During the construction stage, low or zero emission (LZE) homes may require a larger investment on the part of builders – especially for builders who are less familiar with LZE technologies and building methods. An advanced, cold-climate heat pump, for instance, can cost significantly more than a standard forced air furnace typically used for heating. However, as shown by the showcase LZE homes built through this project, LZE homes offer construction cost savings and possess dramatic potential for ongoing cost savings to the homebuyer. These findings echo the results from a recent Utah analysis which found that all-electric new homes can be cost-competitive for builders and generate significant monthly savings for home buyers.

Ways to Cut Construction Costs

• During construction, the average avoided cost of not installing gas infrastructure is $2,100 per single-family showcase home. This includes gas infrastructure within the home and the lateral line from the home to the main gas line. 

• Rebates are available through the federal 45L tax credit for builders that achieve ENERGY STAR NextGen or Zero Energy Ready Home certifications for their home. This credit is available for homes acquired before July 1, 2026.
  • An ENERGY STAR NextGen home qualifies builders for $2,500. 
  • A Zero Energy Ready Home qualifies builders for $5,000. 

• Builder rebates are available locally through Rocky Mountain Power’s Wattsmart New Homes Program for energy-efficient new homes.  
• Builder rebates are available locally through Enbridge’s ThermWise Builder Rebates program for energy efficient homes, dual fuel heat pumps, and other gas efficiency measures.
   

Average Incremental Construction Costs

The homes produced as a part of Utah Clean Energy’s Low and Zero Emission Housing Initiative incurred the following average additional incremental costs: 

On average, the showcase homes cost approximately $16,200 more to build than an average Utah home before accounting for cost savings, rebates, and tax credits. To put these costs into perspective, the incremental building cost per square foot for these three showcase homes ranges from $4.70/ft² to $9.70/ft². On average, this incremental building cost represents 2.8% of the total sales price. Notably, one of the homes used especially advanced energy efficient equipment, above the standards required by the ENERGY STAR NextGen or Zero Energy Ready Home programs. Each home also saved an average of $2,100 during construction by bypassing the need to install gas infrastructure. As a result, this average incremental cost is likely an overestimation of how much additional cost a standard builder would incur by constructing a LZE home.  

Rapid Consumer Savings

Because of the construction savings and financial incentives noted previously, the entirety of incremental building costs doesn’t get passed onto home buyers. Table 1 shows an example from one of the project’s builders, whose home would pass an estimated $6,375 of incremental costs onto home buyers after factoring in early-stage cost savings. 

Table 1: Components factoring into “incremental costs absorbed by home buyer” calculation for “Builder 1.” 

 
According to the Ekotrope RATER “HERS Fuel Summary Comparison” report, this builder’s home would save $1,478 annually on energy costs as compared to a standard new home built to code in Utah. This means that, using a simple payback period calculation (incremental construction costs / annual energy savings), the home buyer would receive a positive return on their investment in about 4.3 years. 

However, in reality, incremental costs are typically absorbed over time by home buyers via an increased initial down payment and higher annual mortgage payments. As shown in Table 2, using Pacific Northwest National Laboratory’s “Consumer Cash Flow” methodology, the home would begin generating positive net savings for its homeowner in only 0.6 years (about 7 months) — assuming a 30-year fixed rate mortgage loan, a 6.63% mortgage interest rate, and incorporating self-reported costs from the builder. After these first several months of ownership, savings would only continue to grow for the homeowner, as illustrated in the graph below. 

Table 2: Consumer Cash Flow Analysis calculation for one of the builder’s showcase home, using Pacific Northwest National Laboratory’s methodology for evaluating residential code updates. Annual mortgage increase and mortgage insurance was calculated using Smart Asset’s Utah Mortgage Calculator. Property taxes were calculated using Salt Lake County’s average property tax rate of 0.67%. The net incremental annual cost of mortgage interest deduction value was calculated using First Community Bank’s Mortgage Tax Calculator, assuming a federal tax rate of 22% (metric recommended by the Department of Energy) and a state tax rate of 4.55%, according to the Tax Foundation. Based on Department of Energy economic parameters, a 30-year fixed rate mortgage loan was assumed. All calculations assumed a 6.63% mortgage interest rate, determined in consultation with initiative builders to reflect current market conditions. 

Net cost savings to homeowner over a 5-year period, from time of purchase. Based on Builder 1’s showcase home. 

In marketing to home buyers, builders should be aware of their home’s incremental cost and HERS report data. Using “consumer cash flow calculation” results can help buyers understand the full picture of buying and living in their prospective home. Furthermore, if consumers are made aware of the cost savings potential of LZE homes, they will be more empowered and motivated to purchase them. Even in the first year, energy efficient home buyers can save more than they’ve spent out of pocket. During construction, builders should take advantage of as many incentives as are available to them to help minimize upfront costs for their buyers — usually available through federal, state, or utility tax credits and rebates. 

What about Solar?

Importantly, solar-ready homes have the potential to provide homeowners with even greater long-term energy savings than what is reflected in the graph above. If homeowners choose to install solar in their solar-ready home, the electricity generation from their solar system can offset or eliminate monthly utility bills, aside from the “basic charge”.