The True Cost of Clean Power

Filed in Capitol Hill, Codes and Regulations by on July 28, 2015 6 Comments

Electric PylonsNAHB staff met with the White House Office of Management and Budget (OMB) July 9 to raise home builders’ significant concerns with the Clean Power Plan regulation now under review.

Working with other industry associations from the Partnership for Better Energy Future Coalition, NAHB urged OMB to consider what the rule would mean – beyond its effect on mining and electricity generation.

Once final, states will be required to develop implementation plans to comply with EPA-established greenhouse gas emission standards, and the mandates within those plans can be enforced by federal agencies, not just the states themselves.

That means the feds could be put in the position of mandating or enforcing building codes, for which it has no authority. Worse, builders and developers could be held accountable for the emissions performance of homes no matter what the home owner installed or added to the powerload after purchase.

And, as NAHB explained, the assumptions EPA is making regarding what is actually achievable from energy-efficiency programs are not realistic: The most cost-effective improvements have already been made, and each new advance comes with a much bigger price tag.

For example, the additional cost (on average) to construct a single-family home to the 2012 International Energy Conservation Code (IECC) compared to the 2009 IECC is $5,668, while the annual energy savings is $427. That means it will take an average home owner 13.3 years to break even, exceeding EPA’s assumed 10-year payback rate and the 7-year simple payback that surveys say home buyers seek.

These costs also have a very real impact on home buyers because every $1,000 increase in the price of a home keeps about 206,000 potential buyers from qualifying for a mortgage.

OMB review is usually the last stage before release of a final regulation by the agency. Although EPA had originally planned to finalize its regulations by June 15, it now expects to release a final rule in August.

For more information, contact Tamra Spielvogel at 800-368-5242 x8327.

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Comments (6)

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  1. J E McFadden says:

    As I follow the NAHB’s ongoing comments about increasing energy efficiency for new homes, I am not convinced that your comments represent mine. Statements about higher costs for new homes never consider the larger planet-wide effects of global warming due to carbon based energy consumption. As a builder member of NAHB, I believe that I have a responsibility to reduce my energy footprint and to sell that position to my customers. Failure to fully account for each home’s carbon footprint and only focus on its retail costs is shortsighted and a prescription for long term failures in our profession. Should we not now count the costs of the lost homes and home sites on the east coast as the sea level rises due to our less efficient building? I for one will continue to build the most efficient home possible and continue to advocate for higher energy standards.

    • Ron Jones says:

      Thank you J E McFadden for your beautifully articulated comment challenging the often repeated and outdated position of NAHB regarding higher energy standards in residential construction.

      I could not agree more with you and I truly appreciate your willingness to refute that position but, just as significantly, the fact that your message, whether inadvertently or by intent, debunks the myth that NAHB’ policy statements represent the views of all members (builders and/or associates) in these matters.

      The notion that this trade association is speaking for all builder members, let alone all the home building industry, is laughable and not lost on policy makers. Having been a builder member myself for almost three decades I have grown very weary of NAHB’s culture of fear and negative messaging.

      From its self-created bully pulpit the organization continues to preach to the (shrinking) choir largely by spewing out pronouncements about what it opposes when it could be taking a true leadership position in making the home building industry an important part of the solution, rather than whining endlessly about the challenges.

  2. How many “average home owners” pay for their home purchase with cash? Because if they finance it, simple payback is irrelevant; a monthly analysis is needed.

    • NAHB Now says:

      Thanks for your comments. Actually, how the home is financed is virtually irrelevant. If a consumer makes an energy efficiency purchase, whether by choice or by code, there is a cost associated with that purchase. There are two highly likely scenarios that may occur: The home owner may own the house for less than the mortgage term, or the upgrade may not last for the term or the mortgage (e.g. windows, lighting). In the former case, the consumer must be able to recoup the portion of the capital investment that has not been realized in the resale of the house. Appraisals rarely take energy efficiency into consideration, thereby leaving the initial home purchaser having to eat the entire cost of the higher efficiency that was not saved during ownership. The latter case leaves the home owner paying on a “dead horse” if the efficiency upgrade cost is not recouped during the life of the product.

  3. “Actually, how the home is financed is virtually irrelevant.”

    Annual energy savings of $427 = $35.58/month

    Additional cost of $5,668:
    30-year fixed with 4% = $16.37/month
    15-year fixed with 3.5% = $32.59/month

    After month 1, the homeowner is either $19.21 or $2.99, respectively, ahead thanks to energy efficiency. I’m guessing most homebuyers will think that’s very relevant.

    • NAHB Now says:

      If the home owner decides to stay the full 15 years, or 30 years, and if those energy-efficient features are still working or haven’t been superseded by cheaper technological advances in the meantime, you’re right, the home owner is money ahead. However, that is generally not the case. The good news is that NAHB has been working for some time with the Appraisal Institute and through legislation to make it more likely that the additional costs of these improvements are reflected in the selling price of the home should the owner decide to move before the term of the mortgage is up, which as we know is the more likely scenario. Thank you again for your comments.

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