Buried deep in the fine print of federal regulations is a seemingly small policy shift that, if implemented, would dramatically raise energy efficiency standards for new homes. Such a move would save homeowners thousands of dollars on their energy bills and move the country closer to its climate goals. But after months of waiting to see if the administration would actually reverse course, eight Democratic senators have grown impatient and on Monday pleaded with regulators to act.
“We urge urgent action to ensure new homes are brought up to date with energy standards.” Read the letter to the Federal Housing Finance AgencyThe Federal Housing Finance Agency, or FHFA, provided the agency with information exclusively to Grist. This little-known, independent agency oversees the nation’s two largest mortgage backers, Freddie Mac and Fannie Mae, and has the authority to mandate minimum energy standards for those programs, which cover hundreds of thousands of new home purchases each year. This breadth of scope means that FHFA’s benchmarks are effectively De facto national standard.
But right now, the agency has no efficiency standards at all, and senators including Chris Van Hollen of Maryland, Bernie Sanders of Vermont, and Elizabeth Warren of Massachusetts want to change that. They said enacting minimum requirements would “support stable and efficient housing markets by reducing wasteful energy, improving health outcomes, and lowering costs for both renters and homeowners across the country.” Establishing guidelines would also reduce emissions that contribute to global warming and help protect families from the effects of extreme weather, they note.
Advocates say many new homes are not energy efficient, which leads to higher energy bills that hit low-income households particularly hard. Some states State law requires that new homes be built to the current International Energy Conservation Standard (IECC), which was last updated in 2021. Most states still adhere to older versions of the standard, and some have no requirements at all.
“Many American families are struggling with rising energy bills,” Van Hollen told Grist. “Improving the energy efficiency of their homes will lead to lower energy bills. FHFA can play a key role in saving both homeowners and renters money by enforcing minimum energy standards on new construction built with Enterprise-guaranteed mortgages. I commend the FHFA for their prior commitment to take this step. Now is the time for them to follow through and pave the way for more cost-effective, energy-efficient housing across our country.”
The IECC was established in the late 1990s and, despite its name, is primarily used in the United States. The standard specifies energy-saving factors such as insulation, window efficiency, and airtightness. It is revised every three years, The 2021 edition shows an improvement of about 40 percent. It has improved energy efficiency compared to the 2006 edition. The IECC also serves as the basis for more rigorous standards such as the federal Energy Star program.
“This is not aggressive green building,” said Lowell Unger, director of federal policy at the American Council for an Energy-Efficient Economy, a nonprofit group that is lobbying the FHFA for reform. “This is meant to be a standard that builders across the country can implement.”
The Federal Housing Finance Agency declined Grist’s request for a formal interview and did not answer questions about whether or when it would adopt energy efficiency standards for its mortgage programs.
This spring, the Department of Housing and Urban Development (HUD) and the Department of Agriculture (USDA) finalized a long-overdue update to minimum standards for mortgage programs that was based on the latest international standards. FHFA to Congress The company said it was considering similar measures and expected to make a decision by the end of the second quarter, but that deadline passed months ago.
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HUD and USDA estimate that the rule change would cost an average of $7,200 upfront per home, but would save $950 in annual utility costs and about $15,000 over a 30-year mortgage. The FHFA change would have a similar effect, but its impact would be much larger, because Fannie Mae and Freddie Mae insure more than half of the mortgages on the more than 1 million new homes built each year.
“Energy poverty is a serious problem,” said Alice Cohen, senior attorney at the National Consumer Law Center. “It doesn’t make sense to continue building new buildings that lock in higher utility rates and ensure people have to pay more for energy than they should.”
Because the latest FHFA standards could reduce residential energy consumption by an average of one-third, the climate impacts could be significant.
“That’s a big deal,” Unger said, adding that over time, as new homes become a bigger part of the housing stock, the climate and economic benefits of stricter FHFA efficiency standards will only grow. His organization estimates that by 2050, the transition to the latest international standards will reduce carbon dioxide emissions by about 194 million metric tons. Equivalent to consuming approximately 22 billion gallons of gasoline.
However, some people oppose FHFA adopting the standards.
The National Association of Home Builders, one of the largest trade groups in the United States, said:Hurry“Requiring new homes to meet the 2021 IECC would cause an unjustified increase in upfront costs and exacerbate the affordable housing crisis,” the group said in a statement, though it declined Grist’s request for an interview. In a press release in May Sean Woods, the association’s president, said mandating the new standards “will stifle homebuilding and have a domino effect across the economy, including fewer jobs and housing options, higher housing costs and a weaker tax base.”
It remains unclear what action, if any, the FHFA will ultimately take on the issue, as well as the length of time builders have to adapt to the new requirements and some of the finer details of how future revisions to the International Energy Conservation Standard will be handled. Supporters and opponents alike are eagerly awaiting responses from FHFA Director Sandra Thompson, whose five-year term leading the independent agency ends in 2027.
“It would be a huge missed opportunity if that doesn’t happen,” said Cohen of the FHFA standards. “The buildings that are being built now are the buildings that low-income people will be occupying later.”
