Among the many shifts in real estate, there’s arguably only one that can truly make the world a better place. That is, of course, the shift to building and retrofitting more homes to be eco-friendly. Regardless of whether you call them green, sustainable or high-performance homes, they all aim to be more energy efficient and minimize our impact on the environment.
While these homes, from an economic perspective, produce positive externalities such as reducing carbon emissions, conserving water, reducing runoff and ensuring we have more high-quality air to breathe, they also boast tremendous opportunity for real estate professionals looking to earn more money by engaging with more clients. Therefore, not only are they good for business, but they are ethically sound endeavors.
The National Association of REALTORS® (NAR) got ahead of this trend and offers its members a Green Designation. And the number of agents earning this designation grows annually. Likewise, a decade ago, Craig Foley, co-founder of the REthink39 team, and chief sustainability officer at LAER Realty Partners in Winchester, Massachusetts, saw the writing on the wall and has since become an expert voice on sustainability in real estate. His advocacy track record is packed with pull outs that are too long to list, which is one reason he was tapped by NAR to speak on the importance of sustainability at its annual Conference & Expo in San Diego, California, last November.
RISMedia had the chance to sit down with Foley at the conference and discuss some of the most critical issues in sustainable housing and learn more about his role and efforts supporting such a worthwhile endeavor.
Caysey Welton: How is your brokerage positioning itself to lean into sustainable and high-performance housing?
Craig Foley: Just looking at the numbers in terms of consumer engagement on sustainability, it’s happening across all spaces and in stock market trends. And the National Association of REALTORS® is really engaged on this topic. Charlie Oppler immediate past president of NAR spoke about what sustainability means for our trade organization; and our current President Leslie Rouda Smith’s theme is: Strength, Safety and Sustainability. So, we see it as a new way to engage with members and also consumers. Our realty partners see the same thing, and we’re surprised, frankly, that there aren’t a whole lot of real estate companies engaging with this topic.
One of the numbers we use all the time is that 74% of U.S. consumers are making purchasing decisions based on a company’s environmental reputation. So that’s the big picture. There’s a new way to engage consumers, and our brokers and our staff are finding that our sustainability initiatives are something that we can use as a recruiting tool.
CW: Doesn’t some of this shift toward sustainability require at least some policy and government intervention?
CF: In Massachusetts, we’re lucky enough to be in a state where there’s a political will to move toward net zero energy solutions. We have incredible incentives for solar in our state, and the combination of efficiency plus renewables gives us a framework in which our REALTORS® understand that this is a value proposition—something they need to be engaged with.
I have plenty of customers who are on the other side of the aisle that get this topic. In fact, two of my team members are on the other side of the aisle. They get the value proposition of lower operating costs, quiet comfort and health—good indoor air quality, proper ventilation—that has value for consumers in the marketplace, and all of my team members get that.
CW: Sustainability is also on the minds of vendor partners like lenders and appraisers. Would you agree that plenty of people connected to residential real estate recognize that the stakes are high?
CF: The lending industry is part of this. Freddie Mac’s energy advisory council and Fannie Mae’s energy efficiency taskforce are really looking at this opportunity. The GSEs (Government Sponsored Enterprises) get that this is an opportunity we all have to tackle.
Appraisers can go through the Valuation of Sustainable Buildings program. It’s a pretty intense class, but it allows appraisers to better understand the value of high-operation homes.
I think everybody understands that there is a climate crisis that we’re tackling, and we have a huge opportunity if we stop thinking about how scary it is. This is an opportunity where we can really change the framework and do some really great stuff.
CW: Let’s talk about you specifically. What interested you in carving out this niche?
CF: When the market crashed in 2008/2009, I started an energy management procurement firm with someone I had sold a house to, so I got into that and moved away from real estate as the market crashed.
New England has a pretty powerful wholesale energy marketplace and I started to realize the opportunity for residential REALTORS® to become engaged with this. My business partner had some health issues, so we ended up closing down shop, but I kept my real estate license and realized that because we had passed the Green Communities Act in Massachusetts in 2009, and we had a solar residential revolution coming, that there was no agent on the face of the Earth who had the knowledge I did before the market was really there. I convinced my wife—she’s a sucker, I mean she married me—to say let’s go for this even though there wasn’t a ‘there’ in the marketplace in 2012/2013, but it was clearly coming, and that was the best decision I ever made because now I’m running a team that’s making a living on this.
CW: I referred to this as a niche, but it certainly has potential to be much more than that. What’s your current outlook on the state of sustainable housing from a policy and economics standpoint?
CF: We have a new presidential administration obviously; they’ve passed an infrastructure bill that’s been signed into law by President Biden. It has a lot of money in it to focus on infrastructure improvements to deal with the changing climate. We’re seeing states that never got into this framework suddenly start to say, “Huh, I guess we should start to tackle that.” I’ll say for Massachusetts, we’ve got one of the best economies on the face of the Earth, certainly in the 50 states. A lot of that is because we have a great healthcare system, employment is incredible and our educational institutions are phenomenal.
Right up there is this transition to a clean energy economy—jobs in energy efficiency and jobs in renewables. It’s a job driver as well, as we make this transition, and Massachusetts is showing that it’s absolutely possible, and it’s a huge benefit for the economy, so I pay a lot of attention to what’s going on in Beacon Hill and advocate for my performance homes. Governor Baker just signed a law in April, a next-gen climate action plan, which offers Massachusetts communities an option to require a net zero energy building code. Fifty-nine communities in the state signed a letter saying, ‘we want that.’ It’s going through a regulatory process right now, but I vote with my wallet, so I’m pushing for that hard because I know that for our team, for the REthink39 team, it puts us in an even better market position.
CW: You say you vote with your wallet, which is worth mentioning because often the implications are that sustainability hinders economic growth. You obviously disagree with that notion.
CF: Well, look, I sold $10 million in real estate in August. That’s kind of the marker in the industry for an agent who is really producing, and $9.5 million was in high-performance homes. My team’s done $25 million. That’s what we do. If you want to take the time to become knowledgeable and competent in this, you have a huge opportunity here.
Money is a driver for all REALTORS®, for sure, but the market opportunity and the fact that I can get up every morning and feel really excited about going to work because I’m contributing to something that does in fact contribute to long-term solutions, is an even bigger driver.
We’re only at the beginning. I made the investment before there was a ‘there’ in the marketplace. I think it’s a great business opportunity.
CW: So how big can this get?
CF: One-hundred percent of the market, eventually. You have to have solutions, including for existing homes.
CW: You mean by retrofitting existing homes to become more efficient and high performance?
CF: Yeah. I own a house in Melrose, Massachusetts. We’re starting a deep energy retrofit. My wife and I are making that change because we know that Melrose is going to be one of those communities that’s going to require a net zero code. People are going to have to be onboard, or they’re going to be left behind.
And builders are getting that, too. They understand that there’s an opportunity here. I mean, there’s still some builders who hate change, and they’re used to doing things the same old way, but there are a lot of smart builders out there who are really engaged in this.
CW: Aside from political will and general reluctance, what other potential challenges lie ahead?
CF: The inflation issue has partly been pushed, particularly in the real estate industry, because of tariffs that were imposed during the last administration—lumber tariffs, aluminum, steel tariffs, those have a big problem in our industry. I’d like to see those tariffs removed to deal with some of the inflationary issues, but I think all those things are short term. It’s going to happen. Probably the bigger issue is when interest rates go up and a homebuyer’s power drops.
If some of the mortgage lenders move away from just principal, interest taxes and insurance as part of the debt-to-income ratio (DTI), and instead start to look at what energy and transportation costs are, and include that in the valuation for the debt-to-income, that will be a huge driver for the market. I could offer homes that wouldn’t require payments to a utility company. In fact, in Massachusetts, the utility company would pay you to live there. This is going to be an essential piece of this market transformation.
Caysey Welton is RISMedia’s content director. Email him with your real estate news ideas, firstname.lastname@example.org.