You can already get tax credits for historic preservation, which is an inherently green practice.  Preservation projects (including adaptive reuse like turning abandoned schools and factory buildings to apartments or retail space) must comply with standards that mean they have to reuse as much of the existing material as possible, so preservation projects always have higher labor costs and lower material costs than new construction (creating jobs and reducing waste).  

Preservation projects are usually required to keep the old windows, which is a big sticking point for a lot of environmentalists, but that's mostly an education problem; a properly restored wood window, with an appropriate storm window, will perform thermally as well, or better, than a new window, and will last about 5 times as long as a vinyl window before needing to be restored again, so there's another big embodied energy savings.

There is definitely a need for tax credits for green buildings also, so I'm not saying the preservation credits are all we need, but they do help.  Also, a program to support green building techniques could be modelled after the preservation tax credit program.  

Tax credits can be an easier sell politically than grants or other financial support because they don't require taking any money out of government budgets, so they are "invisible".  The only problem with them is they work best on projects with total budgets over a million dollars, because they best way to use them is to sell them to raise cash for equity, and the buyers are all big corporations that don't buy anything less than that.

We live in a green building.  The energy efficiency is an attractive feature, but was not the primary reason.  It was comfort, unbelievable comfort, a new experience.

Decades ago I spent a night at Amory and Hunter's house.  It was the middle of the Winter, above Aspen, in the Rockies.  I had one thin blanket on a bench next to a single pane French glass door with snow swirling outside.  I thought I would freeze but was totally comfortable.  

The damper on a wood stove squeaked all night from the howling winds, and when I told Amory about it the next morning he said that they put in the wood stove during home construction years earlier, but never used it.

You have to feel it to believe it.   I just had to have a house like that and finally built one ten years ago.  Our home never changes temperature.  It doesn't matter whether the weather is below zero or 100 outside.  It is just amazing.   As more people experience the comfort of efficient thermal mass buildings, with passive solar, the demand will grow, organically, by experience.

Cassandra adds that people with Seasonal Affective Disorder (SAD) will go into remission with the steady warmth of this type of building.

You wrote..."It takes time for the extra money invested in green building to pay off; same with retrofits."

That's not true...anymore.  Solar panels are not a proxy for green / non-green!  They can constitute one component, but unfortunately as they're one of the most costly options, there appears to exist a perception that green building must cost more.  Many builders have proven otherwise.  It's just time for the rest of the educational curve to catch up.

Same with defining "green".  "Green" and "Sustainability" don't mean much anymore, if anything.  Especially given the inherent tendency of the Bush administration (and others through history) to take words and redefine them (water boarding is what?!), it is essential that the "green" community define itself and its message.  How?  Science based standards.  Same goes in construction...ecology and biology provide indisputable standards on which to measure "greeness".  Think Biomimicry.  Think conservation biology.

But building "green" does not cost a cent more than traditional construction, as a first cost.  Over a lifecycle, homeowners continue saving more and more...probably akin to compounding interest!  And with more and more externalities measured, I would bet (these bets seem to be going around), that dollars and cents proof will bear out that green building never cost more than traditional construction.  Maybe solar panels do, but that's not the same thing.

Beyond that, to a more theoretical level, I'd argue that this statement was NEVER true...when you factor in all externalities caused by "non-green" construction, it has been cheaper to build green, from the start of time.

With new home construction on a downturn, there are a lot of residential contractors who'll be desperate for work in the coming year; if we can get them on these greening projects it'll be win-win-win for homeowners, contractors, and our global warming/oil dependency fight. A timely federal program or large state-level projects could make a huge difference.