Sustainability–will homebuyers pay for it? And if so, how much more? By now, almost everyone agrees that the climate is changing, dramatically and quickly. No matter what the reasons for it, the rise of extreme weather conditions across North America and the world represents a growing and ominous threat.

Sustainability standards

To its credit, the real estate development industry in Canada and the United States has recognized the need for more sustainable building for decades. Developers on both sides of the border pursue certifications such as LEED, Green Building Initiative, Green Globes, Bomba Best, Energy Star, One Planet Living, United Nations sustainability standards, and on and on. And yes, anyone who lives in Toronto can tell you about features like green roofs and green spaces popping up everywhere.

Timber construction

That said, the sustainability movement goes much deeper than certifications, of course. The mass timber construction movement is sweeping across the country and the world. In this province, a change in the Ontario Building Code to allow up to six stories of wood construction has opened the door to a flurry of new midrise projects constructed of timber panels and assembled onsite.

Make no mistake, the move to building in wood marks an important milestone in sustainable building. Manufacturing concrete accounts for a whopping 8 percent of all carbon emissions, whereas wood absorbs and sequesters CO₂ instead. Indeed, wood is the only renewable building resource we have, so we should expect it to play an increasingly larger role in our buildings.

Will homebuyers pay for it?

But do new homebuyers really care about wood construction or the environment? And if so, do they care enough to pay a premium for a more sustainable product? The prevailing thinking among many builder/developers is that homebuyers love sustainable features but not enough to pay for them. So, what does the data tell us?

What Tarion data tells us

Let’s look at some recent third-party surveys from new home construction buyers and Canadian homeowners in general. According to the 2023 Tarion New Home Buyers Report a whopping 96 percent of buyers interested in pre-construction and newly built homes rank energy efficiency right up there with the price, size, and design of a home. It is a must have!

In fact, most homebuyers (not just new construction buyers) in Canada want an energy efficient home. Abacus data from 2023 reports that 59% of all homebuyers look for energy efficiency, while only 7 percent reported that energy efficiency was not a deciding factor.

What the CHBA survey says

The 2023 CHBA Home Buyer Preference Survey surveyed more than 20,000 recent new-home buyers across Canada and asked them to list their most important buying criteria. Sure enough, energy-efficient appliances; an overall energy-efficient home; high efficiency windows; and an HRV/ERV air exchange program all made their top 10 list.

In other words, while sustainability as a concept may not top the list of considerations in new home buying, energy efficiency most certainly does. This reality is universally true among all homebuyers, but especially among Canadian new home buyers.

And no wonder, given the high cost of fuel, persistent inflation, rising interest rates, and all the other recent economic pressures on buyers. Homebuyers want and need to keep their costs down and the sustainability movement dovetails into that need and want through energy efficiency.

What Tridel and Mattamy do

Tridel, arguably the builder most celebrated for its sustainable building, manages the nuances between sustainability and efficiency brilliantly. Note how they position their product all around energy and water efficiency. “A typical Tridel Built Green Built for Life® building consumes, on average, 34% less electricity, 57% less natural gas and 43% less potable water than a Model Reference Building.”

Given that 96 percent of buyers want an energy efficient new home, Tridel’s positioning makes a lot of sense and helps explain how they resonate so powerfully in market.

Similarly, Mattamy has been experimenting with bringing geothermal technology to market for at least five or six years. In fact, according to their 2022 sustainability report, they completed “the first home in the largest residential geothermal system of its kind in Canada at Springwater in Markham, Ontario, a 300+ home Net Zero Ready energy community.”

Like Tridel, we see how energy efficiency takes top billing in Mattamy’s sustainability efforts, indicating that they too understand what new home buyers really want and will pay for.

But what about the rest of the sustainability story, beyond energy efficiency? How much do homebuyers care about the environmental impact of building materials and smart systems?

Apparently, quite a bit!

What Canadians will pay

According to a survey conducted by Ipsos Reid (The TD Canada Trust Green Building Poll), 73 percent of Canadian homeowners or those considering buying a home are willing to pay a premium for environmentally friendly features. Among those considering a purchase in the next two years, this propensity increases to 85 percent.

When asked how much more they would be willing to pay, the average response was 10 percent more. When asked why they might pay such a high premium, respondents pointed to energy cost savings and increased resale value as their motivators. In fact, 92 percent of Canadian homeowners say reducing their current home’s impact on the environment is somewhat or very important to them.

The bottom line

All told, most home-buying and home-owning Canadians clearly find energy efficiency and other sustainability features in their home very attractive. They claim they will pay a significant premium for those features and benefits and, logically, they expect other homebuyers to do the same. This dynamic is even more true when it comes to new home construction and/or younger buyers.

While it is a bit too soon to tell how condo buyers will react to the timber construction trend, in the immediate future developers can resonate with homebuyers of all ages by focusing their product and sustainability efforts on efficiency. By following Tridel and Mattamy’s lead, they can help make a difference to our environment while still ensuring they make the sale.

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