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Archive for October, 2009

Chicago Magazine Features Cul-de-Sac

Wednesday, October 28th, 2009

This is a blog from the renowned real estate writer Dennis Rodkin on www.chicagomag.com (Chicago magazine):

The Housing Decline’s Green Lining
By Dennis Rodkin

John Wasik’s latest book makes the case that the housing collapse could at least make people examine current building practices.

Among the many losses resulting from the recent real-estate downturn, John Wasik’s may be unique: he lost the premise of his latest book. Near the tail end of the housing boom, Wasik—a personal finance columnist for Bloomberg News and the author of a dozen books—was working on a book arguing that the latest crop of U.S. houses was too big and too wasteful of natural resources. A longtime resident of Prairie Crossing, the groundbreaking eco-subdivision in Grayslake, Wasik had for two years been gathering notes on the urgent need to reinvent homes and neighborhoods along green lines.

But in the late summer of 2008, the concept seemed to evaporate as real-estate markets began to collapse all over the country. “I had a book on sustainability, saying we shouldn’t build this way anymore,” he told me recently, “but suddenly home-building was coming apart.” The book seemed dead in the water.

Over the next few months, though, Wasik realized that the housing crisis catastrophically proved his point. “People can’t afford the kinds of houses we’ve been building,” he says. Not only were the resource-wasting methods of building unsustainable, but the mortgages that paid for many of those homes could not be sustained either. The book was back on.

Released over the summer, The Cul-de-Sac Syndrome: Turning Around the Unsustainable American Dream is Wasik’s 13th book. In it, he makes a compelling case that the shockwaves sent through the economy by the housing collapse could at least make people examine the ongoing practice of building too big, too far from urban centers, and too wastefully.

Wasik isn’t blaming the homeowners—or the builders. “They did what they could to make their homes affordable,” he says. “They did the right thing, taking advantage of an era of cheap interest.”

But now, Wasik writes, foreclosures, shrinking home values, and diminished tax revenues may force a reconsideration of some fundamental aspects of the housing industry. “There will be no sustainable growth in home sales unless the underlying cost and environmental impact of building and developing drops significantly,” he writes.

Wasik, a veteran environmentalist, comes at this topic with a preexisting agenda: to get greener homes built. But he also sees this moment as a crucial opportunity. With affluence rising in populous China and other countries, he notes, “their emulation of our profligate lifestyle imperils us all.”

Tags: Chicago Magazine, Cul-de-Sac, suburbia
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Getting Suite on the Cul-de-Sac Syndrome

Tuesday, October 27th, 2009

This is a review from the blog Suite 101:

Book Review: John Wasik’s Cul-De-Sac Syndrome
US Financial Columnist Critiques the American Dream

© Gabrielle Pollock
Oct 27, 2009
American Dream, Stephane Tougard
John Wasik questions the economic and environmental sustainability of suburban living in the wake of the recent housing bubble and increasing fuel costs for commuters.

In his book, The Cul-De-Sac Syndrome: Turning Around the American Dream, John Wasik addresses the origins of attitudes toward homeownership and looks to a future where housing can once more become affordable, as well as economically and environmentally sustainable. With the help of innovators in architecture and town planning, Wasik attempts to re-imagine lifestyles which are community-based, not dependent on long commutes and are both personally and ecologically healthier. It seems that if the American Dream is to be attainable once more, it needs an update.
Homeownership – A Democratic Right?

Wasik says, “Ever since the dawn of the twentieth century, families all over the country were desperate to leave crowded city apartments for a place of their own. That’s part of the American dream that has been largely enjoyed by almost 70 percent of the country.”

Wasik encapsulates this long-held desire with a quote from archietect Frank Lloyd Wright, from his own book, The Living City, published in 1958: “When every man, woman, and child may be born to put his feet on his own acres and every unborn child finds his acre waiting for him when he is born–then democracy will have been realised.” It is stirring stuff with osmotic appeal and the US is not alone in its property bias. Australia too, another country with vast frontiers, also has an insatiable appetite for land ownership.

However, the more recent shift away from cities, when housing became increasingly unaffordable, has led to the development of large suburbs, which Wasik calls ‘spurbs’. In these ‘spurbs’, people are heavily reliant on motor vehicle transport to travel often great distances to work and the quality of life and health of commuters is at stake. It is most unlikely that American forebears envisaged such ramifications in their version of the American Dream.
Dot.com Crisis and September 11 Sharemarket Reaction

According to Wasik, the turbulence in the sharemarket during the late 1990′s and early in the following decade caused a massive shift in confidence away from equities and into property, as people watched their share investments dwindle. This in turn caused a housing boom, which continued to gain momentum until the bubble burst in 2008.

Wasik describes how a belief in homeownership, as the most solid of investments, took hold and also how during the ‘mortgage bonanza days’ people not only took out one mortgage, they took on a second and third mortgage as well. “Homeowners were spending money that they thought was on the house; their loans were supposed to be covered by gains they bet would come in the future,” Wasik says.

According to the author, by the end of 2008, Americans owed more in mortgages than they owned in home equity, while at the same time property tax, averaged over three years of property values, had sky-rocketed. With enormous outlays, people turned to their credit cards to make ends meet and debt further spiralled out of control. Wasik, notes that ‘simple supply and demand economics” were forgotten in the boom.
Re-imagining the American Dream

Despite the gloom, and perhaps because of it, Wasik finds hope. It’s an ‘out of the rubble, good will prevail’ kind of thing. Increasing fuel costs, environmental concerns and quality of life, along with the lessons learnt from the housing mania, could spawn a different way of looking at the American Dream.

Wasik explores new and innovative design in pre-fabricated houses in favour of the wastage and on-site work hours involved in conventional stick building. He talks to town planners and architects about passive energy-saving homes, who predict that ‘green’ houses in ‘green’ developments will be sought after as much more affordable over time.

“Changing course will involve some major cultural soul searching. These mistakes of the housing debacle will cost us trillions and may burden several generations of Americans with debt and create longstanding difficulties in obtaining credit and buying homes. Only one thing is certain: The age of froth is long over. It’s time for reckoning and renewal,” Wasik concludes.
The Verdict

John Wasik pulls no punches in his book, The Cul-De-Sac Sydrome: Turning Aound the Unsustainable American Dream, but to his credit neither does he over-simplify the issue by laying the blame solely on financially devestated and demoralised homeowners or conversely focusing entirely on disreputable lenders. Instead, he attempts to create a cultural context by which to understand why the American Dream has soured for so many. Even more importantly, he looks ahead to a future where homes at the centre of American life may be within reach again.
The Details

Author – John F. Wasik

Title – The Cul-De-Sac Syndrome: Turning Aound the Unsustainable American DreamPublisher – Bloomberg Press

Date – 2009

ISBN – 978-1-57660-320-8

The copyright of the article Book Review: John Wasik’s Cul-De-Sac Syndrome in Reference Books is owned by Gabrielle Pollock. Permission to republish Book Review: John Wasik’s Cul-De-Sac Syndrome in print or online must be granted by the author in writing.

Read more: http://referencebooks.suite101.com/article.cfm/book_review_john_wasiks_culdesac_syndrome#ixzz0V9wRfxK6

Tags: Cul-de-Sac Syndrome, development, spurb, Suite 101
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NY Times Blog on “Spurbs”

Friday, October 23rd, 2009

This is the NY Times blog Schott’s Vocab on my word “spurb,” which I coined for “The Cul-de-Sac Syndrome” to describe a centerless, sprawling urban area virtually unconnected to a central city.

October 23, 2009, 4:00 am
Spurb

John F. Wasik’s term for “sprawling, unwalkable urban-suburban areas that have no connection to public transportation and central cities.”

Commenting on Mr. Wasik’s book, “The Cul-De-Sac Syndrome,” in The Daily Herald, a local paper in the Chicago area, Anna Marie Kukec wrote:

Still, Wasik draws much on his suburban roots for his books and has even touched on his own neighborhood in “Cul-De-Sac.” That book examines what caused the housing meltdown, how sprawl and tax breaks contributed to unaffordable homes and what could happen next.

As part of his examination, he even coined the term, “spurb,” or the sprawling urban area that’s not conveniently located near anything, like suburbs that seemingly spring out from the middle of a corn field, he said.

Writing for the Huffington Post in June, Mr. Waskik argued:

The spurb’s time has long past. Future energy demands from the rest of the world mean higher energy prices down the road. We need homes where there are jobs, infrastructure and transportation.

From Schott’s Vocab

1. October 23, 2009 7:22 am Link

Out on long island there are spurbs a plenty but there probably won’t be s’more anytime soon
— karen lyons kalmenson

2. October 23, 2009 10:36 am Link

I read Wasik’s Huffington Post article just now.
A good article about neighborhoods that can’t be walked in because too many highways flow through them. You have to be in your car. A suburb afflicted with sprawl. He describes his own term, spurb, as an “ugly word.” A n ugly word for a not too pretty thing.
He describes the ideal town as something like Barcelona, where he and his wife found they could walk from their hotel through the downtown for miles, stopping at stores and cafes, and ending up at the beach. He also cites some Northeast U.S. cities as having walkable neighborhoods.
He likes Seattle for walkability. Dallas, not so, too spurby, too Jetsonesque with its tangle of highways-thru-suburbs, plus many new suburb that aren’t organically developed close to shops and viable neighborhoods.
— Michael Dennis Mooney, Albany
3.
3. October 23, 2009 11:55 am Link

A “spurb” also implies a state of mind. To me, it’s a place where there was little or no planning. The landscape is dominated by mega-stores and strip malls and no consideration was paid to mixed-use zoning, where you could actually walk or bike (or take public transportation) to retail or commercial areas.

From my research, spurbs really got out of control because land, energy and building costs per square foot were much cheaper than urban or inner-suburban locales. Simple economics dictated that these places sprout up in former farm fields or deserts.

But there was little foresight in planning for resource use and future property taxes in spurbia. The people who moved 50 miles or more from job and urban centers did so to pursue the American Dream and were willing to do anything to get a more affordable version of it.

When mortgage rates rose on their adjustable-rate loans, property taxes climbed and energy prices soared, spurbia was — and still is — in deep trouble. So there was a reason why desert subdivisions in Arizona, California and Nevada became foreclosure gulches. These spurbs are cautionary tales that we ignore at our peril.
— John F. Wasik

Tags: Schott's Vocab, spurb
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Flaming Out on Old Suburbia

Tuesday, October 20th, 2009

My alma mater, The University of Illinois-Chicago, graciously asked me to speak about my “Cul-De-Sac Syndrome” and sustainability. This is from their “Chicago Flame” webzine:

Cul-de-Sac Syndrome
UIC alumnus speaks about the American Dream
Erin Vogel
Issue date: 10/19/09 Section: News

Is the American Dream sick? John Wasik, above, on the Cul-de-Sac Syndrome.
Media Credit: Juliette Cardenas
Is the American Dream sick? John Wasik, above, on the Cul-de-Sac Syndrome.

John Wasik, award-winning author and UIC alumnus, visited the Richard J. Daley Library last Tuesday afternoon to discuss his latest book, “The Cul-de-Sac Syndrome: Turning Around the Unsustainable American Dream.”

Wasik’s visit marked the beginning of the UIC Alumni Authors Series, a burgeoning program organized by Linda Naru, Coordinator of Communications and Marketing at the UIC Library, with the intention of educating the UIC community about the 100+ past UIC graduates that are now respected authors.

“I think that the Alumni Association has been looking for ways to recognize alumni for their work,” Naru said, “and the library wants to do more outreach programs centered on books and writing that will draw students, faculty, and alumni into the library.”

Arlene Norsym, the Vice President and Associate Chancellor of Alumni Relations, suggested that John Wasik speak at UIC after meeting the author and reading one of his books. She found the book’s subjects to be “fascinating and thought-provoking.”

The focus of Wasik’s talk was the idea of sustainability: first, the difficulty of defining this concept, and then the ways we, as Americans, must change our thinking in order to integrate this concept into our daily lives and choices. Wasik began his book with the intention of better understanding the idea of sustainability; he went so far as to relocate his family to Florida for a month in order to find a truly sustainable family that was living “off the grid” and “generating its own power.”

Wasik explained that the idea of the “Cul-de-Sac Syndrome” is about the current, rather desperate, situation of our country, the idea that “we’ve hit and blind alley and can’t go any further. We need to rethink things so we can go in another direction.”

One of Wasik’s suggestions to improve our country’s current situation has to do with rethinking our ideas of “community”; for instance, how we think about the differences between the big cities and suburbs. Wasik lives in Prairie Crossing, a conservation community in Grayslake, Illinois. According to Wasik, in Prairie Crossing, “we define sustainability as something we can walk to, as being able to buy food that is grown a block away.”

Tags: Chicago Flame, sustainability, UIC
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Sprawled Out in Wisconsin

Monday, October 19th, 2009

This is a blog that quoted a section of “Cul-de-Sac” regarding the myth that “growth pays for itself.”

Wondering why we don’t bother building community amenities anymore?

I’m long overdue in noting the unfortunate end of the Franklin Cultural Center board’s efforts to fund and build an arts center here. The organization was chaired by Don Dorson (read his letter after the jump). So much for local community amenities.

I also just started reading a newly published book called THE CUL-DE-SAC SYNDROME: TURNING AROUND THE UNSUSTAINABLE AMERICAN DREAM. And there’s Franklin – a favorite for authors and journalists needing an object lesson in sprawl economics – on page 53:

High-growth areas nearly always translate into higher property taxes. One study in Dane County, Wisconsin, where the tax burden is among the highest in the United States, showed that while the county’s population grew 12 percent from 1990 to 1996, total property taxes soared 3.57 times faster than the population. Part of the reason is that developers rarely pay the long-term costs of building communities. Impact fees are often minimal.

Once subdivisions are built, builders are off the hook to fund schools parks, roads, and other infrastructure. In fact, the disparity between what a single-family home costs taxpayers and what developers pay is huge. In Franklin, Wisconsin, just south of Milwaukee, each new home cost taxpayers more than $10,000 for schools and services in 1992 (it was considerably more by 2008). The developer’s contribution: $813 per home. Impact fees vary from locale to locale, but they never cover the full cost of development.

Tags: building, growth, sprawl
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When Renting a Home Beats Buying

Wednesday, October 14th, 2009

This is my Bloomberg News column on the subject:

Renting Beats Home-Buying Remorse After Meltdown: John F. Wasik

Oct. 14 (Bloomberg) — Unless you want to stay in a neighborhood for life, renting a home may make more sense.

With more foreclosures and huge inventories of unsold homes looming and mortgage rates held down by the government, the housing market may not stabilize for years.

It’s no longer a given that you will build home equity. The housing debacle may have depressed housing prices for a generation in all but a handful of areas.

Am I spouting American housing heresy? After all, can’t you still build wealth by simply buying a home and holding it? And with 30-year, fixed-rate mortgages dipping below 5 percent, isn’t your buy signal flashing “go”?

A rent-versus-buy decision is a complicated one. You will need to make some blunt assumptions and do some in-depth homework on the neighborhood in which you want to buy.

The first layer of your decision-making is the duration of your investment. If you are fairly certain you are going to be in a neighborhood for an extended period — say you have a young family, like the local schools and have a secure government job — check the “buy” category and calculate ownership costs.

Those facing relocation, looking to downsize or retiring should strongly consider renting.

It’s difficult to recoup all of your closing costs and down payment in a short period of time. This is the easy part.

Rent Versus Buy

Now comes some gnarly cash-flow analysis for those leaning toward buying.

Let’s say you were considering a $300,000 home, put down 20 percent, and obtained a 5 percent, 30-year fixed-rate mortgage. You are in the 33 percent federal-tax bracket and you will pay $7,000 annually in property taxes and about $1,000 for insurance and maintenance. Your total monthly payments are $1,945.

Comparing your purchase to a similar property renting for $2,000 a month, you come out ahead buying and holding for 30 years. While your actual cash outlay is much less for renting — $583,267 versus $751,236 for buying — once you figure in the tax benefits over three decades, you are better off buying.

The combination of appreciation, leverage and tax breaks makes buying the winner over 30 years. Instead of having paid rent and gained no equity, this example will show a net asset value of $526,770 for buyers. This, of course, assumes a positive annual gain in your home’s price.

This example assumes a 1 percent annual return rate, stable property taxes and federal write-offs continuing untouched.

Property Taxes

Yet times have changed and it’s unlikely you will have the same mortgage, expenses and write-offs for three decades.

Real-estate taxes are wild cards that few brokers will discuss. Since public agencies are mostly dependent on property valuations for revenue, they are hurting in this housing recession and may be crippled for years from depressed home values. I’m seeing this in my area where the primary school district alone is facing a $3.5 million shortfall.

The most dangerous assumption is that property taxes will remain static. Ask your broker for past real-estate bills and the fiscal shape of local taxing bodies.

Another flawed assumption is appreciation. You can still lose home equity.

Check on median property values where you are buying. A few states were relatively untouched by the recent bubble, such as Texas, Utah, Wyoming, Oregon, Pennsylvania, Tennessee and North Carolina. Home-value declines were the worst in Nevada, California, Florida and Arizona, according to the U.S. Census Bureau’s most recent American Community Survey.

Invest the Difference

Still want to buy a home? Then dig even deeper in your targeted areas.

How many foreclosures are pending? Are there any vacant homes? What has been the mortgage default trend over the past two years? Is there a glut or shortage of unsold housing units? You can find local housing inventories by contacting area realtor associations.

Frank Armstrong III, a Coconut Grove, Florida-based financial planner and author of “Save Your Retirement” (FT Press, $14.99), says home ownership “is no longer a risk-free transaction. This has been the assumption for 30 years, and it’s been rebutted.”

An unstable or declining neighborhood usually translates into home-equity loss for buyers, most of whom have no idea when an area has hit bottom.

There’s no shame in not buying and exploiting the hidden upside in renting, though.

The money you would have spent on maintenance, taxes and insurance can pay off credit-card bills or be invested in an emergency fund, retirement or college savings. I know that few people will look at it this way, but renting might be a chance to recover financially.

(John F. Wasik, author of “The Audacity of Help: Obama’s Economic Plan and the Remaking of America,” is a Bloomberg News columnist. The opinions expressed are his own.)

Click on “Send Comment” in the sidebar display to send a letter to the editor.

To contact the writer of this column: John F. Wasik in Chicago at jwasik@bloomberg.net.

Tags: home rentals, homeownership, homes, real estate
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Author Profiled

Tuesday, October 13th, 2009

This is a short profile that ran in The Daily Herald, a suburban Chicagoland paper:

Author John Wasik of Grayslake looks at writing in different ways.

“Writing a column is like a sprint, you do it in a specific period of time,” he said. “But writing a book is like a marathon with writing, editing and promotion.”

With more than a dozen published books, Wasik’s marathon has focused on a variety of consumer and economic issues, including his latest releases: “The Audacity of Help,” about President Obama’s economic plan and the remaking of America, and “The Cul-De-Sac Syndrome,” about the sustainability of neighborhoods during the real estate downturn.

While the former newspaper reporter has worked for various publishing houses, the latest two books were under Bloomberg Press. They are available through Amazon.com, Barnes & Noble as well as other book stores.

“In some ways, John follows in the footsteps of Jessica Mitford, especially with ‘Cul-De-Sac,’” said his agent Robert Shepard of Los Angeles.

Mitford, one of the famous and politically active Mitford sisters from England, hosted author dinner meetings in San Francisco many years ago that Shepard attended. Wasik had interviewed Mitford for a story and mentioned how he was looking for an agent for his books. Before she died, Mitford connected Wasik to Shepard in the late 1990s.

His life here has helped to guide his career, like a sprint around the suburbs.

Wasik was born in South Suburban Chicago Heights and grew up in Matteson. After he married, he and his wife, Kathleen, moved to Libertyville and then to Wauconda before settling into a home in Grayslake. They’re raising two daughters: Sarah, 12 and Julia, 8.

He earned a bachelor’s degree in psychology at University of Illinois-Chicago, but later decided to go into journalism. He started his reporting career at the Star Publications, a weekly chain that covers the South Suburbs. He often covered mob-related activities connected to a Chicago Heights city council, he said.

He later joined Consumer Digest magazine and produced several award-winning investigative projects involving treatment of the elderly and financial fraud. That work led him to writing a column for Bloomberg News and writing books, starting in 1987.

Since then, he has won numerous awards and appeared on NBC, NPR and PBS. He’s also a regular speaker around the area. He appears regularly for promotional spots, including at 7 p.m. Wednesday, Oct. 14, at Common Ground in Deerfield, and at 7:30 p.m. Tuesday, Oct. 20, at the Schaumburg Library.

Colleagues believe Wasik has the unique ability to dissect complicated financial problems and explain them in a way that makes sense to everyone.

“I really enjoy having him as a guest on my radio shows because I know we’ll have fun exploring the topic of the day and I’ll wind up thinking a little differently about the issue because of a point he has raised,” said Ilyce Glink of Chicago, a syndicated real estate and finance columnist and commentator.

Tags: Daily Herald, economy, jobs, Obama
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Green Deal Means Jobs

Wednesday, October 7th, 2009

The Green Deal: Obamanomics can do more for small business
October 6th, 2009

By John F. Wasik

There’s something glamorous about a couple of bright souls in an American basement or garage. They tinker around a bit, apply their imagination and creativity to a project, and voila, they’re the next Stephen Jobs or Bill Gates, reinventing the way the world works. Are those days over? Can America still foster the culture of innovation that helped it launch the second industrial revolution, land on the moon and seed the information age? Is President Obama’s “Green Deal” going to foster this kind of growth?

Durable small companies that do everything from manufacturing forklift parts to specialty contracting have been creating the bulk of new jobs in recent years. It’s these “high-impact’’ firms that have been generating employment at a surprisingly robust pace over the past decade. As defined by the U.S. Small Business Administration, these companies generally have less than 20 employees, are 25 years old or less and represent about 3 percent of all firms.

Obamanomics3As I discovered in researching my book The Audacity of Help: Obama’s Economic Plan and the Remaking of America, it’s the small shops, factories and firms that are producing new jobs, accounting for 33.5 percent of employment growth for firms of their size from 1994 through 2006. In contrast, during the same period, firms with 500 employees or more accounted for nearly all of the job loss in the U.S. economy. Yet the stimulus plan and budget do little for small businesses; they didn’t get the kind of cheap-credit bailout that the largest mismanaged financial institutions received.

Obama’s stimulus program will benefit specialized contractors in the building trades, alternative power and energy efficiency. While the initial plan will not be a substitute for a comprehensive climate change policy, national green building standards or a renewable energy portfolio mandate (required use of clean energy by a certain date), it will likely seed thousands of businesses and create jobs. Here’s a breakdown of the nearly $42 billion that will be made available:

* $11 billion for smart-grid research and development
* $6.3 billion for energy efficiency and conservation grants
* $6 billion for loan guarantees for electricity generation and renewable projects such as wind and solar (bringing them online and feeding clean power into the grid)
* $5 billion for weatherization assistance (for low-income residents)
* $4.5 billion for making federal buildings more energy efficient
* $3.4 billion for fossil energy research and development (carbon storage and “clean” coal)
* $2.5 billion for energy efficiency and renewable energy research
* $2 billion in grant funding for advanced batteries systems (making them lighter and store more power over time)
* $1 billion for other energy efficiency programs (alternative fuel trucks and buses, smart appliances)

There’s little doubt that the stimulus package will be the largest portion of seed money ever devoted to remaking the economy in a more sustainable mold. Provided the general economy doesn’t collapse, there will be reasons to be optimistic about the green sector. Renewable energy/efficiency industry grew three times faster than the general economy in 2007.

Mostly creating jobs that can’t be outsourced, this employment boom buoys states that have already embraced alternative energy such as California, Oregon, Colorado and Washington. Ironically, the biggest consumer of solar panels is Germany, which has a long-term tax incentive program in place for residents and businesses to buy and install them. Green-collar jobs in the U.S. will never grow substantially without a comprehensive policy that funds a smart grid with net metering, a national renewable energy standard (Al Gore would like to see all electricity generated from renewable sources in 20 years), job training and national building mandates that directs owners to do energy-efficient retrofits.

While the number of new business start-ups (around 600,000 annually) will not be directly effected by the Obama plan, it may spur new growth in companies specializing in creating a green building industry. Even traditional jobs (see below) will flourish if Obamanomics funds a multi-year construction or rehabilitation or maintenance boom.

There’s one other small-business linchpin that the Obama plan leaves out: Cheap and available credit. Small businesses are still being pinched by the credit crunch. They should be able to garner interest-free loans and get the same kind of deals the big banks got during the bailout. It’s also essential that Congress pass a universal, affordable health care plan. Such a national program would immediately make small businesses more productive and profitable.

John F. Wasik, author of Audacity of Help: Obama’s Economic Plan and the Remaking of America (Bloomberg Press), is a personal finance columnist for Bloomberg News and the author of several books. Wasik has won more than 15 awards for consumer journalism including the 2008 Lisagor and several from the National Press Club. He has appeared on such national media as NBC, NPR, and PBS. He lives in Chicago. For more information, visit www.johnwasik.com.

Tags: Green Collar Jobs, Green Deal, Obama
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Green Remodeling Pays Big Time Under Stimulus Plan

Thursday, October 1st, 2009

This is my 10/1/09 Bloomberg column:

Homeowners Get Easy Money From Green Renovations

Commentary by John F. Wasik

Oct. 1 (Bloomberg) — Can you profit from being an eco- investor?

There are really only two ways of doing it now. You can buy a risky sector fund or stock and hold on to it for dear life over the next few years. Or you can invest in your home.

Of the two, I prefer a home investment because the incentives have never been better and there’s no market risk. All the green funds got creamed last year.

Yet it’s unlikely your broker will tell you about the multiple tax breaks available through state and federal governments. Nor will he mention that eco-improvements will lower your cost of living.

If you do this right, not only will you be cutting your energy costs and greenhouse gases, but you can realize immediate savings in energy costs. Solar panels, for example, will save you money every year and have a steady rate of return that’s almost guaranteed, depending on the state incentives.

As part of the U.S. stimulus plan, also known as the American Recovery and Reinvestment Act, there are a raft of generous tax breaks for everything from replacing doors to installing geothermal heating systems.

Whether you are contemplating a complete makeover or just replacing a furnace, you have until the end of next year to put in service a number of improvements to qualify for the federal tax credits.

What You Can Do

Fixing up your home has never made so much economic sense. Uncle Sam is subsidizing lots of green remodeling this year.

The Treasury will give you a tax credit of 30 percent of the cost (a maximum of $1,500) for energy-efficient windows, doors, insulation, conventional heating/cooling systems, water heaters and biomass stoves.

As with any tax break, only certain types of improvements qualify, although this is the most generous range of incentives in recent memory. See www.energystar.gov/taxcredits for specifics. Even if you rent or own a condo, apartment or co-op, you can save on energy costs by buying Energy Star appliances.

Even better credits are available on geothermal heat pumps, solar panels/heaters, small wind energy systems and fuel cells. There’s no limit on the 30 percent write-off for these items through 2016.

So if you purchase a $20,000 solar-electric system, you can get federal credit for $6,000 that will knock the price down to $14,000. And that’s before state tax breaks apply, so this is not your final price.

Although state programs vary, there are additional incentives for installation and actual purchase of the clean power you generate.

Figuring a Payback

When doing the numbers on your home-improvement project, you will need to see what your state is offering you to go green and make a few assumptions.

Let’s say you want to install a 5,000-kilowatt solar electric system on a full-sun, south-facing roof in New Jersey, which has a generous alternative energy program. The retail price is $38,000, but after a state rebate of $8,750 and $8,775 federal credit, your net price is $20,475.

Since the state will compensate you for the solar power you generate, you will receive renewable energy credits once you produce at least 1,000 kilowatt hours of electricity.

According to a payback analysis at www.thesolarcenter.com, you will receive $2,750 in annual state energy credits while paring about $1,000 in electricity costs for a saving of $3,845.

Know Your Energy

If power rates drop, then the payback will be less generous. One reasonable prediction, though, is that climate- change legislation will penalize fossil-fuel power producers and force their rates higher, so it also pays to know if your electricity is generated by nuclear, coal, gas or hydroelectric.

Another consideration is the cost of solar equipment, which has been dropping, so that may also shorten your payback time.

No matter which course you choose, I’m generally optimistic about the future of investing in what I call eco-tech, a category that includes clean power, energy efficiency, green buildings, biofuels and nanotechnology.

As the nation’s largest venture-capital entity, the Obama administration has provided more than $37 billion in seed money for numerous projects in alternative energy, clean fuels and electric vehicles through the stimulus plan. That means the cost of these products will come down as they are mass-produced.

Few would dispute that eco-tech will gain even more traction as the United Nations Climate Conference convenes in December and carbon-trading exchanges are established.

No matter which eco-technologies win out, one concept won’t change: If you have a chance to reduce your living costs, why not do it now?

Global climate-change solutions will require time, capital and mass political acceptance. Paybacks on your home improvements will materialize at a much less glacial pace.