Episode 01: How much it REALLY costs to build a passive house

Welcome to the Outlier Podcast, the podcast for everyone who is interested in building better homes. Host Sandra is chatting with Anthony, the founder and lead designer at Outlier Studio, who is passionate about creating beautiful and high-performing homes. Together, they sit down once a month to chat with industry experts and to answer any and all questions about high performance homes. We want to educate Australians about the possibilities of energy efficient design and change the way we build houses today. We hope you join us on that journey.

People love the idea of energy efficient houses, but are afraid of the potentially high extra building cost. Building designer Anthony and builder David explain how much it really costs to build a high-performing house in Australia and clean up some of the myths surrounding passive houses.

Episode Transcript

Sandra

Okay, now I’m here with David and Anthony, our professional expert consultants. Good morning to you guys.

Anthony

Good morning, Sandra.

David

Hi guys. How are you going?

Sandra

Thanks for taking the time to answer the questions that the people have asked us. I know cost is probably something that bothers you a lot in your work and you’re getting asked about it a lot. So, I figured, maybe we’ll just start off by telling the people how you calculate your building costs. What is the process for you Anthony and maybe also you David after, how do you come up with a budget for a built?

Anthony

Yeah, certainly. So, I will add that as designers, we have an understanding of cost, but we are certainly not experts. And that’s where we love to have a builder with us from day one of the design phase to ensure that we have that budget on track. Because without having that budget checked, there is no built, so that design will never come to light. So, working with David collaboratively in that process is just so valuable. I couldn’t speak more highly of it.

David

The process is amazing. The way that we calculate the building costs is, that a client will engage Anthony and also me to be a consultant during the design. To start determining the cost of the design, we use project sheets. That has our past projects and how much per m² these projects cost. And then that way we can compare it to the new design and see where it’s going to fit per m² and we can come up with an idea of the design. Anthony then will develop a set of concept plans and after that we are going into the process of doing the feasibility costing. The feasibility costing is a detailed estimate, a very thorough estimate. I will sit down and calculate all the material involved in the build; all the labour involved in the build and any trades and supplies involved as well.

And then on top of that we add the builder’s margin, which is standard. After we have done the feasibility costing, we have a really good clear understanding of how much the project is going to cost. And then from there, there is some revisions and estimations made and maybe potentially another feasibility, and then we move forward into the cost analysis, which is the exact same process,  except this time we have all the information required as far as engineering, soil tests, so we know exactly what’s going to be built structurally. Also, Anthony would have gone through the design process with his team and will have a really clear understanding of all their specifications as far as tiles, plumbing fixtures, appliances involved in the project.

Anthony

Just to go back a step there, for those who are sort of saying ‘Well, I’m not certain if I want to commit to a full concept and go through a whole pre-construction phase and design phase, that’s where those project sheets are just so helpful.

So, if you come approach myself or the team ad say, ‘Look, this is kind of what we’re thinking’ and outline a bit of a wish list and sort of an image of the aspects of the home might be, then we can sort of say ‘Okay yeah, we have got a project that was really similar to that and we can look at the project sheets and say ‘Is this sort of what you had on mind’ and you say ‘Yeah that’s pretty close.’ We know what that cost. We’ve had that costed and we can say ‘Look I think this is kind of where this would be then. So, it’s really about just aligning those expectations as well at the start and making sure that we’re all on the same level. Extremely helpful

David

I sort of feel that in the building industry there is a real misconnection between the design process and the construction process. Anthony and I are trying to bridge that gap and obviously having me involved as a consultant. But a lot of projects will go through design, and they might get to the plan or preliminary stage, and they will email it out to a few different builders to tender and because that builder may have potentially ten different quotes or estimates he is doing at that stage, he is not going to put too much effort into it. He’s not going to know the specifications involved in it and he’s going to scheme over things, and you know he may come back with a price, and it suits your budget, but then, once it actually comes time for him to do his final quote, he’s got a full set of specifications, all of the sudden it’s: Hang on. A hundred thousand or even more above your budget.

Anthony

I had an experience very early on in my career where this happened to myself, where I was working with clients. We finalised the design and had some indication from some builders about the price and that was enough for them to be sort of content to move forward. We ended up finalising construction documentation, full engineering package, it was ready to go for a building permit essentially, and upon having all of that further information, it was then priced. And it was considerably higher and well above those client’s budget. And they expressed to me just how disappointed they were in me and that they were never going to be able to build that home. That’s exactly that spark that I needed to say right, this industry… the way that it’s working in the industry currently does not work and there has got to be a better way to do this. And I can safely say, you know, we found that way to do that now and we are sure that what we’re doing, what we are creating together as a team, we’ll get to fruition. It will be built.

Sandra

Yeah, that’s awesome. Because when you got to a designer, when you go through that whole process, you have your heart poured into that house that you’re building, and then you’re just told it’s not going to happen, that must be pretty crushing for them. So, it’s great to see that there’s options for people to have more security and know exactly that their budget is going to be held.

How do costs for a passive house compare to traditional building costs per m²? What percentage increase is there to make your home a certified passive home?

Anthony

How long is a piece of string, is always the answer you’ll get to that question. However, to give some more solid response to that, we might use one of our current certified passive houses as an example. So, looking at the feasibility costings on this, we felt that it would probably be $100,000 more to go to that certified level. From a custom build level, so removing those high-performance components. Now that home was… I can’t recall the sizes, David?

David

255 m². Including garage.

Anthony

Yeah, so 255 m² including garage. That’s in an estate, surrounded by all new builds as well, so with nice flat level ground to give some context to what we’re working with here. The majority of it is brick construction yes sorry. That would be around $100,000 from that average custom home with a 255 m² footprint. That’s probably as much as we can comment on that. It’s so varying between metro and regional pricing as well and the size of the home.

Sandra

What do these 100K go towards?

David

That’s items as far as the airtightness, so the actual products you install for airtightness, but also one of the biggest costs with airtightness is the labour involved in it. To make a house airtight, the details have to be very precise. Small little leaks can really add up, especially with passive house when you’re getting that airtightness. HRV, so heat recovery ventilation. The unit that blows fresh air into the house and exchanges it, so you don’t lose the temperature. Glazing. And also, insulation. They are sort of the main components.

Anthony

Yeah, absolutely. I suppose the one thing to add to that though is that we know it’s a fact that that’s not something everyone can afford in their budget, let’s say those $100,000. And truthfully, it may be more than that. once we have final selections and what not. But we’re looking at more of a hybrid approach to this. So, what we are finding at the moment, is that is really challenging to… As Australia is only just newly adopting passive house construction, we’re finding that we are still playing catch up. There’s a lack of materials that we available to us in Australia. We have to import on pretty much every project in some capacity, whether we’re doing it through a distributor or directly. There certainly are limitations in it which is one of the reasons that the cost is a little bit higher. So, we’re looking at a bit of a hybrid approach. We are trying to reassemble I suppose those components, like the airtight membranes. How can we look at that and use more conventional materials? So, we are looking at plaster board as airtight layers and other things.

David

We are trying to remove the internal airtight membrane and using plaster. And also, with that, there are details and connections that we’re going to make sure that we continue through the wall. What Anthony and I are putting together is definitely going to cut the cost. Instead of that extra $100,000 you would be looking at for a certified passive house, we can cut these costs by 50 percent we believe. Potentially you could install less quality windows, you know, still high-performance windows but not certifies passive windows.

Anthony

Just to clarify, when we say hybrid, we are not talking about actual certified. In our opinions, certifications might be out of reach for most. We are trying to look at this from the perspective of the average person like ourselves, you know. I can’t speak for you David or Sandra, but you know, I definitely couldn’t probably afford that extra outlay for certified passive homes. But I want to try and achieve the highest performing home I can. So, by doing that, we’re looking at sort of that hybrid approach. Not going for certification, but still a very high performing home. The early results are indicating that it’s performing to those levels with airtightness. Obviously, the windows are great, high-performance windows. They are not certified passive house, but still performing great. And yeah, we are aiming for a 50 percent cost reduction compared to certified. We’re excited about that! And you’ll hear more about that in the future.

Sandra

That’s amazing. I mean imagine if I’m building a home and I’m coming to you and saying look I want a high performing home; I want it as insulated and as efficient as possible without certification, and you’re telling me ‘Okay, you’re looking at an additional, let’s say $50,000, that’s a great value for money. Because if we’re looking at how well that house is going to be performing, we’re having money savings for cooling, for heating, for maintenance, for servicing.

What time frame are you looking at roughly to have that 50k just back in the bank just by saving on these expenses?

Anthony

Well, if we look at that example again of that particular project, and if we we are looking at that hybrid approach we were talking about, it could be within 10 to 15 years, hopefully closer to ten. And that’s working on today’s current sort of market. Obviously, energy prices are just going to increase, so it could be getting closer to 10 or even less. At the end of the day, most people are living in their homes for sort of these time periods anyway. The average regional Australian lives in their home 10 to 15 years I believe. So, the pay back will occur within that time frame and if it’s a healthy,comfortable and affordable home, truly we would like to see you stay in for longer.

Sandra

Yeah, it should be a no brainer really, especially given the fact that people are going to be working from home way longer, you’re going to be spending more money on heating your home. So, if you’re building a high-performance home, you can save a lot of money down the road for sure.

David

This discussion is around the costs side of the project now, but just the health and the comfortableness of an airtight home to live in, you know, to me it’s a no brainer.

Anthony

I’m sure it’s been highlighted in the last 18 months to 2 years of everyone working from home: What has your energy bills been like? How comfortable have you been? Have you been hot, cold? We are able to reduce all of that and make it far more comfortable, and far healthier to be inside all the time whilst working and of course definitely reduce those operating cost with heating and cooling in particular.

Sandra

That’s awesome. To get a bit more practical, what would you say is an appropriate price per square meter to build a new home, considering we’re going to take this hybrid model

David

If you look at the hybrid model, the higher performance home, I believe you’d be looking at $2,500 per m² as a starting point. And if you are looking to go for certified passive house, you are probably going to be looking at $3,000 per m² and up. I hate m² because every project’s different and every project’ unique, but I understand you got to have a bit of a starting point to work from. But very project should be based on its own merits. You can have projects up around $6,000 a m² if it is very, very architecturally designed with some great details and that sort of thing.

Anthony

Again, that’s where those projects sheets really help with that. You can sort of outline that from the beginning and equate that as a starting point on a square meterage range. We got that particular design with its square meterage range versus the final pricing. Again, there’s a difference between regional and metro. We are more working on regional pricing, we can’t speak too much on metro, as we haven’t had a great deal of projects down there yet.

Sandra

Looking at it from a little bit of a different perspective, but staying within the the hated square metres, sorry David. When potentially money or the budget is not that big of a limitation, but I’m not sure how big of a home I want to build, what is the kind of the pressure point where I can say ‘okay, it doesn’t make sense to go bigger for the amount of additional costs it will have’.

David

I believe a good design team can quite quickly determine your family’s needs  and what size home you need. I know in Australia, we generally build quite large homes.

Anthony

I think currently, or it definitely fluctuates between America and us, but Australia is still number one as far as the size of a home goes. So, we’ll just put that in for context as well. So, the expectation that the average Australian has might be a little bit skewed compared to the rest of the world as to what they think they need.

Sandra

I can get tell you firsthand as a German, it’s ridiculous how big the houses are here. I’m used to living in little shoe boxes.

Anthony

You call it a shoebox now but did you use that terminology prior to moving to Australia?

Sandra

Probably not.

Anthony

It was probably a comfortable size apartment. But that’s fair enough, if that’s culturally what we’re used to as well, we have to appreciate that and allow for those considerations. But it really comes down to the difference between, say the average Australian volume builder home, but that’s not what we are talking about. We actually have another aspect to achieve here, and that’s the high-performance aspect of a home. So, we want to try and ensure that we’re providing or consulting on the fact that this will perform how we want it to. And to achieve that, it helps you have a smaller footprint. It helps to have not a great deal of perimeter of building, so the glazing to wall ratio overall is important. The more glazing we have, the harder it is to get to get it to perform as we know. We’ve touched on it in articles on our website and in previous chats as well, that glazing is a giant hole in your wall.

Comparative with the windows that we like to work with, you have an R4 wall bat in the wall, but the equivalent U-value of a window is probably around 0.6 R. So, it’s not comparable as far as I’m concerned. So, we try to limit the amount of glazing, keep those ratios under control and that’s also assisted by having a reasonable perimeter of the building. Rectangles are a great example; we want to aim for that. Nice and easy to make that work. And that also translates to internal as well. With airtightness, the entire external building is considered the airtight fabric, or the envelope. In Australia, we have a NATHers assessment for energy rating, and you’ll see them zone off conditioned and unconditioned spaces internal, to try and reduce the heating and cooling loads within those areas of the home. Bathrooms are unconditioned, we don’t want to try and heat and cool that. But the living area, yes, we will try to heat and cool that. However, with an airtight home, we are intending to look at it as whole, so that is a larger volume. Now, we want to ensure that this volume is confined as much as possible, to the requirements of the clients’ needs. It does have higher heating and cooling demands as well, so it’s important that we’re able to try and keep that at a comfortable size to achieve that high-performance.

Now, it doesn’t answer the question entirely, because there is a bell curve there and there is a magical point. But again, this is something that we would want to chat with that individual about and say ‘Okay, that’s what your wish list is, this is what we, based on our experience of past projects, and the project sheets, can say this is about the square meters you’re looking at. And this is what we would advise on that home.’

David

I think it just comes back to getting a team together. Have a designer, have a builder on board, whether it’s myself, or Anthony, or anyone. That way you can make some good clear decisions and get some professionals involved to work out exactly what you need them and what your budget is.

Anthony

There are some exceptionally large certified passive homes out there as well. It’s more down to our expert advice and consultation on your brief and  what you desire.

There are also other aspects which we won’t breech into today such as sustainability so, you know, we want to size the rooms on standard material sizes like plaster sheets and timber lengths etc. So, we reduce wastage and off cuts on site, which is also a consideration we take into account when designing.

Sandra

Another question, going a little bit into a different direction. If you have an existing home and chances are, if you’ve bought a home a couple of years ago, the energy efficiency is not that great. You probably have some single glazing going on. If people want to “passify” their home or just make it a little bit more high performing, how do they calculate if it makes more sense budget wise to tear down and build new or to actually renovate and try to insulate that existing home?

Anthony

It’s a pretty hot topic at the moment. It’s also a difficult one to answer, because it can depend on demographics, where it is located…

David

…If it is heritage listed. There are heaps of things involved in it.

Anthony

Heaps of constraints can exist on each individual property. I suppose maybe again it could be good to use an example. So, we might work on sort of your very common home in Australia, which is a cream brick home, the 3 or 2 tier brick home. There is a very much copy and paste floor plan, it’s very frequently seen throughout Victoria and Melbourne. We have quite a few here in regional Victoria, as well. They are on average 160 square metres or so. We’re not going to talk about home extensions, we are just going to keep it to renovations here. If you were to strip it apart and altar the floor plan and pretty much everything internally is new…

David

I think if we were going down that path of doing that, you might be able to knock an old wall over, open up the living area and perhaps the wet areas as far as laundry and bathroom are relatively staying in the same area. To bring that up to a high-performing home, you could be looking at around 300-350k for that. But once we start going airtight with the renovation, that’s where some extra cost can occur, because you’re trying to put building airtight membranes on a house that already has stumps and wall connections and roof connections. It’s just the detailing as far as closing those connections and other components. If you are looking to go airtight, you could be looking at around $400,000.

Anthony

And that’s basing it off of that example we just gave, around 160 square metre cream brick home. Obviously, that just completely changes every time you step into a new scenario and a new home. Once again, every project is unique.

The best approach we would advise to anyone in that situation is engage a designer and a building consultant who offers a consultation service, at the very minimum, to come for a site visit. So, the designer and builder are both there, in fact even a structural engineer would be very helpful in this scenario and do a walk through. The clients explain what their intentions are, what their expectations are, and that way we can get a firsthand account of the scope of work I suppose. That way, David can see what condition the actual building is in. If you step through the front door and you fall through the floor, well, maybe you are better off demolishing, because you’re going to have to strip that whole house down to get back it to where it needs to be.

David

It really does depend on the condition of the home. If the home needs restumping or it has been re-stumped but there is still a long way to get it to level conditions… Same with the walls, if there is a long way to plumb, and straighten all the walls, then, once again, the construction is huge, and you are going to have a price increase. But just get your team together and I’m sure with a building designer, a builder, and potentially a structural engineer on site, they can quite quickly determine the process going forward.

Anthony

We are able to put together some schematics, some plans and they can really help and assist with that as well when the conversation develops further, before committing to signing the entire process with ourselves. It again depends a lot on the location as well. A home in regional Victoria, that price point is going to be a lot lower. Again, we are not focussing on sustainability or any other aspects. So, yeah, that price point is going to be a lot lower than, let’s say, in the suburbs of Melbourne, where the home value might be a couple of million dollars.

Sandra

I guess at the end of the day it’s best to just get the experts in really and have the consultants on your site to have the foundation to make a proper decision if it makes sense to go either way.

David

I’m truly believe that in the design stage, whether it’s a new built or a renovation or extension, you need to invest a little bit of money to get some really great insight from some professionals.

Sandra

You can save a lot of money that way. If you invest that little bit early on, you’re going to save some money down the road. If you don’t do it and you don’t know what you’re getting yourself into, all of a sudden, you’re looking at plus 10 percent on your budget and the project might just never happen. So, it’s definitely a worthwhile investment.

Anthony

Exactly, and there are so many examples. I think figures as high as 50 to 60 percent of designs actually don’t get through to construction. The majority of those due to budget. So, these few hundred dollars that you outlay for an initial consultation with the right people, designer, builder, engineer, will potentially save you thousands of dollars. And that is just one aspect. The other one that hurts is the emotional. You’ll go through such a lengthy process and can be so emotionally attached to this design, which is your home, where your family will live and grow, to have that taken away from you at the end of that whole design process, because you couldn’t get it to work, to be built with your budget, that can be avoided with such a small little outline and time commitment at the very beginning.

Sandra

All right, I saved the most important questions for last. These came from our good friend Clint, that I know you guys are very familiar with. And Clint wants to know: David, do you ever get mistaken for Hollywood actor Jason Statham? I definitely see a little resemblance there.

David

That has actually happened a couple of times, to be honest. And just so everyone knows, I am a badass just like him!

Sandra

So, you can have Jason Statham build your home, that’s a plus! And Anthony, there is a resemblance with you that Clint saw, too. Are you familiar with MasterChef contestant Simon Toohey? He thinks you look a little bit like him.

Anthony

I was not, but the first night that aired, I received a good 3 to 4 messages from people saying Hey, what are you doing on MasterChef? But just so you know, I can’t cook.

David

He can design a home though!

Anthony

Yeah, that’s where my talents lie.

Sandra

Awesome, well thanks so much for having this chat with me. I hope we could answer everyone’s questions. If there’s more questions, just let us know, we are happy to dive into it again and just be transparent about it. And hopefully, make all these projects happen.

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