EQuilibrium* HEALTHY HOUSING FOR A HEALTHY ENVIRONMENT Qualitative Consumer & Industry Market Research October 2006 * EQuilibrium is an official mark of.

EQuilibrium*HEALTHY HOUSING FOR A HEALTHY ENVIRONMENT

Qualitative Consumer & Industry Market Research

October 2006

* EQuilibrium is an official mark of CMHC

CANADA MORTGAGE AND HOUSING CORPORATION

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Outline

Background and Objectives Existing Programs and Previous Research Approach Results of Consumer Focus Groups Results of Industry Interviews Implications


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Background and Objectives

Goals of the EQuilibrium Initiative are to: Develop a clear vision and approach to achieve high quality,

Healthy HousingTM and sustainable communities across Canada Increase the national capacity of Canada's housing and renewable

energy industry sectors for the long term delivery of zero impact sustainable housing in all regions of Canada

Foster market awareness, acceptance and delivery of Healthy HousingTM and sustainable communities

Enhance Canada's domestic and global leadership in sustainable residential community design and development, leading to Canadian business opportunities in international markets.

EQuilibrium concept is based on five key principles that guide the design and construction of sustainable housing and communities: Health, Energy, Resources, Environment, and Affordability.


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Background and Objectives

Objective of the market research was to inform a marketing strategy by: Assessing overall interest Determining which benefits and features are most appealing Identifying key factors impacting acceptance Obtaining input into development of value proposition Exploring perceptions regarding brand positioning

Targeted early adopters pre-disposed to invest in energy efficiency and environmental features

Focus on initial market introduction - after the first demonstrations


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Approach

Background Paper Lessons from existing programs and previous research

Consumer Focus Groups 6 cities (Toronto, Calgary, Whitehorse, Vancouver, Montréal,

Halifax) 2 sessions in each city (5-9 participants per session) Participants recruited to fit early adopter profile 90 participants (47 Women, 43 Men)

Industry Interviews 11 builders participated (3 AB, 2 BC, 2 ON, 3 QC, 1 MB) Mix of custom and mass market builders


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Observations drawn from various sources Characteristics of Early Adopters

Consumers are buying their second or third home; they are more educated than the average; they have higher incomes; and they report adopting other environmental habits (e.g. recycling, using transit, etc.)

Builders are often smaller custom builders; however mass market builders may also be interested under the right circumstances

Features and Benefits that Resonate with Consumers Most important features are: overall construction quality; energy

efficient or renewable energy features (windows, high-efficiency furnace, solar PV, etc.); indoor air quality (IAQ); and location.

Most important benefits are: saving energy costs; durability; less maintenance; good neighbourhood; reduced environmental impact.

Existing Programs and Previous Research


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Features and Benefits that Resonate with Builders Most important benefits are: keeping up with latest technology;

brand differentiation; responding to consumer demand for better quality and lower operating costs.

Environmental and energy features must compete with luxury features but even so many builders intend to implement more of the former.

Most popular features are: windows; furnaces; water heaters; toilets; air tightness; insulation.

Less popular are advanced features such as solar PV.

Factors in Acceptance of Energy Efficient Housing For home buyers, key incentives are: energy and cost savings;

quality; uniqueness of design; indoor air quality; security of supply. For home buyers, key barriers are: initial cost; maintenance issues

and competition with other features.



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Factors in Acceptance of Energy Efficient Housing For builders, key incentives are: product differentiation; keeping

up with technology; message of quality; brand recognition and reputation.

For builders, key barriers are: lack of consumer demand; overhead costs of certification programs; technical and regulatory difficulties with grid connections; risks of non-performance.



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Canadian Programs R2000 – Limited acceptance with mass builders – primarily

because of risk associated with pass-fail nature of the program, cost and complexity. However the brand is well known by builders and continues in several provinces.

EnerGuide for Housing - Not a building program but a rating scheme. Level of interest has been good and is growing – perhaps seen as indicator of quality.

Energy Star (ON), Novo-Climat (QC), Built Green (AB, BC), Power Smart (MB) - These programs have replaced R2000 as the premium program in selected provinces (they are generally less demanding). They are achieving significant success, almost breaking into mass market. Overall trend towards standardization and quality control may be factors.

Healthy HousingTM – awareness of program is generally low.



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U.S. Energy Star – Has been successful in becoming the national

standard. Factors in success include: quality; strict standards; partnership with established organizations; incentives; marketing; technical assistance; and training. Note: standards are lower than in Canada.

Building America is responsible for the “Towards Zero Energy” program – Successes include involvement of industry members and recruitment of mass market builders to pilot the concept.

Japan Market is more advanced due in part to broad acceptance of grid

interconnection and time-of-day pricing. Other factors include marketing that focuses on cost-performance and quality; mass production with customization options; brand name associations with well-established companies.



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Results of Consumer Focus Groups

Perspectives on Energy Efficiency and Healthy HousingTM Consumers were aware of a myriad of technologies, appliances,

materials, equipment and best practices to save energy, improve indoor air quality and reduce environmental impact.

Some of the most common mentions included energy efficient light bulbs, insulation and energy efficient appliances - Participants quickly focused on specific energy saving products that they owned or had heard of with a focus on saving money on utility bills.

They had some idea of renewable energy technologies but were vague on technology details and are confused by terms like passive, PV, etc.

They recognized there is a responsibility to future generations. They expect government to lead but a few were sceptical or

cynical about government intentions/capabilities.


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Awareness of Other Programs Widespread familiarity with Energy Star (but mainly appliances). About half were familiar with EnerGuide (though more in relation

to equipment). Many (but less than half) knew of EnerGuide home inspections

(few knew the name). Many (but less than half) knew of One-Tonne Challenge. A few knew of R2000 but vague on details. Many knew of regional programs (B.C. Hydro, Hydro-Québec,

Energy Solutions in YK, Novo-Climat in QC). Few were familiar with Healthy HousingTM. Overall low awareness of program names – but some awareness of

specific products (e.g. B.C. Hydro giving away energy efficient light bulbs).

Most felt that motivation for these programs was combination of saving $ and protecting the environment.


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Initial Reaction to EQuilibrium Concept Strong interest and curiosity. Sounds “too good to be true”. Widespread view that this will be expensive (perceived high cost of

renewable technologies, experience with the high cost of home renovations).

People want more information (e.g. will it really work; cost and savings; what would it look like?).

Widespread concern (especially in Toronto, Montreal, and Vancouver) that it would only be applicable to new, suburban developments.

Would this be applicable to retrofits of existing homes? Renewable energy and grid connection sounds intriguing – how

would it work? Will it require the occupants to make significant changes in their

lifestyles?


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Key Benefits (Top Three by City)

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Calgary Halifax Montreal Toronto Vancouver Whitehorse

Wei

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Lower energy bills

Healthier living

Reduced pollution

Reliable energy


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Key Benefits (Overall)

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Lower energy bills Healthier living Reduced pollution Reliable energy Greater comfort Affordable

Wei

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Key Benefits Though not on the list, quality of construction was of very great

interest. Men tended to focus on the cost savings. Women tended to focus on health benefits (e.g. reduce allergies

and asthma) first and then linked these to environment benefits. Calgarians made the link not just to environment but to resource

conservation (anticipating future scarcity). Participants in Whitehorse and Halifax had more interest in

security/reliability of energy supply given more frequent blackouts. There was some confusion about liveable neighbourhoods with

many wondering how this was related.


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Key Features (Top Three by City)

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Calgary Halifax Montreal Toronto Vancouver Whitehorse

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Sustainablecommunity design

Renewable energysystems

Energy and resource-efficient construction

Climate specificdesign

Natural daylighting

Energy-efficientappliances andlighting

Water coservationand re-use


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Key Features (Overall)

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Renewableenergy

systems

Energy andresource-efficient

construction

Climatespecificdesign

Naturaldaylighting

Passive solarheating and

cooling

Watercoservationand re-use

Energy-efficient

appliancesand lighting

Sustainablecommunity

design

Land andnatural habitatconservation

Indoor AirQuality


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Key Features There was great interest in the possibility of residential renewable

energy systems but a general lack of understanding of what the different systems were (e.g. PV, geothermal).

In Calgary and Whitehorse, climate-specific design resonated well. In Vancouver, participants were more sceptical of solar energy

(not enough sun). None of the features were perceived as negative but there were

questions about scope of water reuse. People liked the idea of liveable neighbourhoods but either did not

see how it applied to individual homes being “net zero” or they were sceptical that it might be too utopian.

Low interest in IAQ features seems to contradict high interest in benefits related to healthier living.


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Financial Barriers & Solutions Expectations are that houses will cost 25-100% more ($50-200K). Most believe costs will come down over time but that it will take 20

years or more before it becomes available for the mass market. People willing to pay more if savings justify it - general willingness

to pay $15-20K more – some would go as high as $50K. Some wondered if savings would depend on extensive lifestyle

changes. Some were concerned about finding the extra up-front capital

even if it could be shown that the savings justified it. When informed that cost might be $10-30K more, people were

surprised – some accepted it, others remained sceptical and wanted to know how. Most felt that if the added cost of a EQuilibrium house was that low, they would consider buying one if they were in the market.


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Financial Barriers & Solutions Most want to see evidence of both costs and savings – need to

publish detailed financial information. Many suggested a need for government subsidies – at least in

beginning (e.g. reduced CMHC mortgage insurance rates, property tax rebates, etc.). Also interest in cost savings guarantees.

People in Halifax and Whitehorse were less concerned about cost. It was suggested that application of the concept to multi-unit

residences would help spread the costs and lower the cost per unit.

Some suggested obligatory disclosure of energy costs for all house sales.


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Other Barriers & Solutions Reliability, durability and maintenance - Suggested building model

homes - Get personal testimonials - Provide information, clarify benefits, costs and risks.

Willingness/ability of contractors to build quality - Change building codes to enforce higher standards - Provide guarantees on materials, systems, etc.

Location and availability of land - Provide different types of models (e.g. multi-unit models, in-fill models).

Aesthetics not a significant barrier. Most (but not all) thought Government involvement would provide

greater confidence. CMHC has a good reputation and the CMHC imprimatur gave added credibility to the concept.


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Program Positioning Most participants thought the energy component and the Healthy

HousingTM component should have equal weight. There were mixed views on the “net zero energy” aspect – some

thought it would sound too good to be true – some thought it sounded too much like accounting – some thought it might be useful if it could be achieved – many thought it sufficient to focus on very low energy use.

Most frequent suggestions for marketing were: home shows/exhibitions, articles in magazines, internet, brochures in banks and real estate agencies. Several participants suggested sponsoring a TV series or a documentary.

Some felt program needed to leverage existing programs and names (e.g. Energy Star, Novo-Climat).

Others thought it should be a new name: focus on health, on environment, on energy, on costs, on future generations.

Quick suggestions included: “smart”, “enviro”, “natural”, “R3000”, “total energy”.


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Results of Industry Interviews

Profile of Participants Build between 5-1200 homes/year. ¾ are focused on single detached market. 50% are custom builders; 30% are mass market; remainder are

both. 90% consider themselves “green builders”.


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Market Trends Demand exceeds supply – consumers want larger, more luxurious

homes on smaller lots – some energy efficiency is expected. Main innovations are: more integrated designs, better materials

and more efficient systems, beginning to see more ground-source heat pumps.

New building codes in some provinces, municipal interpretation varies.

Energy price increases not yet fully transmitted to consumers in many provinces.

Shortage of building lots is squeezing builders. Interest in higher density urban construction is beginning to grow. Premium energy efficient programs are catching on.


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Participation in Current Programs Most common are R2000 and provincial equivalents. Key reasons for participation: build reputation; lead the

competition; improve brand recognition. Not yet translating into market share or profit, consumers not yet

demanding these programs in large numbers, but builders do expect to eventually measure success in terms of increased sales.

Many participate because it is the right thing to do and they get satisfaction from building a quality product.


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Current Product Positioning Products feature both energy efficiency and Healthy HousingTM

attributes as very important. Key messages are: quality; cost performance; green product;

benefits of third party certification (i.e. assurance of quality). Key promotional channels are: verbal discussions with buyers (by

far most important); features in promotional materials; websites.


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Promotion of EQuilibrium - Key messages should be: quality cost performance third party certification green product specific features (e.g. renewable energy systems) These are not substantially different from current messaging but

may be different in degree – other factors such as off-grid reliability are not considered important

Features that Resonate - Most attractive are likely to be: IAQ features Renewable energy systems Energy efficient appliances and lighting Home as a complete integrated system


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Barriers Biggest barrier remains the up-front cost Perceived risk (complexity of systems, performance and durability)

in particular as it relates to the renewable energy systems Utility regulations re: grid connections Municipal inspection practices and expectations (i.e. awareness

and understanding of improved designs) Solutions include

Improved financial incentive through appropriate pricing of energy Need ongoing institutional/government support for innovation and

market introduction Build awareness and understanding of municipalities Develop framework for third party verification Need subsidy and marketing assistance for early stages


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Value Proposition – needs to be based on Stay ahead of the technology curve Improve product quality Improve brand recognition Establish market share in new niche area Ultimately there will have to be an expectation of increased sales

Program Positioning There were no dominant themes Some suggested associating with brands for existing programs

(e.g. Built Green, Novo Climat, etc.) Others suggested associating with larger concepts such as “One

Planet Living”


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Comparison of Focus Groupsand Interviews

In most respects, builders have correctly assessed the perspectives of consumers and views are consistent Key benefits (quality, cost performance, healthy living, green

product) Key features (renewable energy systems, energy efficient

construction) Key barriers (price, risks)

Some differences Although consumers rated healthy living highly as a desirable

benefit, IAQ features did not resonate with them – builders thought it would

Consumers doubt industry’s capacity to deliver these products Many consumers believe that governments should regulate

EQuilibrium-like standards for all housing


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Implications

Interest is there among both consumers and builders Target:

Mass market Should give equal or more attention to high density development

in the urban core as well as single detached homes in greenfield areas

Need to design product to provide seamless transition from traditional design in both form and function

Product Positioning: focus on… Quality of construction (link to third-party certification) Cost savings Healthy living Reducing pollution “Not as expensive as you might think”

Features: highlight… Renewable energy systems Integrated “whole house” design


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Implications

Overcoming Barriers: Scepticism regarding costs and savings Provide demonstrations Make detailed technical and financial results widely available Arrange testimonials and third-party coverage (e.g. selected

periodicals)

Overcoming Barriers: Concerns about reliability and durability, maintenance, etc. Provide access to model homes Arrange testimonials Provide guarantees

Overcoming Barriers: Concerns about contractor capabilities and trustworthiness Need government sponsorship and oversight in early market

penetration period


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Implications

Overcoming Barriers: High Initial Costs Encourage provinces/utilities to price energy appropriately Encourage provinces to raise minimum performance standards for

all housing Consider financial incentives – if/when needed to facilitate early

adoption Overcoming Barriers: Regulatory Barriers

Facilitate resolution of grid connection issues with provinces/utilities

Facilitate resolution of municipal inspection issues in cooperation with FCM


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Implications

Value Proposition (Consumers) - For minimal extra cost up-front, EQuilibrium will deliver: Significant cost savings Improved construction quality A healthier indoor environment Equal or better convenience, comfort, aesthetics

Value Proposition (Builders) - For modest investment in improved design, materials, craftsmanship, and renewable energy systems, EQuilibrium will deliver: Significant early share in a growing market Head start on the competition Enhanced reputation for quality and brand recognition Understanding and experience with key emerging technologies Increasing sales


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Implications

Program Positioning Give equal weight to energy and Healthy HousingTM Focus on ultra-low energy use and on-site green energy

production – as opposed to “net zero energy”

CMHC as facilitator Sponsor demonstrations Lead marketing (home shows, media, etc.) Facilitate process of overcoming barriers Information clearinghouse

EQuilibrium* HEALTHY HOUSING FOR A HEALTHY ENVIRONMENT Qualitative Consumer & Industry Market Research October 2006 * EQuilibrium is an official mark of.

Documents

housing corporation7

canada mortgage

impact sustainable housing

environmental features

housing corporation8

previous research slide

mass builders

important features