New Energy Codes Mandate a Blow to Housing Affordability

In a move that will curb new construction and harm housing affordability nationwide, the U.S. Department of Housing and Urban Development (HUD) and U.S. Department of Agriculture (USDA) have issued a final determination that will require all HUD- and USDA-financed new single-family construction housing to be built to the 2021 International Energy Conservation Code (IECC) and HUD-financed multifamily housing be built to 2021 IECC or ASHRAE 90.1-2019.

Without adequate review and consideration of how it will affect home buyers or renters, HUD and USDA have rammed through a mandate that will do little to curb overall energy use but will exacerbate the housing affordability crisis and hurt the nation’s most vulnerable house hunters and renters. Studies have shown that building to the 2021 IECC can add up to $31,000 to the price of a new home and take up to 90 years for a home buyer to realize a payback on the added cost of the home. This unreasonable trade-off for a new home buyer will do little to offer meaningful energy savings for residential homes and apartments and in fact, will make older, less efficient homes more attractive.

“The Biden-Harris administration has set a goal of building an additional 2 million homes and this new policy runs completely counter to that objective,” said NAHB Chairman Carl Harris. “HUD and USDA are supposed to help the most vulnerable home buyers and renters — not price them out of the housing market. This senseless nationwide codes mandate will significantly raise housing costs — particularly in the price-sensitive entry-level market for starter homes and affordable rental properties — and limit access to mortgage financing while providing little benefit to new home buyers and renters.”

It is also likely that the Department of Veteran Affairs will join with HUD and USDA to only finance new homes if they are built to the 2021 IECC.

This ill-conceived policy will also act as a deterrent to new construction at a time when the nation desperately needs to boost its housing supply to lower shelter inflation costs. Moreover, it is in direct conflict with the current energy codes in the majority of jurisdictions around the country. This will lead to a host of logistical and implementation challenges in the field and will require bringing a third-party to manage the compliance process.

And targeting new home construction is the wrong approach to reduce energy consumption in the U.S. Homes built to modern energy codes are already energy efficient. According to the National Renewable Energy Laboratory, upgrades to the existing housing stock — 130 million homes that were built before the introduction of modern energy codes — could yield a projected reduction of 5.7% of the total annual U.S. electricity consumption in 2030.

Compliance Dates and Paths for Home Builders

At the strong urging of NAHB and other commenters, HUD did extend the compliance dates for these new requirements. The effective date of the rule is May 28, 2024, but the compliance  dates for the building code mandates are:

• 18 months after the effective date for single-family homes;
• 12 months after the effective date for multifamily projects; and
• 24 months after the effective date for homes in “persistent poverty rural areas.”

In addition, the rule provides other compliance paths. Homes built to above-code existing standards will satisfy the new requirement. Programs specifically mentioned by HUD include ICC-700 National Green Building Standard (NGBS), Energy Star Certified New Homes, and Leadership in Energy and Environmental Design (LEED), among others.

Adoption of the prescriptive or performance paths of the 2024 IECC will also be an allowable compliance pathway.

A Top Issue at the 2024 NAHB Legislative Conference

HUD and USDA’s new minimum energy standard will be a top issue at the upcoming NAHB Legislative Conference in Washington, D.C. on June 12.

NAHB is calling on Congress to include a provision in the fiscal year 2025 Transportation, Housing and Urban Development, and Related Agencies Appropriations bill to prevent HUD from using any funds to implement the 2021 IECC for all HUD- and USDA-financed newly constructed housing.

NAHB Chairman Carl Harris and First Vice Chairman Buddy Hughes will be on Capitol Hill on May 1 to meet with several U.S. senators, and this topic is sure to be high on their list of concerns.

The NAHB Legislative Conference offers a unique opportunity to speak one-on-one with your elected representatives on Capitol Hill and to push for housing policies that will help your business and our industry. A strong showing can help move the needle on this vital energy codes issue as well as other top housing priorities, including the need to boost the production of transformers and ensure proper funding for workforce development to help alleviate the severe labor shortage in the construction industry. Learn more at nahb.org/legcon.