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GreenMoney Journal - publishing since 1992
Fall 2010 issue
Socially Responsible Investing – Better Companies, Better Communities
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The One-Year, 4.5-Million-Jobs Investment Plan: Self-Sustaining, Market-Based Jobs vs.
by Ed Mazria
On June 11, 2009, Architecture 2030 founder and Executive Director Ed Mazria testified before the
United States House Financial Services Subcommittee on Housing and Community Opportunity concerning
its 'One-Year, 4.5-Million-Jobs Investment Plan', a plan to reinvigorate the U.S. economy through
the private building sector. The Plan would leverage each $1 of federal stimulus money spent to
generate large amounts of private spending in the renovation and home building construction market,
creating many more jobs than otherwise possible while reimbursing the federal government twice as
much as it invested
The country continues to struggle with a deep economic recession as unemployment inches toward
double digits. Construction unemployment is currently at 20%, more than double the national
average. Over the past eight months, construction jobs have been evaporating at an astonishing
111,000 jobs per month with over 1.7 million construction workers now unemployed.
In
March 2009, construction of residential buildings was down 48% from March 2008, 66% from March
2007, and a staggering 75% from March 2006 with no relief in sight. Because the average annual
income for residential construction workers is $35,500, unemployment in this sector is devastating
for families across the U.S., forcing them into poverty.
The private building sector
represents 93% of total U.S. building stock while the public building sector represents only 7%.
The economic health of every U.S. industry is tied to the private building sector, especially
housing. This includes everything from steel, insulation, caulking, mechanical and electrical
equipment, solar systems, glass, wood, metals, tile, fabrics, and paint to architecture, planning,
design, engineering, banking, development, manufacturing, construction, wholesale, retail, and
distribution. Simply put, if we do not stimulate building construction, specifically, renovation
and home building, we will not revive the U.S. economy in any substantive and lasting way.
The Plan and Its Benefits
Allocating $30 billion of stimulus dollars to the
private building sector to provide a 'housing mortgage interest rate buy-down' for homes that meet
or exceed the initial energy reduction target of the widely adopted 2030 Challenge will create 4.5
million new jobs and $296 billion in direct, private investment and spending. It would also open up
a new $47.6 billion renovation market that could grow to $1 trillion by 2030. Through the new tax
base created, the Plan would return to the federal government twice the $30 billion allocated
annually while generating 66% of this amount in tax revenue for local governments.
The
Plan requires those participating in the housing mortgage interest rate buy-down to renovate (or
build new) to specific energy reduction targets. This requirement is central to the Plan,
immediately creating demand for Building Sector services and products, including $47.6 billion of
building renovation. It is this demand within the private building sector that generates $296
billion in private investment and spending, and it is this $296 billion in private investment and
spending that makes the 4.5 million new jobs possible. Without this additional investment and
spending, the number of jobs created would be far less.
Only 2.3% of total U.S. housing
stock would need to participate in the Plan to create these massive economic benefits. If demand
for these construction services is also generated in the remaining 97.7% of the residential sector,
either through market forces or continuation of the Plan over a period of years, the demand created
could help fuel our economy for the next 40 to 50 years.
Plan benefits are weighted to
encourage renovation in the current 'overbuilt' environment; however, the Plan also offers benefits
for new buildings that meet the targets to further encourage an immediate and rapid shift to an
energy-efficient built environment. The Plan leverages the benefits of energy reductions by
offering for both existing and new homes, through Fannie Mae, Freddie Mac and other GSEs, increased
mortgage financing with reduced interest rates in relation to the energy reduction target reached.
Existing Homes and LEM Homes
Those seeking to purchase an existing home,
refinance their mortgage (including to avoid foreclosure), or purchase a newly constructed home
that qualifies for a 'location efficient mortgage' (LEM) could choose to reduce their qualifying
mortgage rate by 1.0% or more, if the home meets or is renovated to meet one of the corresponding
energy reduction targets.
To qualify for one of the percentage buy-downs, the homeowner
must both i) meet the minimum HERS residential efficiency rating and ii) invest a minimum amount,
which is added into the new mortgage, in energy efficiency and/or renewable energy systems. The
minimum amount required to be invested is dependent on the amount of the new mortgage.
For example, a homeowner with a $240,000 mortgage at an interest rate of 6% would have a
monthly mortgage payment of $1,439. Having paid in $30,000 in equity, his mortgage balance is
currently $210,000. The homeowner qualifies for a 5% mortgage interest rate and wishes to take
advantage of the 2.0% buy-down rate for a new rate of 3%. To refinance his mortgage at 3.0%, he
will need to renovate his home to use 75% less energy than that required by code, spending a
minimum of $40,000 on efficiency measures. The cost of the renovation would be added into the new
mortgage, so that the new mortgage is now $250,000. However, because of the significantly lower
interest rate, i.e. 3.0%, the new mortgage payment is just $1,054, a savings of $385 per month.
With the additional monthly savings on energy bills of approximately $158, this homeowner would
save a total of $543 per month.
New Homes
Those seeking a reduced-rate,
30-year mortgage to purchase a newly constructed home could choose to reduce their qualifying
mortgage rate by 0.5% or more, if the home meets one of the corresponding energy reduction targets.
Cost of the Plan
To achieve the benefits presented here, the federal
government would need to invest $30 billion per year, based on an average cost of a 1.0% mortgage
rate buy-down being 4 points (or 4.0% of the mortgage amount). The Plan will return to the federal
government twice this amount in new tax revenue each year through the new tax base created by the
4.5 million new jobs, as well as the increased economic activity. In addition, the Plan will save
the government the cost of unemployment benefits. Because the Plan returns twice the federal
government's investment annually through the new tax base created, Architecture 2030 recommends
that the Plan be implemented for at least three years or until the recession ends.
Conclusion
Addressing the collapse of the private building sector is critical
to stabilizing the U.S. economy. The Plan being proposed by Architecture 2030 addresses this, as
well as many other challenges facing the country, including energy independence and climate change.
With a single investment, the U.S. can create millions of jobs, strengthen the U.S. economy, reduce
CO2 emissions and energy consumption, and save consumers billions of dollars. Investing in the
private building sector is the only investment that can accomplish all of these objectives.
Additional details, correlating graphs, (Energy Reduction Targets referenced above, etc.) and
The Plan itself are available at http://www.architecture2030.org
Article by Edward
Mazria AIA, founder of Architecture 2030
About Architecture 2030
Architecture 2030, a non-profit, non-partisan and independent organization, was established in
response to the global-warming crisis by architect Edward Mazria in 2002. 2030's mission is to
rapidly transform the US and global Building Sector from the major contributor of greenhouse gas
emissions to a central part of the solution to the global-warming crisis. Our goal is
straightforward: to achieve a dramatic reduction in the global-warming-causing greenhouse gas (GHG)
emissions of the Building Sector by changing the way buildings and developments are planned,
designed and constructed.
About Architecture 2030 founder Ed Mazria
Edward Mazria is an internationally recognized architect with a long and distinguished career.
His architecture and planning projects span over a thirty-year period and each employs a
cutting-edge environmental approach to its design.
His published material includes
technical papers, articles for professional magazines, and a number of published works including
The Passive Solar Energy Book published by Rodale Press. He outlines his strategy for addressing
today's most pressing global challenge, climate change, in his article "It's the Architecture
Stupid!" (Solar Today) and in subsequent pieces "Turning Down the Global Thermostat" (Metropolis)
and "Blueprint for Disaster" (On Earth). His buildings have been published in Architecture,
Progressive Architecture, Metropolis, Architectural Record, Landscape Architecture, Architectural
Digest, Process, Public Garden, Solar Today, Texas Architect, The Wall Street Journal and The New
York Times to name a few.
Mr. Mazria lectures extensively throughout the United States,
Europe, Asia and Latin America, and has taught architecture at the University of New Mexico,
University of Oregon, UCLA, and the University of Colorado-Denver.
He is the recipient of
numerous awards including AIA Design Awards, AIA Design Innovation Award, Commercial Building
Awards from the Department of Energy, "Pioneer Award" from the American Solar Energy Society and an
Outstanding Planning Award from the American Planning Association.
More information at
http://www.architecture2030.org
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