In real estate, the conventional wisdom holds that home buyers should shoot for the largest house they can afford. But even before the foreclosure crisis trickled up to million-dollar McMansions, developer Chad Ludeman sensed that this chestnut was moldy.

It wasn't only that he saw too many people splurging on domestic castles that were breaking their budgets. He also was convinced that they were buying homes that the planet couldn't sustain either.

Ludeman isn't the first to make the connection between our insatiable appetites for built property and the environment. But since he was launching a career as a developer, he was in a position to offer an alternative to the standard house on steroids. So, he reformulated the old real estate maxim for a world in which homeowners need to count both their pennies and their carbon usage, and came up with this version:

Buy the smallest, most energy-efficient, best-designed house at the lowest price you can find.

Ludeman is putting the finishing touches on his demonstration project in East Kensington, and it's just the sort of house America needs right now - a tight-as-a-drum box that cost a miserly $100,000 to construct and promises to subsist on $1,200 worth of energy a year. If General Motors had developed a product this efficient, it might not be facing possible bankruptcy today.

At roughly 1,150 square feet, the two-story, three-room house might fit inside the great room of the average American manse, which has now blimped up to 2,700 square feet. Yet it's anything but a monk's retreat.

Because it was designed by one of the city's most promising young designers, Brian Phillips of Interface Studio Architects, it features the kind of thoughtful details usually found in custom homes. Strategically placed windows and high ceilings make it brighter and more airy than a typical rowhouse. You'll have to limit your material acquisitions to live there, but at least trapdoors in the floors offer a little extra storage for the overflow.

Ludeman, who founded the development company Postgreen, calls his creation the $100K House, although it would cost you more than $200,000 to buy one of the four original models on the 2100 block of East Susquehanna Avenue - were any left for sale. The name and the construction budget were inspired by The Perfect $100,000 House, a meditation on the state of residential construction in America, told in the form of a cross-country house-hunt by Metropolis Magazine columnist (and former Dwell editor) Karrie Jacobs.

The figure, Ludeman concedes now, is misleading because it doesn't factor in land or design costs. "I kind of regret using the name. We're dropping it in the future," says Ludeman, 31, whose idealistic approach and shoulder-length mane set him apart from the average home builder.

But he makes no apologies for the results, which are expected to qualify for a platinum rating from the U.S. Green Building Council, its highest award.

Ludeman decided to attempt the $100K house because he saw "no one was building anything with less than three bedrooms in Philadelphia."

In Fishtown, he says, "The typical new house is three stories, 2,000 square feet, and sells for $500,000." And that's with the usual energy-guzzling features. "We felt green design should be available to the average working stiff."

The fact that he feels obliged to articulate such an aspiration is an acknowledgment that green design doesn't come cheap; it costs a lot to save energy in America. When City Council recently proposed restricting Philadelphia's property-tax abatement to energy-efficient homes, critics complained that the break would shut out low-income buyers.

Green advocates counter that the poor need to control their energy costs to be successful homeowners. Ludeman's houses nudge the discussion forward by combining a low up-front price with affordable operating costs.

The four $100K houses in East Kensington are just the beginning. Ludeman and Phillips see the design as a prototype that can be repeated, with variations, around Philadelphia and elsewhere in the country. "This is the way homes are built in Europe," Ludeman says. "The U.S. market is just so far behind in terms of building science."

He became fascinated with the idea of building energy-efficient houses several years ago. Trained as an industrial engineer, he went to work for a company that made bar-code scanners. But he longed to build something more substantial and began rehabbing townhouses in his spare time. His experience convinced him that our houses needed to be built more efficiently.

Small and cheap are, of course, relative terms. Since Ludeman was doing his R&D in Philadelphia, where the 16-foot building lot is standard in low-priced neighborhoods, he adopted the rowhouse form.

Those humble homes are naturally energy efficient and affordable, with compact floor plans and little wasted space for corridors. Since they're built in rows, the middle houses benefit from free insulation.

In a sense, he had to work harder to create a more energy-efficient version. It helped that he met Phillips, who had just produced an award-winning design for green, low-income houses on Sheridan Street in North Philadelphia. He punched up the design for the private developer - but not by much.

"Both projects," Phillips observes, "are trying to boil down a house to - not exactly the essence - but to an understandable series of components. Reducing the number of components is the key to affordability. Still, we gulped a bit when Chad gave us the $100K number."

All those years of researching green technology paid off for Ludeman. He was able to reduce the need for heating and cooling dramatically by switching from standard wood-frame construction to structured insulated panels. The 4-by-8 sections are fastened together to form the walls, which are sheathed in slate-colored fiber cement board.

To keep the plain gray exterior from looking like an electrical substation, Phillips mixed up a two-tone pattern for the walls and arranged the windows in a lively, syncopated rhythm. He also made a point of increasing the window count on the south walls to take advantage of the sun's warmth during the winter. Because the house is equipped with a heat exchanger, otherwise known as an energy recovery ventilator, the air temperature is constantly balanced to cut down on the need for heating and air conditioning.

When manufactured heat is needed, it will come from radiant pipes embedded in the concrete floors and powered by solar roof panels. Ceiling fans do most of the cooling, though a single ductless air conditioner serves as a backup. During the recent heat wave, Ludeman boasts, the air temperature never exceeded 72 degrees - and he never resorted to the AC.

Part of the green strategy is making the parts do double duty. The solar panels also warm water for showering. Unlike hugely wasteful standard heaters, which warm water 24 hours a day, the system in the $100K house is designed to provide hot water only on demand.

Interestingly, Ludeman differentiates between the house's low energy costs and organic materials. He uses recycled and sustainable materials as much as possible, as well as finishes that don't throw off unhealthy gases, but keeping costs low is the priority.

So, where other builders would tempt buyers with rich wood floors and stone countertops, Ludeman opted for plywood. It's not clear how long the material will hold up. If buyers have to replace their countertops in a couple of years, it won't be cheap - or green.

It also remains to be seen whether the $100K house can be adapted and expanded for growing families and changing tastes. Adaptability, after all, is what has made the Philadelphia rowhouse sustainable for 300 years.

None of that deters Ludeman. He's already at work on a cheaper and more efficient house. This one, called The Passive Project, does the $100K even better: It uses no energy.

Changing Skyline:

To view the unique features of this house online, go to http://go.philly.com/100kHouse.

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Contact architecture critic Inga Saffron at isaffron@phillynews.com or 215-854-2213.