Kevin Smith means it when he says he's "seen the home of the future."

To the 43-year-old Davis resident and project manager for Northwest Land Park LLC, the home of the future is "net zero electric," which means each unit will generate as much electricity as it uses.

That's what Smith wants to achieve for a new 825-unit housing development backed by Ranch Capital, a San Diego investment company. The 32-acre site, south of Broadway and west of Fifth Street, is currently the home of a Setzer Forest Products factory and some old warehouses.

"We really see this as an energy-efficient and technology-driven opportunity to have the home of the future in the middle of town," Smith said.

For now, he is starting small – conducting a test run of six homes to see if there's appetite for his vision in a depressed market.

Situated on a sleepy corner at Third and V streets in the Southside Park neighborhood, the new homes will have solar panels, LED lights and special insulation. The first homes will be available in September.

"If the electricity generated is more than what they need, it goes back to the grid," said Michael Zannakis, senior product services coordinator for the Sacramento Municipal Utility District.

The homes are a triple-win, Zannakis said, explaining that when a house is energy-efficient, the customer pays less and SMUD doesn't need to buy extra electricity off the market, not to mention the environmental benefits.

The homes' special insulated walls are rated R42 – the R stands for resistance to the flow of heat. In comparison, the walls in conventional homes are rated anywhere from R12 to R14.

Additionally, Smith points out that the pre-installed LED lights consume 154 watts total, as opposed to a single incandescent light that uses 75 watts. The savings, both in energy and in money, he said, are substantial.

Planning a net zero community, however, is not without obstacles. Experts say such developments are expensive to design and hard to measure in success.

UC Davis West Village, billed as the nation's "largest planned zero net energy community," is a prime example of the difficulties facing developers and researchers alike. The housing development for students and faculty opened last September, but researchers don't know whether the net zero energy goals are being achieved.

"It's very doubtful that we will have a complete assessment of the project in the next year," said UC Davis Energy Institute associate director Jerry Braun, who was closely involved in the research and design for West Village.

Braun cited several problems with measuring the success of these developments, including funding and data collection. Another issue: Researchers can't control how people behave.

"Some use more energy than others even though they're living in identical buildings," he said.

Even in the tough economy, Smith said he thinks there's a market for his urban homes and that his prices – in the high $200,000s for a single-family house – are competitive.

"A demographic change is happening," he said. "Most of the new households are going to be young people without children, so you don't need the big yard and swing set."

The wave of environmental consciousness among millennials is crucial to his success, Smith added, along with $4 gas and the desire to stay closer to the center of town. "There's a loss (in) quality of life when you spend your mornings sitting on (Highway) 99, inching your way to work."

Last August, the city gave the green light for the 825-unit development, which will include duplexes and single-family homes. If everything goes well at the test site, Smith said he could start construction on the larger project as soon as next year.

Sacramento Assistant City Manager John Dangberg said there's "definitely a market for urban houses," noting that the development was consistent with the city's general plan for new infill housing.

"You need to go back through the existing fabric of the city to renew and modernize," Dangberg said.

Smith said he isn't afraid of the recession, but noted it may take seven years before the entire project is completed, depending on market conditions.

"Knock on wood, history has shown that economic downturns don't last forever."

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