A sea change is under way in the building industry.

For a host of pressing reasons – melting polar ice, withering Midwest corn fields and American casualties from various missions to protect U.S. oil interests abroad – both homeowners and crafters of building code demand better building energy performance. After all, nearly half of U.S. energy is consumed by our buildings.

Meanwhile, the field of building science – our physics-based understanding of how buildings and their component parts function as interrelated systems – has advanced to the place where we can achieve revolutionary gains in energy performance at affordable cost.

We’ve got burgeoning demand. We’ve got the science. We should be engaged in a campaign of deep energy retrofits to transform the energy performance of our built environment, all supported by investments from public agencies and utilities. Unfortunately, it’s not happening. And at least part of the problem is that available energy efficiency incentives are supporting the wrong work in the field.

We’re suffering from a case of energy efficiency myopia, committed to incentives that reward homeowners for pursuing the most modest of energy improvements to their homes. We end up with slightly better insulated buildings, but often not meaningfully improved buildings.

This strategy is all in the name of capturing the “lowest hanging fruit,” but the approach has two major flaws:

1. Its tunnel-vision focus on incremental energy cost savings ignores the broader and equally important benefits brought by good energy retrofits informed by building science: indoor air quality, durability, comfort and quality of life.
2. It can act as a disincentive for the deeper, more transformative progress we all need to be making to improve the energy performance of our built environment.

Every time we retrofit a home, we’ve got maybe a once-in-two-decades opportunity to improve that building. If we limit ourselves to Band-Aid approaches we’ve failed in our responsibility as stewards of the built environment to capitalize on that chance and to revolutionize both the efficiency and livability of that structure.

I’m all for incentivizing home energy retrofits. In today’s economic climate homeowners need all the help they can get.  But we need not limit ourselves to incentives that fund only cost-effective energy improvements calculated at an unrealistically short payback period. These agencies’ singular focus on short-term energy improvements at the meter discourages the real, lasting change that will have a meaningful impact on the performance of our built environment and on people’s lives.

And let’s face it, if our energy efficiency retrofits don’t even reach the same level of performance as minimum code for new building (a disconcertingly low bar) then our methodology is flawed.

Let’s call on public agencies and utilities to take the dollars currently being spent on marketing and funding small, incremental improvements in energy efficiency and spend it on a campaign of deep energy retrofits guided by modern building science. Let’s reinvest in the envelopes of our buildings, super-insulate, air-seal and mechanically ventilate for a constant supply of fresh air. Let’s decommission those old wasteful, sometimes dangerous furnaces and replace them with super-efficient heat pumps at a fraction of the cost.

Let’s use the market power of incentives to encourage the changes in the built environment that our households and our planet demand.

Sam Hagerman co-founded the contracting firm , emphasizing sustainability in the built and work environments.

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The city sees it. Builders see it. The market sees it. But so far Portland lenders can’t – or won’t. Accessory dwelling units (aka ADUs, backyard cottages, or granny flats) are sound investments.

I was just reminded of the public buzz and excitement in Portland surrounding ADUs when the city sent word last week that two backyard cottages will be featured on this year’s . The 2012 tour’s focus on small houses is just one example of an explosion of interest in small footprint living. We get half a dozen inquiries each week from Portlanders wanting to build an ADUs.

It’s no wonder. The housing type makes a lot of sense.

On environmental and social levels, ADUs reap big dividends. Their small footprints makes good use of land within the urban growth boundary and reduce per capita energy consumption. Their locations in existing urban neighborhoods make walking, biking and transit use easy and supports local businesses. Their size and affordability supports mixed income communities. And their flexibility makes inter-generational living feasible.

ADUs also drive homegrown economic development, something I care a great deal about as a Portland builder and business owner. As the building industry shakes off the Great Recession, ADU construction can create jobs in Portland.  The city recognized this in 2010 when it placed a three-year moratorium on system development charges for ADUs.

But these greater benefits of ADUs don’t mean that they’re some sort of centrally-planned housing experiment. ADUs are market tested and profitable. This is why local lenders’ blind spot for them is so puzzling.

We now have the comparables to show that adding an ADU to your property adds significant value. And the income-generation numbers are even more convincing. For $150,000 you can build a nice two-bedroom ADU that commands $1,500 in rent per month in today’s market. Factoring in debt service, taxes, maintenance and vacancies, the positive cash flow on that property could easily be north of $500 a month. And all the while, you’re adding real, lasting value to the property.

Added value, secured debt, positive cash flow – what’s not to like from a lender’s perspective?

Granted, lenders have rightly become more conservative after the recent real estate and banking debacle, but ADUs are the antithesis of the speculative McMansions in the ‘burbs that got us into this mess. Unfortunately, many ADU projects die on the vine today because lenders won’t extend reasonable financing to these projects. So the social, environmental and economic benefits of ADUs in Portland remain largely unrealized.

The first lender that sees the great opportunity presented by ADUs and takes the plunge will profit from its vision, as will the rest of us. It won’t come a moment too soon for our city’s economy, environment, or denizens.

Sam Hagerman is the co-founder of . Contact him at sam@hammerandhand.com.

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