Incentive-Based Greening: A Primer for Promoting Sustainable Design Policies for Localities

By Cameron Miller, Issue Editor

INTRODUCTION

Buildings are gluttonous consumers of natural resources: constructing buildings creates vast amounts of waste material and operating buildings contributes significantly to global pollution.[1] Most reports indicate that on a worldwide basis, nearly 40% of all primary energy[2] is used on buildings.[3] Particularly in the United States, buildings are responsible for approximately 62% of electricity consumption, over 36% of primary energy consumption, and 30% of greenhouse gas emissions.[4] Thus, it is critical that all actors involved in the development process—government officials, private developers, property owners, and the general public—understand what sustainable building and green policies are and why sustainability goals are so important in the development industry.

Sustainable, or “green,” building practices represent a critically important component of the broader environmental movement. Rather than tackle a full-scale review of the legal aspects surrounding the implementation of pro-sustainability development practices, this comment focuses on a subset of green building policy implementation: incentivizing green building practices at the local government level. The first sections provide a brief overview of what sustainable building practices are and why they are environmentally important. Next, the comment looks to how pro-sustainability policies are implemented; this section compares green building policies mandated by various levels of government, as well as green building standards promulgated by private groups. Finally, this comment presents a survey of policy measures that local governments can undertake to promote green building practices in their communities.

  GREEN BUILDING BASICS

What is Green Building?

“Green building” can be defined as the practice of increasing the efficiency with which buildings and their sites use energy, water, and materials and reducing the (potentially negative) impacts buildings have on human health and the environment through better siting, design, construction, operation, maintenance, and removal.[5] Sustainable buildings seek to limit resource consumption and environmental impacts over the life of buildings—from initial resource extraction to waste disposal—while simultaneously providing building occupants an optimized environment.[6] To accomplish this, sustainable buildings have many design features that are either newly developed technology or otherwise not standard in most construction projects.[7]

Why Build Green?

Building construction, operation, maintenance, repair, and demolition have an enormous impact on the environment.[8] Buildings are a primary factor contributing to greenhouse gas emissions, water and air pollution, excessive energy consumption, solid waste generation, and other critical problems.[9] In the United States alone, there are over 300 billion square feet of building space, which includes over 111 million housing units and almost 5 million commercial buildings.[10] Buildings also account for staggering quantities of storm water runoff, and the indoor air quality of buildings is often substantially more polluted than outdoor air.[11]

With the substantial external effects of buildings in mind, proponents of green building strategies cite a variety of benefits associated with constructing sustainable buildings. Chief among these is a considerable decrease in energy costs over the life of the building, typically achieved through the lower cost of utilities.[12] Proponents of green buildings often point to these cost reductions over the life of green buildings as a justification of building green in the first place.[13] Pro-sustainable building advocates also point to increased indoor air quality and improved overall comfort within green buildings, which could lead to increased productivity in such buildings.[14] Taken together, these positive aspects of green buildings on the micro level have significant environmental effects at the macro level in terms of reducing carbon emissions from buildings, decreasing buildings’ contributions to urban heat islands, and reducing the materials expended in constructing and maintaining buildings.

Governmental v. Private Action?

In the United States, the federal government has not adopted any sweeping mandates for sustainable building. Some federal agencies have, however, established green building mandates for any construction that takes place within its respective department or agency.[15] In this absence of federal regulation, many states have passed legislation either mandating or encouraging entities to incorporate Leadership in Energy and Environmental Design (“LEED”) standards in new construction.[16] While state mandates typically only apply to public projects, many states have passed regulations seeking to incentivize private developers to build green.[17]

By far the most common practice, however, is for cities and local governments to implement regulations relating to sustainable building practices.[18] Unlike state legislation regarding green building policies, some localities have actually mandated sustainable building practices in the private sector, as well as the public sector.[19] Still, the most common practice is for local governments to promote green building practices in the private sector through legislation implementing incentives for sustainable building.[20] Promoting these practices is usually accomplished by tying the receipt of any incentives to developers and builders meeting certain levels of certification under a privately promulgated green building rating system, generally the LEED rating system of the United States Green Building Council (“USGBC”) discussed below.[21]

Currently, there is no universal regulatory system to promote and standardize sustainable building practices in either the public or private sector.[22] Instead, a handful of green building standards have served as guidelines for green building both for governmental and private actors.[23] The most prominent of these such guidelines is the USGBC’s LEED Green Building Rating System, which was created to “bring uniformity to the American green building movement by establishing a common standard of measurement for green building elements, promoting integrated, whole-building design practices, recognizing environmental leadership in the building industry, stimulating green competition, raising consumer awareness of green building benefits, and transforming the building market.”[24]

The LEED Rating System operates as a checklist, with projects seeking certification under the program incorporating various green building components into their designs in an effort to receive credits towards LEED certification.[25] For projects seeking LEED certification, points are awarded in seven categories of human and environmental health, as well as one regional priority category that varies by state or locality.[26] Within each of these categories, there are a given number of “credits.”[27] A certain number of points are available within each credit; thus, it is up to the developer to determine what mix of credits—and the number of points under each credit—he or she wants to satisfy to add up to a certain number of points required for a given level of certification.[28] There are currently four levels of LEED certification: Certified, Silver, Gold, and Platinum.[29] Each successive level of higher certification is achieved by scoring more points on LEED’s rating checklist.

INCENTIVIZING GREEN BUILDING

Incentive Strategies for Promoting Sustainable Development

This section reviews five programs commonly used by municipalities to promote green building practices in their private development sectors. The strategies outlined here are green building tax incentives, density bonuses and green TDRs, expedited permitting for green projects, pro-sustainability grant programs, and green design assistance programs. These policies and programs are not an exhaustive list; rather, they represent some of the most frequently adopted strategies for incentivizing green development. Other viable strategies certainly exist, and it is critical that a community hoping to stimulate greater use of green building practices tailor any pro-sustainable building program to the specific objectives and needs of that community.

  1. Tax Policies and Incentives

Tax abatements and incentives are often the most flexible programs because states and municipalities have the ability to approve a multitude of sustainable performance standards and allocate those abatements or incentives to any taxing jurisdiction.[30] It is critical to note that developers and property owners have different priorities depending on whether they are small- or large-scale developers, short- or long-term owners or investors, developers looking to maintain equity investments in multiple properties, or corporate or residential building tenants.[31] Given the diversity of these parties and their differing interests and needs, tax incentives should be used to entice each group.[32]

While the additional cost of designing and constructing sustainable buildings are borne by the developer up front, the benefits gained from reduced energy costs accrue over the life of the building.[33] As such, a short-term investor or developer may never obtain any tangible benefits from building a green building, thus reducing the incentive to build green. Additionally, building owners who lease their properties may never realize these utilities savings and might prefer to spread those benefits over multiple years.[34] Transferable tax credits can encourage developers to build green, and tax abatements can be used to help defray the additional expenses often incurred by a sustainable design.[35]

  1. Bonus Density and TDRs

Some jurisdictions have implemented floor/area ratio (“FAR”) bonuses, height bonuses, reduced landscaping requirements, and counting green roof space as landscaping and open space in return for including sustainable design components or achieving certain green building ratings.[36] Other jurisdictions sanction transfers of development rights (“TDRs”), whereby property owners sever the ability to develop their typically more rural property and sell those rights to developers seeking to increase densities on prospective projects in more urban locales. Programs like this have the benefit of protecting rural lands from developments by placing conservation easements on rural properties that have transferred their development rights, as well as promoting growth in urban centers. When municipalities have capacity shortfalls, these bonus density programs can be particularly enticing to both developers and building owners. These types of programs also help alleviate the timing problem highlighted above regarding who in the development and occupancy process ultimately obtains the benefits of green building incentives.[37]

Bonus density and TDR programs help developers and building owners realize increased profits by allowing developers to increase floor space on prospective projects, which can enhance a project’s overall viability.[38] It is important, however, that this incentive remain exclusive. That is, as green building becomes more common, more prospective projects might attempt to utilize this incentive.[39] Thus, it is critical that municipalities maintain comprehensive sustainability metrics as prerequisites for obtaining these incentives and reexamine the stringency of those requirements as green building develops.[40]

  1. Expedited Review and Permitting

Streamlining the permitting and approval process for building, plan, and site permits can save green developers considerable time and money.[41] This strategy can be difficult to implement, as it typically involves reorganization of a community’s planning staff. However, over time, it can lead to substantial cost savings, both for the municipality, as well as for developers and architects.[42] Thus, one of the major benefits of expedited review and permitting process incentives is that once the structural changes in planning departments take place, these programs require little to no additional financial investment—they simply require a shift in permitting priority.[43]

Expediting the permitting and review processes affords a municipality the ability to increase tax revenues while also providing the development community with a valuable incentive.[44] However, to successfully implement these programs, local planning staffs must include planners or inspectors with particular expertise in sustainable design and building; namely, it is critical that staffs include personnel who are well versed in LEED or any other green rating system the community uses.[45] As cities improve in this area, they will also experience increased revenues, as projects that move more quickly to completion provide increased tax revenues earlier for the community.[46]

  1. Grant Programs and Fee Subsidization

Municipalities should also consider direct grant programs to help offset some of the additional costs sustainable design and building projects present.[47] These types of incentives are generally awarded as a single monetary contribution. They also offer municipalities the opportunity and flexibility to promote the use of specific features like photovoltaic systems, HVAC systems, or water systems in green projects that are of particular import to that community. Additionally, should the community choose to promote LEED certification, these types of grants can be utilized by municipalities to defray those costs, as certification with the USGBC can be quite expensive.[48]

  1. Technical Design Assistance Programs

Even as demand for sustainable design and building increases, there are still questions regarding what sustainable design and building techniques are most effective.[49] Communities must provide technical expertise to those looking to implement sustainable design components in future developments. As the development community continues to embrace the growing trend of green building, it is important for local governments to keep up by providing quality services from training planners and building inspectors. By keeping accredited officials on planning staffs, communities have the ability to develop better master plans and provide better oversight of proposed green projects. By promoting a culture of sustainability, local planning commissions can also further educate the community on the benefits that sustainable design and building provide.[50]

CONCLUSION

The impact that buildings have on people cannot be overstated. We spend the majority of our time inside of them, they provide us shelter, and they represent the idea of home for so many people throughout the world. However, the impact that our buildings have on the earth is also of great magnitude. Thus, it is critical that humans create ways to build responsibly to protect our future on this planet, and incorporating sustainable design features in our environment represents just one small part in the broader environmentalism movement. While this comment reviews but a sliver of how that goal might be reached, it hopefully serves as a starting point for how local communities across the country might endeavor to solve this global issue.

 

 

[1] Carl J. Circo, Using Mandates and Incentives to Promote Sustainable Construction and Green Building Projects in the Private Sector: A Call for More State Land Use Policy Initiatives, 112 Penn. St. L. Rev. 731, 733 (2008).

[2] Primary energy is an “energy found in nature that has not been subjected to any conversion or transformation process. It is energy contained in raw fuels as well as other forms of energy received as input to a system.” Primary Energy, Real Return Environment, http://www.realreturnenvironment.com/index.php?option=com_ content&view= article&id=49&Itemid=110 [https://perma.cc/5C94-BDQF] (last visited Feb. 21, 2017).

[3] Id.

[4] Stephen T. Del Percio, Comment, The Skyscraper, Green Design, & the LEED Green Building Rating System: The Creation of Uniform Sustainable Standards for the 21st Century or the Perpetuation of an Architectural Fiction?, 28 Environs Envtl. L. & Pol’y J. 117, 125 (2004).

[5] White Paper on Sustainability: A Report on the Green Building Movement, Bldg. Design & Constr. Nov. 2013, at 4, https://www.usgbc.org/Docs/Resources/BDCWhitePaperR2.pdf [https://perma.cc/K9F3-E39S] [hereinafter White Paper] (quoting Office of Fed. Envtl. Exec., The Federal Commitment to Green Building: Experiences and Expectations (2013)).

[6] Benjamin S. Kingsley, Note, Making It Easy To Be Green: Using Impact Fees To Encourage Green Building, 83 N.Y.U. L. Rev. 532, 534 (2008).

[7] Id.

[8] Trip Pollard, Building Greener Communities: Smarter Growth and Green Building, 27 Va. Envtl. L.J. 125, 126 (2009).

[9] Id. at 125.

[10] Id. at 126.

[11] Circo, supra note 1, at 733.

[12] Id. at 737.

[13] Id.

[14] Id.

[15] A. Paige Reber, Note, Taking the “LEED”: Determining the Appropriate Amount of Government Regulation in Green Building Projects, 98 Ky. L.J. 573, 577 (2009).

[16] Id.

[17] Id. at 577–78.

[18] Id. at 579.

[19] Id.

[20] Id.

[21] Sarah B. Schindler, Following Industry’s LEED®: Municipal Adoption of Private Green Building Standards, 62 Fla. L. Rev. 285, 291 (2010).

[22] Reber, supra note 15, at 575.

[23] Id.

[24] Id. at 575–76 (citing Del Percio, supra note 4, at 121).

[25] For an in-depth discussion on how the LEED certification process operates see About LEED, U.S. Green Building Council (Jul. 1, 2015), http://www.usgbc.org/articles/about-leed [https://perma.cc/NV6N-N2F5].

[26] See Checklist: LEED v4 for Building Design and Construction, U.S. Green Building Council (Apr. 5, 2016), http://www.usgbc.org/resources/leed-v4-building-design-and-construction-checklist [https://perma.cc/R29A-ADET]

[27] Id.

[28] Id.

[29] See About LEED, supra note 25.

[30] Am. Inst. of Architects, Local Leaders in Sustainability: State and Local Green Building Incentives 7 (2011), http://www.aia.org/aiaucmp/groups/aia/documents/pdf/aias076936.pdf [https://perma.cc/427Y-9V6N].

[31] Id.

[32] Id.

[33] Id.

[34] Id.

[35] Id.

[36] Id. at 8.

[37] Id.

[38] Id.

[39] Id.

[40] Id.

[41] Id. at 9.

[42] Id. at 10.

[43] Green Building Incentive Strategies, U.S. Green Building Council, http://www.usgbc.org/Docs/Archive/General/Docs6248.pdf [https://perma.cc/7W68-LAJB] (last visited Feb. 7, 2017).

[44] Id.

[45] Am. Inst. of Architects, supra note 30, at 10.

[46] Id.

[47] Id. at 12.

[48] Id.

[49] Id. at 14.

[50] Id.

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