Are Homeowners Willing to Pay for Quality Air?

Source: BIG BUILDER Magazine
Publication date: 2003-04-04

By Cheryl Weber.

At this time of year, when spring blossoms begin to pop and pollen counts soar, allergy sufferers take cover behind closed doors. With the number of people with airborne allergies on the rise, and the number of children with asthma having doubled in the last two decades, builders who offer pre-installed air exchangers would seem to have a ready-made market.

Asthma isn't the only issue: Consumers are increasingly sensitive about fresh air circulation, moisture problems resulting from airtight structures, and a rise in energy costs, all of which are spurring sales of air exchange systems such as heat recovery ventilators (HRVs) and energy recovery ventilators (ERVs). At Ontario, Canada-based Nutech Energy Systems, sales have tripled in the past eight years.

"An educated consumer is one of the drivers," says Roger Johnson, vice president of sales and marketing for Nutech. "Builders are also becoming more interested because HRVs reduce liability and the number of callbacks."

But the question remains, can builders profit from offering purer air? Unlike a gourmet kitchen or a flagstone floor, an air-quality upgrade isn't so straightforward. That's because green building programs and state energy codes requiring some type of mechanical ventilation are already raising the bar on indoor air quality. And consumers have a hard time grasping the options in high-performance technology.

Programs Raise Awareness

In the past five years, big production builders have signed on with programs such as the American Lung Association's Health House, the EPA's Star Homes, and the Department of Energy's Building America. These programs are popularizing an inexpensive approach to ventilation by tweaking the HVAC system builders already use. Typically, a 6-inch pipe sucks in outdoor air and passes it through a filter and into the furnace's return duct. Every time the furnace fan kicks on, it distributes fresh air throughout the house.

"We call this a supply ventilation system, and it costs about $250 to put in," says Betsy Petit, principal of Building Sciences Corp., in Westford, Mass. The firm consults for Building America, which has partnered with more than 9,000 production builders during the past five years.

In contrast to a job-built supply ventilation system, HRV units are balanced systems. Via a two-way chamber, HRVs pull into the house the same amount of air that's exhausted, thus equalizing indoor air pressure. They also offer the option of integrating whole-house HEPA filters, such as the Guardian Plus line offered by Broan-NuTone, a manufacturer of residential ventilation systems, based in Hartford, Wis. Sal Parente, director of builder sales, says Broan-NuTone's niche market is custom builders and national builders closing on 30 to 100 homes a year.

Distribution of the 10.5 Million Asthma Sufferers
Northeast	19.3%
West	22.5%
Midwest	25.8%
South	32.5%
Under 5 years	7.9%
5 to 17 years	28.4%
18 to 44 years	38.3%
45 to 64 years	18.6%
85 and up	6.8%

"More of the custom builders have grasped onto the product because they understand the importance of creating a home-buying process for the consumer," Parente says. "People that buy production-built homes are more price sensitive, whereas custom builders design products around clients while looking for products that differentiate them from others."

A sampling of builders seems to bear that out. Five years ago, Sarasota, Fla.-based Pruett Builders, which closes on 35 homes a year, started building to American Lung Association Health House standards. About 80 percent of its customers -- who are buying move-up, luxury, and retirement homes ranging from $500,000 to $2 million -- opt for an ERV.

Part of the builder's success may lie in the fact that during the sales process, every home buyer meets with an HVAC consultant, who then explains how the existing ventilation system works, presents the possibilities, and designs add-ons that suit the customer's needs. "We've been strongly encouraging that clients put in an air exchange system because of the humidity here in Florida," says Pruett managing partner Drew Smith. The company retails the units for more than $1,000, marking them up at a percentage typical of other upgrades.

Mechanical Margins

When it comes to profit margins, big builders are putting more stock in their systems approach to mechanical ventilation. Pulte's Dave Beck says customers have never opted for HRVs. "Given the chance, they would choose the aesthetic upgrades that everyone can see," says Beck, director of purchasing for the Las Vegas division. Since it started building to DOE standards for thermal efficiency and air quality five years ago, it has been able to increase the price of its homes. "Every builder in this market has 2,000-square-foot homes that look the same, and competition on price becomes a downward spiral," Beck says. "Our new building practices probably increased our costs by $1,000, and I'd say we're getting $5,000 worth of value."

In Minnesota, though, Centex Homes is unable to differentiate itself from the competition that way. The baseline moved for all of the state's builders in 2001 when the energy code was rewritten to require some type of mechanical ventilation system. The builder offers HRV upgrades in some markets, and at price points higher than $200,000, but doesn't track sales, which are minimal. "In our promotional materials, we do make a point that we are providing vent systems they can later upgrade," says Ed VonThoma, product development manager for Centex Homes' Minnesota division. "But we have to go out of our way to explain it for a majority of customers."

Scott Sinelli, purchasing director for Village Homes, in Littleton, Colo., agrees. "We don't have buyers asking for HRVs. To a certain extent, buyers expect their houses to be safe. The building industry isn't educating people to make the decision."

But because they're prepackaged, accompanied by a marketing brochure, and simple to install, maybe it's just a matter of time before big builders begin to view HRVs as a way to increase profits. "We're working hard to seal houses tightly and ventilate so we maintain positive pressure," says Pam Session, president of Hedgewood Homes, in Cumming, Ga. "Once the standard reaches this level, we keep raising the bar. It may get to the point where HRVs start to make a whole lot of sense."