Buildings are the Elephant in the Room for a Nation Still Over-Reliant on Imported Energy

Energy Efficient Homes Are a Sound, Income-Producing Investment for American Families

Home Builders Trade Associations vs. Nearly Everyone Else

Home Builder Attacks on Energy Codes Promote “Penny-wise, Pound Foolish” Homes

All Americans Benefit from More Efficient Homes & Commercial Buildings…A Micro to Macro Look at the Benefits of Building Energy Codes


 

Buildings are the Elephant in the Room for a Nation Still Over-Reliant on Imported Energy

America still relies heavily on energy imports from unstable sources. After decades of progress in the efficiency of cars, trucks, manufacturing facilities, and utilities, the largest energy consuming sector today is America’s homes and commercial buildings, which use 42% of all energy, 54% of natural gas, and 71% of electricity.

Total 2009 US Energy Consumption by Sector (Source: US Energy Information Administration)

Total 2009 Us Energy Consumption by Sector

Codes that boost building energy efficiency take a page from American business – the most innovative and productive economic force in the world – by investing in the same kind of efficiency measures that have slashed manufacturing costs, particularly in energy-intensive industries.

One Fortune 25 CEO reported that as a result of efficiency, his company is now making twice as many products with 37% less energy than in 2000.  Doing more with less is about more than lowering cost of goods sold and boosting bottom lines – it’s about heightened competition and increasing corporate resources for capital investment, hiring workers, enhancing employee benefits . . . even contributing to local charities.

Because our homes are energy-intensive . . . energy is the highest cost of maintaining a home, higher than property taxes and higher than insurance . . . a home that is just 30% more efficient than an average home will put tens of thousands in the wallets of home-owning families over its long 70- to 100-year life.

Average U.S. Homeowner Costs, 2007-2008

Average US Homeowner Costs, 2007-2008

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Energy Efficient Homes Are a Sound, Income-Producing Investment for American Families

The energy-saving features of the 2012 & 2015 IECC are one of the only elements of a new home’s construction that pay for themselves in monthly cash savings.  Not only is the investment in efficiency quickly recouped by lower energy bills, but those bills remain lower for the 70-, even 100-year life of that home, letting families keep tens of thousands of dollars that would otherwise have paid higher utility bills.

Home builders tend to view home ownership as a snapshot of the day it’s purchased – from this perspective, a home’s first cost is all that matters in the financial equation.  But as homeowners know, a home’s purchase is just the first day of a long motion picture with hundreds of factors involved in the financial equation.  And the most unpredictable plot line of the motion picture is the cost of energy, which peaks with extreme weather and which – according to low-income housing advocates – is the leading reason for foreclosure other than inability to pay mortgage principal and interest.

If first cost were the only consideration in making investments, no one would ever buy stocks, let alone energy-saving improvements.  That said, the outlay for home efficiency improvements can be capitalized over a long-term mortgage after making down-payments (customarily 5-20%).  And the financial return on an energy efficient home is always positive and recoups outlays within 1-2 years.

Incremental Investment in Homes Meeting 2012/2015 IECC (vs. 2006 IECC) Investment in Blue Chip Stocks
Initial Outlay 10% of incremental cost of efficiency + $4.77/month for every remaining $1,000 capitalized over a 30 year 4% mortgage 100%
Net Proceeds Generated $4,763 – $33,105 over 30-year mortgage term, after full recoupment of increment outlays.
(Savings vary depending on climate zone.)
Likely – but uncertain – capital gains, stock dividends
Taxable Because proceeds result from reduced energy bills that are not deductible for homeowners, no difference in tax for efficiency investment Dividends fully taxable, capital gains tax on sale of profitable stocks
Break-even on Investment Outlays 1-2 years Uncertain

The home efficiency investment pays off in resale value as well.

 

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Home Builder Trade Associations vs. Nearly Everyone Else

Anyone can understand why builders don’t want to be told how to build their homes.  But while the financial consequences an inefficient home add up for 4-5 generations, a home builder’s interest in its performance ends when the keys are turned over to the family who buys it.

At an average of over $2,000 a year, America’s utility bills are the highest cost of maintaining a home, higher than either property taxes or insurance.  Buying a home with the permanent energy saving features in the most current codes (the 2012 or 2015 IECC) will put between $4,763 and $33,105 more in the home-owning family’s wallet over a typical 30-year mortgage (after quickly recouping the cost of the efficiency improvements) than a home built to the 2006 version of the IECC.  But since many of the features are permanent, the savings over a home’s 70-, 80-, even 100-year life will amount to tens of thousands of dollars.  And since homes are the largest energy consuming sector, the more homes that are built to the 2012 or 2015 IECC, the fewer new power plants we’ll need and the more of a dent we can put in America’s over-reliance on imported energy.  No wonder builders stand alone in opposition to stronger energy codes, while proponents include an unlikely alliance of manufacturers, environmental and consumer groups, Main Street businesses, labor, architects, low-income housing advocates, government, and others.

 

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Home Builder Attacks on Energy Codes Promote “Penny-wise, Pound Foolish” Homes 

A National Association of Homebuilders survey found that 9 out of 10 Americans want permanent energy-saving features and will pay 2-3% more for a home that has them.  Builders that build to less efficient energy codes are locking in wasted energy for as long as 100 years, costing families tens of thousands of dollars more than they would pay for homes meeting the most recent 2012/2015 IECCs.  According to low-income housing advocates, this “penny-wise, pound foolish” policy also increases foreclosures, since energy costs are the highest and most unpredictable cost of home ownership.  Home buyers know their principle and interest payments when they sign their mortgage documents and, while their taxes and insurance can rise, they are relatively stable compared to compare to the peak fluctuations of energy bills when weather is extremely hot or cold.

When each “penny-wise, pound-foolish” home is multiplied by hundreds of thousand new homes constructed each year, the consequence is a profound negative impact on national security and energy policy.

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All Americans Benefit from More Efficient Homes & Commercial Buildings . . . A Micro to Macro Look at the Benefits of Building Energy Codes

Homeowners More Money for Home-Owning Families. Reduced energy bills from homes built to the 2015 IECC will put tens of thousands of dollars in the wallets of homeowners after quickly recouping the added investment cost of efficiency improvements. These are real savings from lower energy bills.Energy efficient homes are better built, more comfortable, quieter, and have higher resale values. Low-income housing advocacy groups like Habitat for Humanity document fewer foreclosures from efficient homes.
Other Ratepayers More Stable Energy Costs for All Consumers. By stabilizing a community’s energy demand, more efficient homes and commercial buildings also stabilize overall energy costs to Main Street businesses and even to owners of inefficient homes.
Power Grids Greater Stability for Utilities. Because efficient homes and commercial buildings perform during peak periods, they delay the need to build costly electricity generation units and stabilize demand and energy prices for inefficient homes and businesses.
US Businesses Enhanced Competitiveness. Building energy efficiency boosts America’s competitiveness by improving the nation’s energy use per unit of GDP, which remains significantly higher than other industrialized nations.
National and Energy Security Sound Energy Policy. Reducing wasted energy from the “elephant in the room” has already had a long-lasting, positive impact on overall electricity generation and sound national energy policy. As Duke Energy CEO Lynn Good told the Financial Times, “Improvements in energy efficiency for buildings and appliances appear to have broken the traditional connection between electricity demand and economic growth.”

If customer desires and emerging trends mean something, even builders benefit from efficient homes.  According to an NAHB survey of “What Today’s Homebuyers Want,” 9 out of 10 home buyers will pay 2-3% more for a new home with permanent energy efficiency features.  In a separate NAHB survey, “Energy Efficiency” was the #1 emerging construction trend identified by top builders, while “Green Building” and “Zero Energy Home” ranked #4 and #5, respectively.

 

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