Energy costs, warming climate spark stricter energy codes for federally funded housing

May 29, 2024, 5 a.m. ·

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U.S. households continue to pay more for electricity in homes that were not built for current and future climate conditions. (Yunyi Dai / Special To The Midwest Newsroom)

Growing electricity costs and the need to climate-proof homes as temperatures rise have prompted the U.S. Department of Housing and Urban Development and the U.S. Department of Agriculture to adopt updated energy standards for new single and multi-family homes.

As the Midwest Newsroom reported in 2023, a patchwork of state regulations allows cities and counties to determine energy and building codes, which are often outdated.

The new rules, announced in April, require residential construction projects funded by HUD to meet current standards for insulation, air sealing, efficient windows, lighting, and heating and cooling systems.

“Many people have been caught by surprise when utility costs spike,” said Marion McFadden, a HUD deputy assistant secretary. “Families should never have to find themselves making hard choices about whether to heat their home in winter or use cooling during a heat wave.”

HUD supports affordable housing for more than 4.3 million low-income families through its public housing, rental subsidy and voucher programs.

In 2022, consumers on average paid 14% more for electricity than in 2021, according to Consumer Price Index data. A review of state level trends in some Midwest states shows the average price of electricity growing steadily since 2018.

“Homes are not being built to the latest and most up to date building and energy efficiency codes which, if they were, would significantly reduce housing and energy costs,” said Mark Kresowik, senior policy director at the American Council for an Energy Efficient Economy.

HUD estimates that implementing the current International Energy Conservation Code, set by the International Code Council, will save households up to $950 a year. In new multifamily housing four stories and above, these standards save households $224 per apartment per year, according to HUD.

“There'll be substantial cost savings,” said Alice Hill, an energy and environment expert for the Council on Foreign Relations. “It'll also reduce overall pollution to the extent that so many homes are still being powered by natural gas or coal-powered plants. And it could offer greater resiliency during extreme weather conditions.”

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Alice Hill, Senior Fellow, Council on Foreign Relations (CFR)

Home builders argue that incorporating current energy efficiency elements into construction increases costs for buyers. In February, the Washington Post reported that members of the National Association of Home Builders “have been opposing efforts to update building codes to facilitate an easier transition to cleaner technologies.” 

"All that energy code was going to do in my price range is make it to where the working man and woman would not be able to buy a home," North Carolina developer Ron Jackson told the Post. Jackson estimated additional costs of about $20,000.

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Mark Kresowik is senior policy director for the American Council for an Energy Efficient Economy. (American Council For An Energy Efficient Economy / Provided)

Kresowik said added costs for a new home are far lower. One study found an average price tag of $6,500 for new builds. HUD said that under the new rules, the upfront costs of the energy efficiency improvements can be rolled into a Federal Housing Administration mortgage. 

“How soon do the energy savings come? The answer is about 15 months for a low income household,” Kresowik said. “So people in homes with modern building energy codes can really save a tremendous amount of money.” 

Fannie and Freddie

U.S. Rep. Emanuel Cleaver, a Democrat from Missouri, is part of the U.S. House of Representatives Sustainable energy & Environment Coalition, a group of nearly 100 lawmakers who advance “policies that support clean energy innovation, address climate change, protect our natural environment, and promote environmental justice,” according to the coalition website.

Cleaver said he applauds the stricter minimum energy standards in HUD projects because low-income families often find themselves in older dwellings, where high energy bills increasingly eat into incomes.

“There are rural communities where they haven't had a new home built in ten to 15 years,” Cleaver said. “It means that people are living in houses where they may only be getting about 50% of the energy that they pay for.”

Cleaver said he’d like to see the Federal Housing Finance Agency, which oversees Freddie Mac and Fannie Mae, follow HUD’s example. The pair of government-sponsored enterprises were created to help keep the housing market stable by guaranteeing most mortgages in the U.S., allowing lenders to free up capital to issue new loans.

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U.S. Rep. Emanuel Cleaver, Democrat from Missouri, speaks at an April 2024 press conference about affordable housing in Washington, DC. (Provided)

In May, Cleaver and the other members of the SEEC — all Democrats — wrote a letter to FHFA director Sandra L. Thompson, urging “the Federal Housing Finance Agency (FHFA) to ensure newly constructed homes receiving FHFA assistance meet updated energy efficiency building codes.”

The letter points to the latest International Energy Conservation Code, which it says “will not only reduce the long-term housing costs for homeowners and renters — especially benefiting low-income and minority households who disproportionately bear the burden of high energy costs — but also improve the resilience of housing to climate-related challenges.”

“Black and brown people, along with people in rural America, are the primary victims,” Cleaver said. “Because of where we live and the condition of the housing.”

Getting the word out

Xavier Boatright, deputy legislative director for the Sierra Club, welcomes the news about HUD’s new energy efficiency requirements.

“There are rural or low income folks on a fixed income that are living in housing that has been built with a much older code, and if they haven't had the money to do the proper retrofits to bring it up to code, the amount of money in bills for these folks can be devastating,” he said.

Like Cleaver, Boatright hopes the FHFA will make a decision to incorporate the recommendations outlined in the letter to Thompson from the SEEC.

“This would address the threats of climate change to the U.S. housing finance system and also invite investment in safe and sound communities,” he said.

Regardless of what FHFA decides, Boatright said he wants more homeowners and renters to understand the relationship between energy efficiency, climate resiliency and affordability.

“That they understand the newer codes would allow for easier retrofits and upgrades for more efficient appliances. As well as more efficient installation that could help lead to more climate resilience,” Boatright said.

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Xavier Boatright is deputy legislative director of the Sierra Club. (Sierra Club / Provided)

Money that goes toward high electricity bills can be reallocated to savings, education and other areas that promote generational wealth, he said. In addition, energy efficiency can support better health.

“The most up to date appliances and building materials can reduce exposure to indoor air pollutants,” Boatright said. “And those indoor air pollutants can increase risk of things like lung cancer, COPD and asthma.”

What you can do now

Whether a person qualifies for HUD housing or FHFA acts to require energy efficiency, Boatright said, many households can take advantage of a wide range of incentives, rebates, grants and other benefits through utility companies as well as federal and state agencies.

“We live in a time, in reality, where we have the most historic funding for things like that,” Boatright said.

Here is a list of just a few of state and federal programs that reward homeowners and home buyers looking for energy savings and climate resiliency.

Illinois

Ameren Illinois offers rebates to switch your home appliances to energy-efficient products, including air-source heat pumps, central air conditioners and heat pump water heaters. Learn more.

Window Replacement (CLEAR-WIN) is a pilot program that replaces windows in low-income homes built before 1978 to reduce potential lead hazards, which is one of the top environmental threats to children’s health in the United States. Learn more.

Iowa

The Alliant Energy Instant Discounts program provides discounts and incentives to homeowners who purchase qualified electric heat pump water heaters purchased and installed through participating dealers and distributors. Learn more.

Kansas

The Kansas Housing Corporation provides free comprehensive home energy audits to eligible households to identify inefficiencies and health and safety concerns. Upgrades are provided free of charge by certified energy auditors and a network of professional crews and contractors. Learn more.

Midwest Energy (Gas and Electric) - How$mart Energy Efficiency Finance Program offers its residential customers the opportunity to pay the initial cost of making energy efficiency improvements, then recoup the cost of these improvements through a surcharge on the customer's bill. Learn more.

Missouri

CommunitySavers offers free home energy assessments to help qualifying, income-eligible customers. If you make additional upgrades to your home, Ameren Missouri will help offset upfront costs and you can pay the remaining costs on your bill over time. Learn more.

Nebraska

Nebraska Public Power District’s EnergyWise programs offer a range of incentives and rebates to homeowners who purchase energy efficient heat pumps, upgrade their insulation, install LED lighting, and/or have their cooling system tuned-up. Learn more.

Multi-State

Iowa and Illinois residents can save up to $100 when they purchase a smart, energy efficient thermostat from MidAmerican Energy marketplace. Learn more. They can also earn up to $40 annually when they join the SummerSaver program, a voluntary initiative for MidAmerican residential electric customers who want to help reduce energy use at peak times. Learn more about the SummerSaver program.

Black Hills Energy Customers in Iowa and Nebraska offer rebates to customers who purchase and install qualifying energy efficient equipment. Learn more.

Nationwide

Home Energy Tax Credits: If you make energy improvements to your home, tax credits are available for a portion of qualifying expenses. Learn more from the IRS and from Energy Star.

The Green and Resilient Retrofit Program provides funding for direct loans and grants to fund projects that improve everything from energy or water efficiency to addressing climate resilience of eligible HUD-assisted multifamily properties. GRRP also provides funding to support benchmarking at assisted properties. View the full list of qualifying improvements here.

The Department of Energy weatherization program enables low-income families to reduce their energy bills by making their homes more energy efficient. Learn more.


Lauryn Higgins contributed to this report.


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This story comes from the Midwest Newsroom, an investigative journalism collaboration including IPRKCUR 89.3Nebraska Public Media NewsSt. Louis Public Radio and NPR.


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