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The Green Building Tipping Point

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In the spring of 2006 I went to New Orleans to see what I could do to help rebuild following the nightmare of hurricane Katrina. With a group of partners including Global Green, we began the process of developing a multi-family housing project by announcing a design competition which drew 3,000 registrants.

I can remember very clearly a line of questioning at the press conference announcing the project. Multiple reporters questioned why people who had lost their homes should care about green building. The questions went something like this:

• Isn't green building for rich people?
• Instead of building green, shouldn't we just build the cheapest houses we can build?
• Don't these people have bigger things to worry about than climate change?
• Green-building is way too expensive; there is no way these people can afford it?

In June of 2006, there seemed to be a clear sense that green building was an unnecessary luxury.
That design competition project led to the first green housing development in New Orleans following the hurricane, in the low-income Holy Cross neighborhood.

Then we decided to go big.

In September of 2007 at the Clinton Global Initiative in New York we announced Make it Right, a massive project aimed at rebuilding the core of an entire New Orleans neighborhood -- the Lower 9th Ward. Driven by two passionate and committed philanthropists and with the guidance and encouragement of President Bill Clinton and his team we announced something we had no idea if we could accomplish -- building the greenest single family homes in the world, for some of the poorest people in America, using the world's greatest architects.

I was terrified. We had no idea whether we could do it.

But we went to work, because of the talented team at Make It Right, we were able to return to the Clinton Global Initiative in September of 2009 where the U.S. Green Building Council announced that we had built "the largest and greenest community of single family homes in the world."

This time there were no questions about affordability or whether green building was only for the rich. As residents of the Lower 9th Ward talked about how their energy bills had gone from hundreds of dollars a month to less than ten, how their children's asthma had gone away because of the non-toxic materials used in the homes, and how their lives were now filled with dignity and stability, we had made the case for green building, even in one of the poorest communities in America.

In the years since we launched our first project in New Orleans, green building has become broadly accepted in all forms of construction.

According to the McGraw-Hill Green Outlook report which tracks the building industry, the value of green construction starts jumped 50% from $42 billion in 2008 to $71 billion in 2010, when it represented 25% of the all new building activity. It is expected to reach $135 billion by 2015.

This growth has been especially robust in the commercial sector, where one-third of new projects are now built using green standards.

This change is despite one of the worst economies in American history.

The reason for the tipping point in green building? The bottom line. Simply put, green building is smart building.

Green building equals increased profits and returns to investors in multiple ways:
• Reduction of building operating costs (13.6% on average for new buildings and 8.5% for retrofits)
• Increase in building values (10.9% for new buildings and 6.8% for retrofits)
• Increased return on investment (9.9% for new buildings and 19.2% for retrofits).

In addition to being good for investors, all of this is also good for the world. Buildings contribute almost 30% of global annual greenhouse gas emissions and consume up to 40% of all energy.

Now that we have reached the green building tipping point, how will green building become more deeply embedded in every form of construction and real estate? Through capital. Those looking to retrofit existing buildings or to build new green buildings need funds dedicated to those projects, in addition to the existing tax and regulatory incentives that governments have wisely offered throughout the country. Smart investors are starting to see this opportunity, and will reap the benefits of investing in this space.

We have reached a tipping point in green building. What was once thought of as a luxury for the rich is now seen as a shrewd investment -- and that change will have major benefits for investors, homeowners, and the world.