Why is this K. Hovnanian Community Going with Propane?
Sep 24, 2018 • by Jeffrey Lee
Before resorting to all-electric, builders like K. Hovnanian that are developing land without access to natural gas are considering the capabilities of propane.
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When K. Hovnanian recently closed on the land for the future 25-lot Doylestown Greene community in Upper Bucks County, Pa., the company had three energy options to heat and fuel the homes.
Natural gas was the first option, according to Rick Buchholz, director of land acquisition for K. Hovnanian, a national homebuilder. But while the natural gas main was just a few hundred yards away, a major highway stood between it and the community. Waiting for natural gas would have meant a large cost and a significant delay for the already-approved project. Going all-electric was another option. But it would have meant forgoing popular amenities such as gas cooking and barbecues and using less-desirable heat pump heating.
For this community, a third option had none of those drawbacks: fueling the homes with propane.
K. Hovnanian's dilemma is one that may ring familiar to builders and developers across the country as the price of land forces them to explore parcels outside of the reach of natural gas infrastructure. In such developments, central community propane systems or individual propane tanks allow builders to provide desirable gas amenities without the cost or delays of waiting for the natural gas utility.
Homes in Doylestown Greene will start in the $600s and range from 3,900 to 4,600 square feet. At that price point, homebuyers don't expect heat pumps, Buchholz says. "I think heat pumps still have that stigma: 'I don't feel hot air coming out,'" he explains. "It's all about market perception. People buying these types of homes expect gas heat."
Propane will also fuel other luxury amenities, including gas cooking and a connection for an outdoor barbecue and possibly a fire pit. Homes will also likely include a tankless water heater, which can provide on-demand, endless hot water.
Without delay
Energy choice is just one of many factors that Buchholz considers as he sources land deals and presents them to his corporate colleagues. "We go through a series of internal meetings where they focus on a variety of things," he says. "It's usually the variables. What can you sell the house for, and how many a month can you sell at that price? As a public company, we like to look at our rate of return. Every company has its own philosophy on profit versus the rate of return, or how fast you get your money back and put it into the next development."
As builders and developers navigate those decisions, the availability of propane on any building site is a factor they should consider, says Harris Baker, vice president of business development for Pinnacle Propane and Alliant Gas. The costs and delays involved with bringing natural gas to a community can vary widely for different sites. If those hurdles are large enough to make natural gas an impractical option, developers should consider propane before resorting to an all-electric community, he says.
"People buying these types of homes expect gas heat."
For individual homes or communities with larger lots, propane tanks are a just-in-time, always available option that won't slow builders down. And through central community systems, sometimes referred to as propane jurisdictional systems, propane is also an option for high-density communities. In those developments, a master propane storage system feeds distribution lines to each home, where it's metered just like natural gas. Homeowners pay only for the amount of propane they have used, after they use it. The propane infrastructure can also accommodate other features of the community, such as community pools, clubhouses, or golf courses. (To learn more, download the Propane Jurisdictional Systems guide.)
Because they operate independently, community propane systems are an excellent option when extending the natural gas main would require costly easements, time-consuming roadwork, or environmentally disruptive infrastructure. Propane retailers can often provide more timely and customized service, Baker says. "These builders would go to propane companies that have people that are going to provide much more personalized, face-to-face, familiar interaction," he says.
In reviewing the company's acquisition of Doylestown Greene, Buchholz believed he might face internal resistance to propane from K. Hovnanian executives more accustomed to natural gas. He gathered research, such as the Propane Energy Cost and Carbon Calculator, from buildwithpropane.com to ensure he could answer any questions. He also noted that competitor Toll Brothers was building several high-end communities in the neighborhood with propane.
"Corporate grills you on everything," Buchholz says. "I expected that with the propane, but there was no resistance. Once I told them that it's accepted in this market and that a couple miles down the road Toll Brothers is selling homes at $600-, $700-, $800,000 and up with propane, it was a non-issue."
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