Efficient Underground Home Lands AERO Member Under a Pile of Debt

By Jasmine Krotkov, Neihart

March 6, 2008

Back in the 1970s, after the OPEC oil embargo there was a flurry of interest in energy efficiency. I remember public service spots on the radio and on TV reminding us to turn off lights we didn't need to have on, to turn down the thermostat, to carpool, and, of course, there was the one in which Jimmy Carter famously put on a cardigan. I was living in Boulder, Colorado at the time, and I remember seeing a lot of energy-efficient homes going up: two foam houses, a geodesic dome house, a rammed earth house and a straw bale house - all of which might have even been within walking distance of each other. This was Boulder, after all: a hotbed of hippies. Surely some of those atypical houses were demonstration homes, funded by the university or some foundation, but some were built by forward-thinking people who just wanted to save some bucks on heating costs.

Things sure have changed since then, and I don't just mean in terms of hairstyles, body piercings and online shopping. What I'm concerned about is that today it is a lot harder to get a loan to build an innovative, energy efficient home. Back then, many, if not most banks were portfolio lenders, meaning that they lend you money for your house and they keep that loan for the full thirty years. Today, most banks write mortgages with the intention of later selling them on the secondary mortgage market. When they sell that loan, it has to conform to the standards of the federal mortgage guarantor, Fannie Mae. They won't guarantee a mortgage on an atypical house. Partly this is because there aren't statistics on the resale value of unusually constructed homes. Partly it's because the average home appraiser doesn't have the skills or tools to evaluate atypical construction techniques. It's easier to just limit lending to typical stick-frame construction. Unfortunately this leaves out some of the most promising energy efficient designs.

Things sure have changed since then, and I don't just mean in terms of hairstyles, body piercings and online shopping. What I'm concerned about is that today it is a lot harder to get a loan to build an innovative, energy efficient home. Back then, many, if not most banks were portfolio lenders, meaning that they lend you money for your house and they keep that loan for the full thirty years. Today, most banks write mortgages with the intention of later selling them on the secondary mortgage market. When they sell that loan, it has to conform to the standards of the federal mortgage guarantor, Fannie Mae. They won't guarantee a mortgage on an atypical house. Partly this is because there aren't statistics on the resale value of unusually constructed homes. Partly it's because the average home appraiser doesn't have the skills or tools to evaluate atypical construction techniques. It's easier to just limit lending to typical stick-frame construction. Unfortunately this leaves out some of the most promising energy efficient designs.

I learned this first hand when I built an underground home in Neihart on the north side of the Little Belt Mountains. The design included solar-thermal heat, passive geothermal heating and cooling, passive solar mass and a number of other elements. When I was ready to get a mortgage on this super-efficient, elaborately engineered home, I was shocked to find out from the appraiser that there was no way in heck I'd ever get a regular mortgage on it – simply because it wasn't a stick-frame house. Just outside of Great Falls, Ken Thornton, a former coal power plant boilermaker turned green builder is in the midst of constructing a similar, super-efficient, partially buried, passive solar home. He was unable to get a construction loan for the project. Who knew? This is silly. It makes no sense to penalize people who build green homes with disadvantageous mortgage rates.

Short of changing Fannie Mae, this is where our state government needs to step up by providing incentives for banks to write loans that make it attractive for people to employ proven and innovative energy-saving building techniques. Basically the state could act as a guarantor similar to Fannie Mae, only for unconventional green buildings. Energy experts at the Department of Environmental Quality could work with non-governmental organizations like the US Green Building Council, the Alternative Energy Resources Organization, the National Center for Appropriate Technology, the universities, banking and professional builders associations to develop a loan system or criteria.

One good step in the right direction is the federal Energy Star certification program for homes. A home that has been given the Energy Star rating is guaranteed to have features that make it at least 15% more efficient than standard building codes. Furthermore, having an Energy Star rating has been shown to give some homeowners a cut in their mortgage rate. This is a program that every new home-builder should try to take advantage of but unfortunately, it isn't available for the most innovative designs. What is definitely needed is for the lack of affordable loans on green homes to be recognized as a real hindrance to reducing our carbon footprints and saving money on our energy bills. It's time for our elected representatives and lenders to find a way to finance energy-saving innovation in this state. We Montanans need to step forward; we can't wait for a federal fix to Fannie Mae.

To learn more about green building options, visit www.greenhomeguide.org or go to www.energystar.gov to figure out how you could qualify for an Energy Star home rating. If you're concerned about the limits to innovative green building, let your elected representatives know that it's time to step forward.

I'm Jasmine Krotkov for the Alternative Energy Resources Organization. AERO welcomes your comments and perspectives. AERO is a grassroots membership organization working to help create farm, food and energy solutions for communities throughout Montana. For more information about our programs call us in Helena a 406-443-7272. Thanks for listening.