When it comes to green design, there is one internationally recognized benchmark that you’ll come across time and time again - The LEED Rating System. An abbreviation of Leadership in Energy and Environmental Design, it is a comprehensive certification system that may seem overwhelming to navigate, but this article will break it down into its most salient parts.

LEED was established by the U.S. Green Building Council in the early 1990’s as a tool for creating an industry standard of environmentally conscious architecture across the entire building industry. According to USGBC, “the 1990s saw a growing realization of the need to optimize these systems—with people and nature in mind—to create better buildings”

Throughout their growth, LEED tested their benchmarks across different areas of architecture, from commercial to elementary schools to residential and interior spaces. This resulted in numerous versions of LEED, from LEED 1.0 in 1998 to LEED 4.1 in 2019.

So how exactly does the LEED system work and what benefits does it have for builders and investors? First, let’s look at the different rating systems LEED uses. They are:

*LEED for Building Design and Construction: Used for new construction and major renovations in commercial and retail spaces.
*LEED for Interior Design and Construction: Used for commercial interiors.
*LEED for Building Operations and Maintenance: Used for existing buildings that are undergoing improvement.

*Cities and Communities: Used for entire cities and sub-sections of a city.
And the two rating systems that apply most to residential builders and investors are:
*LEED for Neighborhood Development: “For new land development projects or redevelopment projects containing residential uses, nonresidential uses, or a mix. Projects can be at any stage of the development process, from conceptual planning to construction.”
*Homes: “For single family homes, low-rise multi-family (one to three stories) or mid-rise multi-family (four to six stories).”

Because more than one rating system can apply to a project, LEED uses what they call ‘The 40/60 Rule’. Essentially, If a rating system only works for less than 40% of the gross floor area based on certain criteria, that rating system should not be used. Conversely, if a rating system works for more than 60% of the gross floor area then that rating system should be used.

If prerequisites are met, the benefits of a LEED certified building can be of great value to developers. These vary state to state, but include tax exemptions, grants, reduced costs for building materials, free technical assistance, and expedited permits. These can be especially beneficial to builders applying for the LEED for Neighborhood Development model, as there can be a greater return on investment when incorporating LEED in large, multi-residential developments.