How do you decide what makes financial sense? One approach is to look at the payback--the time it would take for an upgrade to pay for itself. A better way is to look at the return on investment, or ROI. Energy and maintenance costs are fairly steady and easy to predict, so you can choose what level of return you would like to see. Using a simple formula, ignoring the effects of compound interest and inflation, improvements with ROI of 5% or higher are generally a good investment. Even a 2% ROI may be competitive with secure investments such as CDs. Lower ROIs may not make financial sense but should be considered if there is an environmental benefit, such as lower embodied carbon emissions.

Another aspect of economics to consider is first costs vs. lifetime costs. Investing in higher quality materials that last longer than inexpensive materials is one way to achieve this.

Economics comes into play when discussing  new homes vs. renovations. In many cases an existing home can be purchased for less than a comparable new home, and the carbon footprint of the existing home already exists. But if the existing home has older, under-performing windows, a lack of insulation, poor air sealing and inefficient equipment, it may not be cost-effective to improve it enough to reduce operating costs to the level of what you can do with a new home.

The 18 Woodland Grove house was designed and built to put the extra spending where it’s the most difficult to do later.  The shell of the home, windows, doors, foundation, walls, roof are all built to a much higher quality, while the finishes in the home are more common.  It’s easier to paint a wall than replace a window.

Portions of this page attributed to Mike Maines, "Guidelines for designing and building a Pretty Good House". Visit the Pretty Good House website to read more by clicking here.