Green Affordable Housing Essay

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Introduction Green building has come forth over the past decade as a positive movement to produce high-performance, energy-efficient structures that improve comfort and health for resident, meanwhile, minimizing environmental impacts. Nevertheless, a common sense that green features is expensive and not suitable for affordable housing. Recent studies are showed that green buildings have a modest initial cost premium, but the long-term benefits far exceed the additional capital costs. For this report, I will introduce a financial analysis -Net Present Value (NPV), and discuss the impacts of NPV analysis for green affordable housing. Definition of affordable housing Affordable housing means housing is affordable to those households with a…show more content…
To convert future dollars to present dollars, net present value analysis inserts a number “ discount rate”. Here are 4 basic steps for NPV analysis Forecast the benefits and costs in each year. We need to forecast the benefits and costs in today’s dollar include opportunity costs and use expected value to estimate uncertain benefits and costs, omit the sunk costs, non-monetary cost and benefits. Determine a discount rate. The discount rate is a nominal discount rate. We can use this formula to converse real to nominal. (1+real discount rate)*(1+future CPI)-1=nominal discount rate Future CPI = Future consumer price index Calculate the net present value. ∑net present value=∑((total benefits-total costs))⁄〖(1+r)〗^(length ) r = discount rate Determine alternatives After calculate the NPV, we are not only calculated monetary costs and benefits, we also need to consider non-monetary costs and benefits. Life-cycle Costing (LCC) Life-cycle costing is an economics tool to assess the total cost of a product. Another purpose for this tool, as a management decision tool, for comparing different parts conflicts by concentration on facts, money and time. By using Life-cycle costing, total cost of the product can be calculated over the total span of product life cycle. All parties on this project, such as product suppliers, consumers and owners are benefit from LCC. NPV analysis application in green affordable housing This report introduces net