Reaching for the stars: Green construction cost premiums for homestar certification

The assumption that undertaking certification, using a green building rating tool, will increase capital construction cost has been well studied in commercial buildings with mixed results, but less attention has been given to the much larger residential sector. This paper studies New Zealand’s Homestar residential green building rating tool and estimates the cost premium associated with 6-Homestar certification by analyzing the actual capital construction costs of 718 newly built homes in Auckland, New Zealand. To undertake this research, the authors contacted and collected actual capital construction costs from builders and developers of recently constructed single-family homes across Auckland. Given the sensitive nature of property-level construction cost data, this study marks the first development and application of hedonic cost modelling to analyses actual construction costs of single-family homes. The authors find a 12% cost premium for 6-Homestar certification, comprising an 11% hard cost premium and 1% in additional soft costs.