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The White House today announced a proposal that new homes purchased using Federal Housing Administration (FHA) or U.S. Department of Agriculture (USDA) mortgages must be built to the standards of the 2021 International Energy Conservation Code (IECC). Current FHA/USDA mortgage standards require compliance with the 2009 IECC. This proposed standard update is a giant step forward in improving the energy performance of new residential construction in the United States. About 170,000 homes are purchased each year using these government mortgage products, which means 170,000 families will buying homes that are potentially 35 percent more important efficient than the status quo.
The announcement was made following a meeting last week at the White House with 24 states to highlight their efforts on commercial and residential decarbonization policies and programs that lower utility bills, increase climate resilience, and reduce emissions.
Extension of Administration’s Push to Advance Code Adoption
The proposal to increase home energy efficiency requirements builds on the President’s National Initiative to Advanced Building Codes, announced last June, which supports the adoption of modern building codes and standards that save lives, reduce property damage, and cut utility bills. More than half of U.S. states currently operate under 2009 IECC requirements or below (some with no statewide energy efficiency code requirements). This proposal will drive significant change in new home energy efficiency.
Heating and cooling costs are typically the second-largest household expense after the mortgage. Building homes to modern energy efficiency code standards means putting more money in the pockets of families every month. More efficient homes also improve air quality, lower carbon emissions, improve resiliency in during natural disasters, and create a more comfortable living space. It seems like a no-brainer.
The Bottom Line
Efficiency advocates have argued for years that energy efficiency should be required with federally backed mortgages, and there is data supporting the economic benefits for consumers who own more energy-efficient homes. The U.S. Department of Energy’s (DOE) cost-effectiveness review of the 2021 IECC showed the energy savings from upgrades included in the code far outweigh the costs, proving positive cash flow within four years and locking in energy savings for homeowners and renters for decades after construction. Further, homes with increased energy efficiency have lower mortgage default rates, according to a 2013 study from the Institute for Market Transformation. An estimated 50 percent of U.S. mortgage loans are backed by government-sponsored entities like FHA and USDA.
Within the next few days, the Federal Register will announce a lengthy comment period for the proposed changes.