Green AND Affordable:
Opportunities and Challenges for the Appraisal Profession with the Next Generation of Housing – Multi-Family
Appraisal Institute of Canada National Conference 2010 – Victoria, BC
Michael D. Blaschuk, AACIVice-President, BC Housing
About BC Housing • Provincial Crown agency• Created to fulfill government’s commitment to providing subsidized housing to those most in
need:• Homeless• Frail seniors/special needs• Aboriginal individuals and families• Women and children fleeing violence• Low-income seniors and families
• Increasing subsidized housing options through:
1. Developing new housing
2. Maintaining existing portfolio
3. Rent assistance in the private market
BC Housing Owns & Manages:• 8,000 public housing units in 650
buildings • 300 Group Homes
Administers:• 53,000 non-profit, co-op and shelter
units• 27,000 rent supplements
Total• 87,000 Households
Influence on Low Income Sector• 6% of total BC Households• 40% of low income households in BC
BC Housing - Building Portfolio
BC Housing Energy Efficiency Strategies
Reduction in Greenhouse Gas (GHG) Emissions
5%
6%
10%
15%
20%
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%
2006/07 Result
2007/08 Result
2008/09 Target
2008/09 Result
2009/10 Target
2010/11 Target
2011/12 Target
Percent Reduction in Greenhouse Gas Emissions
New Measure Introduced in 2008/09
New Measure Introduced in 2008/09
Service Plan – GHG Reduction Targets & Results
Reduction of Energy Consumption and Greenhouse Gas Emissions
Livegreen – A Housing Sustainability Action Plan
Key Strategies
* Convert from natural gas systems to electrical systems* Integrate renovation and energy projects* Supplement “potentially dirty” electricity with solar* Link “energy performance” to capital projects* Support employee focussed “green” initiatives – bus passes, car pools, etc. * Use “green” materials and micro/hybrid vehicles* Tenant engagement and training – carrot/stick initiatives* Solar hot water pre-heat* System operator training* District Energy Systems* Recycling Demolition
Energy Efficiency InitiativesGREENBROOK: Sustainability in Action
Energy Efficiency InitiativesGREENBROOK: Sustainability in Action• Addition of exterior spray foam insulation to wall
system
• Addition of insulation to foundation walls during Perimeter Drainage project
• Addition of attic insulation
• Installation of new vinyl-framed, double glazed, low ‘e’, argon-filled windows
• Installation of heat recovery ventilator and air tightness sealing
• New roofing system
Energy Efficiency InitiativesGREENBROOK: Sustainability in Action
BC Housing Energy Efficiency StrategiesLEED Case Study – Solar Hot Water
LEED Gold in New Construction
Friendship Lodge Prince
George
Demolition
Little Mountain - Sustainability in Action
Grinding & Recycling
Little Mountain - Sustainability in Action
32 buildings in five lower mainland BC sites
Energy use - $1.0 Million/yr
Energy savings - $155 Thousand/yr
Retrofit cost - $1.2 Million
Engineer
Payback – 7.6 years
Appraiser
Retrofit value = $155 K Cap’d at 5-6% =
$2.6 - $3.1 Million
Energy Efficiency Initiatives
17 buildings in 8 sites in Vancouver, Victoria, and Dawson Creek
Energy Use $300 K/Year
Energy savings - $45 K/yr
Retrofit cost - $350 KEngineer
Payback – 7.8 years
Appraiser
Retrofit value = $45 K Cap’d at 5-6% = $750 - $900 Thousand
Energy Efficiency Initiatives
Simple Payback is Too Simple
Disadvantages of Simple Payback:
•Can’t compare complex projects
•Does not account for benefits and costs after the equipment has been paid back
•Does not account for maintenance, financing, disposal costs; time value of money, and volatility of utility costs.
Advantages of “Appraisal-Based” Analysis (Direct Capitalization, NPV, IRR)
•Compare projects that have different timing and magnitude of costs and savings
•More complete financial picture by considering all costs and benefits over the entire lifetime
•Language understood by investors – CFO, Purchaser, Developer, Investor - net present value (NPV), internal rate of return (IRR), and cash flows.
Simple Payback is Too Simple
Simple Model of Payback Based on Improved Capital Value
Payback of Investment Overall Capitalization Rate
Payback
Period (Yrs)
Direct Rate of Return 5% 6% 7%
Energy Project 1 5 20.0% 400% 333% 286%Energy Project 2 6 16.7% 333% 278% 238%Energy Project 3 7 14.3% 286% 238% 204%Energy Project 4 8 12.5% 250% 208% 179%Energy Project 5 9 11.1% 222% 185% 159%Energy Project 6 10 10.0% 200% 167% 143%Energy Project 7 11 9.1% 182% 152% 130%Energy Project 8 12 8.3% 167% 139% 119%Energy Project 9 13 7.7% 154% 128% 110%Energy Project 10 14 7.1% 143% 119% 102%Energy Project 11 15 6.7% 133% 111% 95%
Solar Panels
Condensing Boiler
Double pane windows
Air-source Heat Pump
Conclusion
www.bchousing.org
•Increasing options in energy-based projects for multi-family properties•Aging inventory and capital renewal being linked with energy upgrades•Cost and value being compared – Life-cycle costs and energy savings•Triple- bottom line becoming a key component of Corporate Social Responsibility (CSR)•Opportunity for the appraisal community to take a lead on introducing “VALUE” into the sustainability agenda
Questions
www.bchousing.org