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