Tax credit for energy in the 1980’s?
Posted 05/10/2011 by Siti Crook
Tax Credit for Energy in the 1980’s
Dennis and I began building new energy efficient homes in the 1980’s. When we first started, builders were pleased if they had $10,000 a house left after completion, all bills paid and the sale of the home settled. If there were investors in the project the remaining $10,000 was shared with them.
The Energy tax incentives in existence until the mid-1980’s, were primarily for alternative energy systems, and difficult to obtain for building envelope improvements that saved energy.
Twenty plus years later and before the housing industry meltdown in 2008, builders aimed for a $100,000 profit on a conventionally built energy wasteful house. With $100,000 as a builder’s target profit one should be asking how much was actually spent on the construction of the building. Of the building costs, how much money was actually allocated for building envelope improvements that save energy.
We know construction math and profitability. The following is a partial list of new home construction line items:
• Acquisition cost of the land, including fees
• Legal fees for township/municipality approvals
• Engineers fees
• Architects fees
• Building permit fees
• Site improvements, i.e. sewer or septic systems, and water
• Insurances, builder’s liability, risk, and worker’s compensation
• Home construction (variable)
• Financing fees
• ROI- Investor’s return on investment
• Real Estate agency fees
• Builders’ soft costs (legal and accounting fees, etc.)
• Seller’s transfer taxes
Home construction quality, especially building envelope improvements, is sacrificed to pay one or more of the other line items. In fact, the construction cost line items were (and still are) viewed as a variable expense of the development costs. When costs savings are at the expense of construction it’s a no wonder homes waste energy.
The homebuyer pays the price three times. Once in the purchase price of the home, the second time for increased operating costs, and the third time to repair the cost cutting measures.
Fortunately, times have changed somewhat. The creation of the Energy Star program, a third party oversight organization, validates energy savings in appliances and new home construction. Quantifiable standards make measuring a new home’s energy consumption feasible, and energy tax incentives possible for more than just alternative energy systems.
Builder’s concerned with the negative environmental impact caused by energy wasteful building cost-cutting won’t cut construction costs to increase profits at the expense of energy efficiency and sustainable building.
41 Responses to “Tax credit for energy in the 1980’s?”
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