While the federal government is ramping up measures that increase building energy efficiency, home builders in a handful of states, including North Carolina, are pushing back against more stringent building energy efficiency measures. But what is in the best interest of homeowners?
Increased building energy efficiency has numerous benefits, including lower carbon emissions, reduced energy consumption, and lower utility bills for homeowners and renters. It can also lead to more comfortable living spaces, improved indoor air quality, and increased property values. From a broader perspective, energy-efficient buildings can contribute to a more sustainable and resilient built environment, which is crucial for mitigating the impacts of climate change.
Considering the Costs
Why are builders opposed to increased energy efficiency? The short answer is money. Implementing energy-efficient building codes and standards comes with increased upfront costs to builders. This is particularly true for new construction, as building materials and construction practices may need change to meet higher efficiency standards. The increased upfront costs will be passed on to the homebuyer and not absorbed by the builder, and the most up to date IECC has been shown to be cost-effective1, making those increased upfront costs paid for by the homeowner a good investment.
We hear all too often that builders are concerned with rising costs, but what they are really concerned about are raised costs that buyers can't see. When was the last time a builder told a potential homebuyer that they should find a cheaper option than granite for their countertops? Builders are only concerned with paying for features that buyers can see when they shop for a new home. Insulation improvements, which offer significant utility bill savings over the life of the home, can't be seen, so builders are reluctant to make those investments, even if they make sense.
Builders want to keep doing things the way they've always done them. It's past time that builders are forced to build better homes, and updated codes help drive those changes. If the increased costs are passed on to the buyer, why are builders so resistant to updating energy codes? Building a better home, which updated codes require, creates a learning curve that builders simply do not want to deal with.
According to the National Association of Home Builders' latest Cost of Construction Survey, insulation (a major component of thermal envelope efficiency) comprises just 1.7 percent of the average cost of home construction (an average of $6,530).[1] Increased insulation levels are among the most common energy efficiency upgrades in the latest version of the Residential International Energy Conservation Code (IECC), and they are foundational to a good thermal envelope and overall building energy efficiency.
Opposing energy efficiency efforts in homes may have short-term cost benefits for builders, but it will lead to higher energy costs for homeowners. Studies have shown that the more energy efficient a home is, the less likely it is that a homeowner will default on a mortgage, in part because lower utility costs decrease the cost of ownership.[2] The total cost of ownership, including mortgage and utility costs, should be considered rather than the short-sighted first costs.
Striking a Balance
"It's essential to strike a balance between energy efficiency goals and affordability concerns, especially for low-income homeowners who are most susceptible to increased utility costs," says Jason Vandever, NAIMA's Director of Codes and Standards. "Incentives such as the 45L builder tax credit tax credit can help builders offset upfront costs of energy-efficiency upgrades in a major way."
Home builders can, in fact, claim a tax credit of as much as $5,000 per unit for a home built to DOE Zero Energy Home Standard (meeting prevailing wage requirements), which requires that the home's thermal envelope meet or exceed the requirements of the 2015 IECC. [3]
"A huge chunk of the cost of increasing the insulation requirements in new homes would be covered by this tax credit, which is available to home builders for the next ten years," Vandever said. "Not only that, a better, more energy-efficient home has tremendous benefits for homeowners and the overall federal goal of reducing building emissions to mitigate climate change. It's becoming increasingly clear that opposition to stricter energy efficiency codes is, in fact, encouraging energy waste at a time when neither the planet nor American homeowners can afford it."
Conclusion
While increasing building energy efficiency may come with increased costs, the long-term benefits of lower carbon emissions, reduced energy consumption, and lower, more predictable utility bills are worth the investment. By taking a holistic approach and balancing energy efficiency goals with affordability concerns, we can ensure that all Americans can benefit from a more sustainable and resilient built environment.
More home builders should take the long view with efficiency and act in the best interest of home buyers.
[1] https://eyeonhousing.org/2023/03/cost-of-constructing-a-home-in-2022/?_ga=2.199855016.762800853.1679596023-1585980671.1679596023
[2] https://information.insulationinstitute.org/blog/hers-scored-homes-2-million-and-counting
[3] https://basc.pnnl.gov/resource-guides/2015-iecc-code-level-insulation-doe-zero-energy-ready-home-requirements
