin, president of Charlotte, N.C.-based developer Crosland’s residential division.

The new NGBS, however, is expected to have minimal certification costs. “I suspect we would be moving toward that sooner rather than later and that the standard would be something we would do on every project,” UDR’s Walker says. “You end up in the same ballpark either way you go, except one’s a lot cheaper and a lot less restrictive.”

If it’s intimidated by the new standard, the U.S. Green Building Council (USGBC) isn’t letting on. In its view, the two standards are complimentary: LEED exists for market innovators, while the NGBS is more of an entry point for players new to the green game.

“LEED was designed to be above and beyond building codes,” says Nate Kredich, vice president of residential market development at USGBC. “What they’ve created will be great for markets that didn’t already have a local program. But the entry point is significantly lower than LEED: They have the mass market in mind, and we have the leaders in mind.”

The USGBC is working on improvements to its own rating system to make it more compatible with multifamily. LEED for Homes is available for any residential structure up to three stories, and the USGBC is piloting a mid-rise program for residential properties of four- to six-stories. The certification costs are much lower for each program, especially when compared to LEED-NC.