Promotion of Green Building: Local Government Land Use and Building Code Incentives and Mandates

By: Geoff White, Esq., FIGPand Daniel Mudd

 A variety of local and state governments across the country have accelerated the growth of the green building movement through various green building incentives and mandates. A 2008 study by the American Institute of Architects (AIA) reveals that 14% of U.S. cities with populations of more than 50,000 have green building programs with many more about to follow suit.  The report also stated that from 2003 to 2007, the number of cities with green building programs grew by 418% and as of 2008, 36 other cities were in the process of developing green building programs. Although the future of green building looks bright, the responsibility for creating a more sustainable building environment will fall heavily on local leadership and strong citizen involvement. Therefore, let us now look at a few of the government incentives and mandates that have been created around the nation and briefly analyze how each method is used to promote green building.

Government Incentives

 The promotion of green building with state and local governments is a recent trend and therefore little evidence exists showing which programs are the most effective. Over the last decade, local and state governments have used a wide variety of incentives to promote green building such as tax incentives, density/floor area ratio bonuses, expedited permitting, “feebates,” grants, technical and assistance programs, reduced building setbacks, discounts on green products and permit/zone fee reductions. Density or floor area ratio bonuses and expedited permits have become the most popular of the bunch. This article briefly explains the types of programs that are implemented across the country in both building and zoning codes for the promotion of green building.

 Zoning Code Incentives:

1. In Pittsburgh, Pennsylvania, the zoning code was recently amended to include a section entitled “Sustainable Development Bonuses,” which allows for density bonuses of an additional 20% Floor Area Ratio (FAR) and an additional variance of 20% of the permitted height for all projects that earn LEED for New Construction or LEED for Core and Shell certification. These incentives are particularly attractive for cities and counties that have capacity shortfalls. These bonuses may make a project more profitable by allowing additional space, and thus additional revenue, that would have traditionally not been permitted.

2. Bloomington, Indiana has initiated a green building program which provides building setbacks and density bonuses as an incentive. Under the Bloomington Unified Development Ordinance § 20.05.049, developers and property owners become eligible for a reduction in side and rear building setbacks for residential and nonresidential districts if it achieves certain “sustainable development practices” based on different goals set out by the ordinance. The program breaks the incentives into three levels of incentives, the greater the incentive, the more sustainable development practices are required.

3. Arlington County, Virginia recently established a Green Building Initiative Program that allows commercial projects and private developments to develop sites at higher density levels, between 0.15 and 0.35 FAR, if they earn a LEED Silver certification or higher. The incentives are given on a case by case basis after board approval. Under the program, site plans must also include a LEED Scorecard to detail exactly how the project has considered green building issues. In addition, the County Zoning Board may also approve of a height bonus of up to three stories for site plans it believes to be exceptional. However, developers are not guaranteed these density and height bonuses just by reaching the minimum LEED certification level. The program may still allow for some density bonuses even if the developers do not reach LEED certification, as long as they contribute to the county’s Green Building Fund which is used to educate developers and the community about green building techniques and green building issues.

Building Code Incentives:

1. Portland, Oregon has proposed a green building program that would be the first of its kind in the country. Although this program is still developing, as its final version is up for City Council consideration later this month, it has already become nationally recognized for its innovative approach. For new commercial and multifamily construction projects, the policy proposes a green building "feebate” program which allows the city to assess a fee against developers who have constructed buildings that only meet the state building code. But this fee is waived for buildings that achieve at least a Silver LEED certification. In addition, buildings which achieve LEED Gold or Platinum certification will receive rebates for their accomplishment. This will be a self-sustaining program by using the fee revenues collected from those buildings which are not LEED certified to finance incentives for the green buildings. An additional incentive created by the City of Portland is to award grants to developers and property owners who use “Ecoroofs.”

2. Chicago, Illinois was the first large city to institute an expedited permit program for buildings that incorporate innovative green building strategies, including LEED certification. In 2005, the Chicago Department of Construction and Permits (DCAP) developed the Green Permit Program which has become a valuable incentive to promote green building. It has thrived throughout the years, growing from 19 permits given in 2005 to over 100 permits in 2007. The program offers two main incentives. First, certain commercial properties are eligible for an expedited permit in as few 15 days or at the most around 6 weeks, which is still half of the typical time. The number of green building elements, the LEED certification level and the project complexity determines this length. Second, the program offers more direct financial incentives by waiving consultant review fees of up to $25,000 for larger projects who reach higher levels of LEED certification. Chicago also provides $5,000 in grants and offers density bonuses to small businesses that include green roofs in their building design.

3. Mecklenberg, North Carolina initiated a Green Building Rebate Program that offers building permit fee rebates to projects with proof of LEED certification, Green Globes or other nationally-recognized rating system-certified projects. The structure of the program allows the rebates to increase proportionately based upon the level of certification achieved: (a) 10 percent rebate to a maximum of $60,000 for LEED Silver, (b) 20 percent rebate to a maximum of $75,000 for LEED Gold, and (c) 25 percent rebate to a maximum of $100,000 for LEED Platinum. To be eligible for the rebate, the developer must submit a written application for a Green Permit Rebate to Documents & Inspections at Code Enforcement prior to the Certificate of Occupancy being issued. The rebate will be awarded if funds are available after Documents & Inspections approves the application.

Government Mandates

 In addition to the use of government incentives to promote green building, several local, state and federal government entities have begun using green mandates or a mixture of mandates and incentives to effectively establish sustainable green building programs. These government entities have become a major driving force behind the movement from voluntary green standards to green mandates in the United States. What was once only a voluntary system, LEED and other green building certification systems have begun to be incorporated as mandatory requirements in more recent building and zoning codes across the country. We will take a brief look at some of the most recent government mandates that have developed across the country for both zoning and building codes.

Zoning Code Mandates

1. In 2007, the City of Boston, Massachusetts added Article 37 to Section 80 of the Boston Zoning Code requiring all new and rehabilitation projects of more than 50,000 square feet to earn either LEED certification or approval by the Boston Interagency Council. Approval by the Boston Interagency Council is based on LEED checklist items and Boston-specific items such as transportation, energy, historic preservation and groundwater recharge. The City is required to deny permits and certificates of occupancy to any noncompliant project.

2. On Earth Day in 2008, Los Angeles, California adopted arguably the largest and most aggressive municipal green building ordinance in the nation in 2008 encompassing both zoning and building code changes. The Private Sector Green Building Plan requires all new projects greater than 50 units or 50,000 square feet to earn LEED certification. These requirements became effective for non-residential and high-rise residential projects on November 1, 2008 and on May 1, 2009 for low-rise residential projects. In exchange, the City will work with builders to speed up plan reviews and permitting for all projects seeking LEED Silver certification and to remove obstacles in the code for elements of sustainable building design, such as green rooftops and permeable pavement. Furthermore, the law has several other innovative mandates such as creating a cross-departmental Sustainability Team to revise green building policies and actively engage the development community, requiring the City to work with other agencies to offer financial incentives for green building, directing that certain city staff be trained as LEED Accredited Professionals, and establishing the Mayor’s Annual Award of Excellence in Sustainable Design & Construction.

3. Philadelphia, Pennsylvania amended Title 14 of its Zoning Code when it introduced a Green Building Design Standards (“Standards”) ordinance on October 25, 2007. This program requires any structure (1) exceeding 4,000 square feet in gross floor area or (2) any extension, rehabilitation, alteration, substantial demolition or change of use of at least 50% of the gross floor area of any structure exceeding 4,000 square feet in gross floor area, to meet these Standards. These Standards include at minimum, performance-based categories that foster green building achievements, specific documentation and calculations showing achievement of these categories and that at least one LEED Accredited Professional be employed as a design professional for the project and sign all plans and drawings submitted to the Planning Commission. Single family dwellings will be exempt from the Standards. The ordinance also requires the Planning Commission to monitor and evaluate the energy and environmental benefits associated with each building starting one year after the completion and occupancy of the building and continuing for five years thereafter.

Building Code Mandates

1. Albuquerque, New Mexico adopted an Energy Conservation Code in 2007 requiring commercial and multi-family residential buildings to be 30% more efficient than a baseline building per ASHRAE 90.1 1999 and requiring one- and two-family dwellings to meet ICC 2006 and several other energy efficiency requirements. The provisions of this code do not apply to commercial and multi-family residential buildings that are LEED certified and that meet other energy performance requirements. However, the legality of this code has been seriously questioned by a United States Federal district judge in AHRI et al. vs. City of Albuquerque, 2008 U.S. Dist. LEXIS 106706 (D. N.M. 2008) as a preliminary injunction was granted under the theory that federal laws governing energy efficiency preempted municipalities from implementing stricter laws in the same field. Due to this pending litigation, it is difficult to tell whether such broad based mandates are worth strongly considering yet.

2. The City of Baltimore, Maryland passed an ordinance in August 2007 which mandated that the City establish Green Building Standards for commercial and multi-family residential buildings over 10,000 square feet that were being either constructed or extensively modified (structural modifications that alter more than 50% of the building’s gross floor area). The requirements were phased in: 1) all city buildings applying for a building permit after July 1, 2008 must be equivalent to a LEED “Certified” level, 2) all city-subsidized buildings applying for a building permit after January 1, 2009 must be equivalent to a LEED “Certified” level, and 3) finally all other buildings (city-owned, city-subsidized, and private) applying for a building permit after July 1, 2009 must be equivalent to a LEED “Silver” level. To ensure that this mandatory program was instituted properly, the City hired a consultant to assist with developing and implementing the new code standards and procedures that are required.

3. San Francisco, California created a groundbreaking ordinance in August 2008 making it the city with the most stringent green building code requirements in the nation. The ordinance, which amended the San Francisco Building Code to include Chapter 13C, specifically requires newly constructed commercial buildings over 5,000 square feet, residential buildings over 75 feet in height, and renovations on buildings over 25,000 square feet to be subject to an unprecedented level of LEED and green building certifications. Compliance with the new green building standards may be met by either: 1) registration and submittal for certification under the LEED system or any other system approved by the Department of Building Inspection or 2) documentation of compliance with the applicable LEED or other standards without registration and certification from those systems. The minimum certification levels that are required by the year 2012 will be LEED Gold for nonresidential buildings and LEED Silver for residential buildings.

Recent Development: The Waxman-Markey Bill

 Although the Waxman-Markey Bill has only passed the House of Representatives and not the Senate, if it is signed into law, all current green building programs involving building codes could become moot because the bill may create a federal building code requiring that new buildings be 30 percent more efficient by 2012 and 50 percent more efficient by 2016. This is a highly controversial portion of the legislation given that states and municipalities have previously been able to set their own building standards to date. The current bill also provides for enforcement mechanisms if state and local governments do not comply with or exceed the national energy efficiency building code. Acording to § 304 of the bill, any state or local government that is not in compliance with the bill shall be ineligible to receive certain emission allowances, federal funding in excess of that State’s share of $125,000,000 each year, and additional funding that will increase each year that a state has not complied. Even though the current bill does not require efficiency upgrades for existing structures, it does offer financial support for home and building owners who make efficiency improvements. It is important to keep a close watch on the progression of the bill as the Senate version may be dramatically different and because of the long-lasting impact of this section of the bill.

Local government green building incentives and mandates have been a significant factor in the recent growth of the green building movement and industry. These initiatives are not just found in the northeast or west coast either, as various Midwestern and southeastern communities are also making green building a priority. The Obama administration will likely place an even greater emphasis on green building practices and techniques, thus spurring continued growth in the industry.

SPECIAL NOTE FROM GRANT AUSTIN AT IGP: Readers may be interested in the DSIRE website - it is a source of information on state, local, utility, and federal incentives and policies that promote renewable energy and energy efficiency. See http://www.dsireusa.org.

Geoff White is a Senior Associate in the Real Estate Group of the Business/Corporate Department at Frost Brown Todd. He is a LEED Green Associate (LEED GA) and a Fellow of the Institute of Green Professionals (FIGP). A sizeable portion of his practice is spent advising clients on the legal issues of green building and sustainable development. He recently co-authored the chapter “Understanding and Mitigating the Legal Risks of Green Building,” in the Aspatore Books Inside The Minds – Negotiating and Structuring Construction Contracts and is currently drafting a chapter in the future ABA publication, The Law of Green Buildings. Mr. White is licensed to practice law in Kentucky and Ohio. Contact him at gwhite@fbtlaw.com or (502) 568-0202.