There are many environmental benefits to a housing model of on-site power generation, energy conservation, and alternative water use. And it turns out, it’s not such a bad investment!
For the Earthship Biotecture model of green building, the only utilities needed are rainwater and sunshine, provided for free by nature. These extreme-green buildings are totally off-grid, for energy, water, and wastewater. The utility bills are essentially $0. For growing families, retirees, or anyone else on a limited budget, that’s a big plus! For those considering doing green retrofits, it’s an interesting challenge to incorporate similar “green” elements into an existing house, both for the environmental benefits and the financial ones.
For typical houses, utility costs vary quite a bit, of course, by the house, the residents, the region, and the utility company. But let’s assume that between water, sewer, gas, and electric utilities for a house, the average cost is more than $165 a month — more than $2000 year. And let’s assume it’s possible to either completely unplug from all these utilities, or at least reduce the annual bill by $2000 a year through a green retrofit. While that type of retrofit might be an interesting science project, would it be an extravagant waste of money? How much could one spend on the retrofit and get a good financial return?
To earn a perpetual annual income of $2,000 from an investment getting 5% return, that requires an investment of $40,000. But saving money is a better investment than earning money, because you don’t have to pay taxes on money saved! A penny saved is more like a penny-plus-a-third earned — depending on your tax bracket. To pay that $2,000 a year utility bill from taxable income, you need to earn around $2,500, which at 5% would require a $50,000 investment. So if you think 5% is a good rate of return for an investment, then you could justify spending up to $50,000.
But wait, it gets better! There are rebates, tax credits, and tax deductions available for many of these green investments. That $50,000 investment might only end up costing $40,000. So that 5% rate of return, just became 6.25%.
And what about utility rate increases? Most likely, utility rates will increase faster than the rate of monetary inflation. To meet new regulations, catch up on deferred maintenance, accommodate development, and encourage conservation, inflation-adjusted utility rates could easily double just over the next decade. So 10 years from now, that $40,000 investment would be earning the equivalent of $5000 a year — or a 12.5% return on investment. Not too bad for a low-risk investment with a high-yield for a sustainable future!