Energy Codes: Political Realties and Misplaced Priorities

There is a significant misconception about housing-related energy efficiency that has led to an adverse impact on housing affordability, while at the same time ignoring the largest source of energy inefficiency in structures. The energy debate is framed as new homes not being efficient enough as the central problem.

Inadvertently, the manner in which the issue of new home efficiency has been presented is backward. 

If the decision-makers in the housing regulatory landscape narrowly view new homes as the problem, then the only solution will be to focus on increasing new home efficiency to an even greater degree. This rationale excludes older, existing homes from the policy conversations, the very homes that are the largest source of inefficiency. 

(Mis-) Framing the Issue

Several months ago, a comment was made in a Minnesota energy code meeting stating that since housing-related greenhouse gas emissions are up 14% since 2005, Minnesota policymakers must increase efficiency targets for new construction even more. The insinuation was that housing isn’t doing enough to combat greenhouse gas emissions in Minnesota.  

This statement represents a problem on two fronts. 

This data point on emissions is accurate and if you didn’t dig any deeper, you’d likely draw the same conclusion. Focusing on growth in only one area, emissions, is only a partial view, one that relies on a not-so-applicable metric.

This 14% increase in emissions, while accurate, is only part of the equation. During the same period, 2005-2020, Minnesota’s housing stock grew by 16.45%. New housing construction outpaced housing-related greenhouse gas emissions by 16%. 

This data point of emissions is also flawed as it cannot capture any increase in efficiency because that is not what is being measured. Instead of efficiency, they are measuring an output: consumption. Measuring consumption for building codes is a flawed metric from an efficiency standpoint as it focuses on human behavior and home performance The former lies outside the scope of the energy codes.

In transportation, policymakers understand the distinction as miles per gallon is how fuel efficiency in automobiles is measured. If transportation-related greenhouse gas emissions increase over a period of time, that is largely a factor of fuel consumption and a growing population.

Miles per gallon is something the National Highway Safety and Transportation Administration and vehicle manufacturers can impact; miles traveled and the number of vehicles on the road are not. Oddly, in housing, policymakers are looking at the issue from a total energy consumption standpoint, but framing the issue as one that only new construction can solve. 

New vs. Old

Last week, Housing Affordability Institute released a white paper highlighting the increases in new home energy efficiency over the past two decades. The report also showcased that the bulk of our nation’s housing stock, nearly 83% has an efficiency score of 130, meaning it is 30% less efficient than a home built in 2006. Compared to a new home today, these homes are far less efficient.

And, over the past decade, new home efficiency has improved, moving from a 100 baseline for a reference home in 2006, to an average of 63 in 2013 to 53 in 2023. Homes built in the United States today are 47% more efficient than they were in 2006. While data on existing home efficiency is not available, it is fair to assume that given to vast scope of the inefficiency issue in existing homes, the needle has not moved in the same way new construction has. 

Older homes built before energy codes and modern insulation are far less efficient than new homes. Every dollar spent on upgrades to these structures will go further in increasing efficiency than it will on new homes. 

Cause and Effect

What happens when policymakers take too large of a step on efficiency because of misplaced focus? Just look at Kansas City and Washington State.

In late 2023, Kansas City, MO adopted a new energy code­ – one with a price tag of $15,000 – $20,000 per new home. New home construction ground to a halt. Normally not newsworthy, a building permit being issued in January 2024 made headlines: Amid housing crisis, 1st permit issued in months to build new home in Kansas City. But why? The reason energy codes and experts were worried about the long-term impact on affordability and the housing ecosystem by going too far, too fast:

And it could be anywhere from 15 to 21 thousand dollars depending on the size of the house,” [Curtis Tate with SAB Homes] said. If buyers can get over the initial sticker shock, they’ll find themselves in a home that could potentially reduce their energy bills Tate says by around $2,500 per year.It means they’ll be cheaper in the long run. In roughly 10 years, that buyer will more than likely be saving money compared to homes built to the old standard. So in theory, newly constructed homes will be cheaper long-term, but people need homes now.”

“Amid housing crisis, 1st permit issued in months to build new home in Kansas City. But why?” KSHB News

And then there is Washington State. A recent energy code update in Washington broke the underlying modeling for the primary performance path. The state’s second option was also discontinued, leaving only the most costly and complex option, Phius Passive House.

Without an alternative affordable pathway, new homebuyers are staring at a $15,000-$30,000 price increase, depending on home size, type and fuel source. A shift like this will only increase cost pressures on the existing home market as homebuyers are priced out of new housing.

The Unspoken Problem: Political Realities

The real focus from an efficiency standpoint should be our nation’s older homes. The data on this is clear.

These older homes may be A problem; however, they are not THE problem. In the policy space, organizations and individuals often enjoy working in the world of theory. There is something liberating about discussing how things should be when you don’t need to worry about how to get there. 

This is where the unspoken problem comes in: the political realities and limitations of the now. Since it is a heavier political lift to focus on where the greatest problem lies, policymakers choose to move to the place of least resistance. 

Targeting new home construction as the problem is common across the housing regulatory landscape. And the sad reality is that it is simpler to foist costs upon an unknown future homebuyer or renter than it is a voter you have to face in November.

Until policymakers change their thinking, we cannot address the full scope of the housing crisis.

Nick Erickson is executive director of Housing Affordability Institute.