This is a Real Estate Development course. the attached Article needs to be read before the write up could be done. write up should follow the sequence of the questions.also what is missing and the major takeaways/what is missing could be pointed out.
REAL ESTATE DEVELOPMENT: In less than one page, what is the major take-away from the Hansz etal paper on green issues. Again, do not get caught up in the math. What is the practice evidence/application? Is there a difference with commerical properties? This is a Pass/Fail assignment. A pass will be recorded as a 1 and a fail as a 0. Submission form: 1. Basic outline/purpose of article 2. Findings 3. Limit 4. Application untitled J R E R � V o l . 3 4 � N o . 1 – 2 0 1 2 T h e Va l u e o f ‘ ‘ G r e e n : ’ ’ E v i d e n c e f r o m t h e F i r s t M a n d a t o r y R e s i d e n t i a l G r e e n B u i l d i n g P r o g r a m A u t h o r s Ramya R. Aroul and J. Andrew Hansz A b s t r a c t There has been recent interest in green building and development practices and research. Resulting from growing environmental awareness and concerns, mandatory residential green building programs have been implemented nationally at the municipal level and Texas has passed legislation to create a statewide program. However, the impact of greenness on residential property values has not been rigorously evaluated. This study examines residential transaction prices in two cities and finds a statistically significant premium associated with ‘‘green’’ properties. Additionally, there is evidence of a larger premium associated with green properties located in Frisco, Texas, which has the nation’s first mandatory residential green building program. Interest in green building is growing. Indeed, the intensity of interest expressed by many sectors of the real estate and the land development industry is a sign of acceptance of green investment and acknowledgement of the need for green building and development practices. There is also concern regarding quality improvement of new home construction from both environmental and sustainability perspectives. With allocation of $5 billion towards weatherizing homes by the American Recovery and Reinvestment Act (ARRA), significant resources will be channeled into green development projects (Committee on Appropriations, 2009). This investment combined with green building programs will further accelerate the American green revolution. Since zoning, building codes, and most development regulations are enacted and enforced through municipal police powers, local governments are at the forefront in developing and updating green ordinances and policies. Nationwide, a few communities have taken leadership roles and have implemented formal mandatory green building best management practices programs.1 See Exhibit 1 for an overview of selected mandatory green building programs. Even though smaller municipalities developed the earliest green building policies, the increasing acceptance of green building practices is reflected in the adoption 2 8 � A r o u l a n d H a n s z Exhibi t 1 � A Survey of Mandatory Green Building Programs Jurisdiction State Program Year Enacted/Revised Frisco TX Residential 2001/2007 Boulder CO Residential 2001/2008 Marin County CA Residential 2001/2008 Austin TX Residential and Commercial 2003 Aspen/Pitkin County CO Residential and Commercial 2003/2008 Pleasanton CA Residential and Commercial 2003/2006 Arlington County VA Residential and Commercial 2004 Pasadena CA Residential and Commercial 2006/2008 Long Beach CA Residential and Commercial 2006 Santa Cruz CA Residential and Commercial 2006 Montgomery County MD Residential and Commercial 2006 Boston MA Residential and Commercial 2007 of policies by cities, counties, and states. For example, the State of Texas has recently adopted legislation to adopt a statewide mandatory green building program to begin January 2012 for single-family residential dwellings.2 A mandatory green building program is a coordinated, systems approach to green development rather than a component-by-component approach to building (Bynum and Rubino, 1998). Since all builders are mandated to follow green building practices in a mandatory program, the community will experience dramatic shifts in sustainable construction practices and an accelerated implementation of green development. Existing green research has focused on commercial buildings and the impact of voluntary third-party green rating systems. As discussed in the literature review, there has been some evidence that quantifies the economic benefits of green commercial buildings; however, limited research exists on the real estate market’s response to residential green development and building practices. In addition, the market may recognize price premiums for the coordinated systems required of mandatory green building policies. Prior research on green building codes addressed the impact of mandatory household energy and water consumption regulations and did not address green valuation influences or green building programs. This leads to two research questions. First, do single-family residential markets reflect and capitalize green investment practices in transaction prices? And second, does the market recognize the coordinated and mandatory aspects of a municipal T h e V a l u e o f ‘ ‘ G r e e n ’ ’ � 2 9 J R E R � V o l . 3 4 � N o . 1 – 2 0 1 2 green development program? These questions are of interest to homeowners, developers, investors, brokers, appraisers, policy makers, and researchers. This study investigates the price effects of green on residential transaction prices in two similar Texas cities: Frisco and McKinney. Frisco has implemented the country’s first mandatory residential green building program and McKinney has no green mandates, although properties with green features have been voluntarily developed. The findings of this study reveal a positive and statistically significant effect on the transaction prices of green residential properties. Furthermore, there appears to be a modestly stronger price premium associated with green transaction prices of residential properties associated with the mandatory green building program. The next section provides background on the study setting, including an overview of Frisco’s mandatory green building program. This section is followed by a review of the extant literature leading to research hypotheses. Next, sample data are described, including the selection criteria used to identify green transactions, and the empirical models are developed as well. Finally, the statistical results are presented, followed by a discussion of the findings and conclusion. � S e t t i n g For comparison, the cities of Frisco and McKinney, Texas were selected because these adjacent cities are similar in terms of demographics, employment, and housing market activity. The Frisco-McKinney area is one of the fastest developing regions of the Dallas-Fort Worth Metroplex. Land that once was dedicated to the production of wheat and livestock feed is now demanded for new homes, schools, offices, and parks. The populations of both cities have been growing at steady rates for the past two decades, creating stable and steady housing demand (Exhibit 2). To manage housing growth and promote sustainability, Frisco implemented a residential green building program in May 2001. A primary difference between these two cities is Frisco’s mandatory green building program, as McKinney does not have any green municipal initiative. Therefore, the Frisco-McKinney pairing provides a natural experimental setting for the study of residential transaction prices, green features, and the nation’s first mandatory green building program. The green development process is a paradigm shift from traditional building practices and developers and builders can be apprehensive, at first, towards mandatory programs. Mandatory programs require developers and builders to deviate from customary construction practices to test new methods and materials that could reduce development feasibility. In fact, this was the initial concern from the local building industry when Frisco’s proposed a mandatory green building program. In response to industry concern, Frisco implemented a performance- based mandatory residential green building program. A performance-based 3 0 � A r o u l a n d H a n s z Exhibi t 2 � Demographic, Employment, and Housing Statistics: Frisco and McKinney Demographic Frisco McKinney Population 33,714 54,369 Median Age (years) 30.9 30.6 Female Persons 50.50% 49.40% Persons per Household 2.78 2.89 Population in Labor Force Civilian labor force 78.90% 70.10% Employed 77.10% 67.60% Unemployed 1.80% 2.40% % of civilian labor force 2.30% 3.50% Armed forces 0.10% 0.00% Not in labor force 21.10% 29.80% Mean Travel Time to Work 27.3 mins. 25.4 mins. College/Graduate School 16.40% 16.80% Land Area (square miles) 70 58 Housing Units 13,683 19,462 1-unit, detached 75.80% 73.20% 1-unit, attached 2.40% 1.40% 2 units 1.50% 2.00% 3 or 4 units 1.30% 3.30% 5 to 9 units 3.20% 4.20% 10 to 19 units 8.50% 5.10% 20 or more units 5.30% 8.50% Note: The source is QuickFacts from the U.S. Census Bureau 2000 (www.infoplease.com/us/ census/data/ texas). program sets minimum sustainability standards, but gives developers and builders flexibility in how they meet green development requirements (Witt, Cantrell, Purvis, and Johnston, 2005). With this initiative, Frisco, Texas became the first city in the United States to adopt a mandatory residential green building program. According to an ordinance passed on May 2, 2001, all residential plats accepted after May 23, 2001 were required to meet or exceed the mandatory green building program standards. After five years, the city restructured and enhanced the residential green building program. The revised program was put into effect for all homes receiving building permits on, or after, July 1, 2007. Frisco’s Residential Green Building Program mandates minimum energy efficiency, water conservation, indoor air quality, and waste recycling standards for all residential construction. Frisco’s assessment of ‘‘green’’ is consistent with the explanation given by Heekin and Meyers (2001).3 Additional details of Frisco’s mandatory green building program are provided in Appendix A. http://www.infoplease.com/us/census/data/texas http://www.infoplease.com/us/census/data/texas T h e V a l u e o f ‘ ‘ G r e e n ’ ’ � 3 1 J R E R � V o l . 3 4 � N o . 1 – 2 0 1 2 � L i t e r a t u r e R e v i e w a n d R e s e a r c h Q u e s t i o n s The hedonic pricing method is based on the premise that the value of a good or service can be decomposed into specific benefits/features. If the market recognizes these individual characteristics, then the contributor value of these benefits/ features can be quantified (Rosen, 1974). In the real estate literature, hedonic methods have been used to study a wide range of attributes including school districts (Walden, 1990), conservation districts (Diaz, Hansz, Cypher, and Hayunga, 2008), and age-restricted and gated communities (Allen, 1997). Despite a relatively developed body of hedonic real estate literature, there appears to be little published research examining the valuation impact of green, an attribute of residential development that is gaining in importance due to social, environmental