Abstract
Investing in the main home is an important form of investment for families and represented one of the main family assets in Italy in the second half of the 20th century. The evaluation of the convenience of the house purchase needs to consider that technologies in construction have undergone a rapid change in recent times that proposes an approach to sustainable building technologies, such as dry construction systems that can reduce energy consumption over time. Moreover, these construction systems are encouraged with tax deductions from the state, that is, financing with public spending via a tax benefit, which recognizes the role of externalities of investments in sustainable construction. The article would apply Life Cycle Flow (LCF) model to a residential building; LCF is based on the Life Cycle Cost (LCC) model and adapted to assess a real estate investment, such as a residential building for private use, taking into account the effects of a tax benefit. The model quantifies the cost of satisfying consumers’ housing needs in the long run. The model takes into account the absorption of financial resources at all stages of property investment. The proposed LCF approach quantifies an average discounted cash outflow per year and an average discounted cash outflow per year per surface unit in square meters; thus, it is possible to compare project alternatives and choose the alternative that minimizes the absorption of financial resources in the long run. In this article, the LCF model is applied to three project alternatives and highlights the energy savings in the long run for consumption choices and the importance of tax benefits for the reduction of the cash outflow for a family in long-term housing. Given the results of the research, the proposed LCF model can be applied on a larger scale, in particular, to quantify social welfare generated by tax benefits financed with public spending, in terms of economic activation and assessing environmental externalities.
Highlights
The objective of this article is to improve the Life Cycle Cost (LCC) analysis applied in several studies for the cost evaluation in the long run both for consumers' and firms' choices
Life Cycle Flow (LCF) analysis allows consumers to make evaluations taking into account the entire life cycle of the building, in addition, aiming to assess investment alternatives by identifying project investment alternatives that are associated with the least commitment in terms of the absorption of financial resources, not with regard to a instant time or a partial duration time, but considering the entire useful life of the building
Three approaches have been recognized: Conventional LCC, whereby the economic value as an internal cost is strictly considered in terms of the life cycle of a product; environmental LCC, which is always accompanied by a complementary Life Cycle Assessment (LCA) based on an evaluation of all costs, including externalities (Notarnicola et al, 2009; Strano et al, 2013a; 2013b; Chinnici et al, 2013; Fedele et al, 2014; Lanfranchi and Giannetto, 2014; De Luca et al, 2014); and social LCC, which assesses internal and external costs in conjuction with LCA, with the involvement of government agencies not directly responsible for the production system (Ciroth et al, 2008; Lichtenvort et al, 2008; De Luca et al, 2015; Falcone et al, 2015)
Summary
The objective of this article is to improve the Life Cycle Cost (LCC) analysis applied in several studies for the cost evaluation in the long run both for consumers' and firms' choices. The LCF model is applied to the evaluation of three project alternatives (traditional “wet” construction technologies, sustainable “dry” construction technologies and sustainable “dry” construction technologies with tax benefits) and highlight the energy savings in the long run in consumption choices and, the importance of tax benefits in the reduction of the cash outflow for a family in long-term housing. Some authors (Imperadori, 2008) showed that, in the past, the application of building systems layered dry was applied only in specialized or niche areas, such as shops, hospitals and commercial buildings, while today, applications of this technique have extended to the field of residential construction When choosing equipment, such as a car or simple light bulb (Imperadori, 2008), consumers adopt the lowest cost as a discriminating choice approach. Sustainable construction systems are encouraged with tax deductions because the state recognizes the role of externalities for investment in sustainable construction, which are financed using public spending by providing tax benefits
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