Buried deep within the minutiae of federal regulation is a seemingly small policy switch that, if flipped, would dramatically raise the energy efficiency standard for new homes. Such a move would save homeowners thousands of dollars on their energy bills and push the country toward its climate goals. But after months of waiting to see if the administration would actually reverse it, eight Democratic Senators grew impatient and begged regulators to act on Monday.
“We urge you to move quickly to adopt modern energy standards for new homes,” read a letter to the Federal Housing Finance Agencyor FHFA, which was supplied exclusively to Grist. The little-known independent entity oversees Freddie Mac and Fannie Mae, the nation’s two largest backers of mortgages, 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 means that any FHFA measure would become effective a de facto national standard.
Currently, however, the agency has no efficiency standard, and the senators — including Chris Van Hollen of Maryland, Bernie Sanders of Vermont and Elizabeth Warren of Massachusetts — want that to change. Establishing minimum requirements, they said, “will support a stable, efficient housing market by reducing wasted energy, improving health outcomes and lowering costs for both renters and homeowners across the country.” Establishing guidelines would also reduce planet-warming emissions and, they note, help protect families from the impact of extreme weather.
Advocates argue that many new homes are less energy efficient than they could be, leading to higher utility bills that hit low-income households particularly hard. This, they say, is just because a handful of states require new homes to be built to the current International Energy Conservation Code, or IECC, which was last updated in 2021. Most adhere to outdated versions of the code, and some states have no requirements at all.
“Too many American families are being stretched thin by the high cost of their energy bills,” Van Hollen told Grist. “Improving home energy efficiency will help lower those bills, and the FHFA can play a key role in saving both homeowners and renters money by adopting a minimum energy standard for new properties built with enterprise-backed mortgages. I appreciate FHFA’s earlier commitments to take this action, and now it’s time for them to follow through so we can pave the way for more cost-effective and energy-efficient housing across this country.”
The IECC dates from the late 1990s and, despite its name, is mainly used in the USA. The code regulates energy saving factors such as insulation, window efficiency and air sealing. It is reviewed every three years, and the 2021 version represents an improvement of about 40 percent in energy efficiency compared to the 2006 edition. The IECC also serves as the basis for more stringent standards, such as the federal Energy Star program.
“It’s not aggressive green building,” said Lowell Ungar, director of federal policy for the nonprofit American Council for an Energy-Efficient Economy, which is pushing the FHFA for change. “It’s meant as a baseline that builders across the country can do.”
The Federal Housing Finance Agency declined Grist’s request for an on-the-record interview and did not answer questions about whether, and when, it will adopt energy efficiency standards for its mortgage programs.
This spring, the Department of Housing and Urban Development, or HUD, and the Department of Agriculture, or USDA, finalized a long-delayed update to minimums for its mortgage programs, based on the latest international standard. Around the same time, the FHFA told Congress that it is considering a similar move and that a decision is expected by the end of the second quarter – a deadline that passed months ago.
According to HUD and USDA estimates, the changes to its codes would bring an average upfront cost of about $7,200 per home, but save $950 in annual utility costs and about $15,000 over the course of a 30-year mortgage. An FHFA change would have a similar effect, but on a much larger scale, as Fannie and Freddie repay more than half of the mortgages on more than 1 million new homes built each year.
“Energy poverty is a real problem,” said Alys Cohen, a senior attorney at the National Consumer Law Center. “It doesn’t make sense to keep building new buildings that include higher utility bills and guarantee that people have to pay more for energy than they should.”
The climate impact of an updated FHFA standard can be enormous because it can reduce a home’s energy consumption by an average of one-third.
“This is a big deal,” Ungar said, adding that, as new homes become a larger portion of the housing stock, the climate and financial benefits of stricter FHFA efficiency standards will only grow. His organization estimates that moving to the latest international standard would save about 194 million metric tons of carbon dioxide emissions by 2050 – or the equivalent of consuming almost 22 billion liters of petrol.
However, some oppose the FHFA adopting a standard.
The National Association of Home Builders, which is one of the largest trade associations in the US, argued that a “chase” requiring new homes to meet the 2021 IECC will cause an unreasonable increase in upfront costs that will exacerbate the affordable housing crisis. The organization declined Grist’s interview request, but in a May press release his representative, Sean Woods, said that the mandate of the latest standard “will act as a drag on housing production and this will have a domino effect on the rest of the economy, with fewer jobs and housing options, higher housing costs and ‘ a lower tax base.”
What action, if any, the FHFA ultimately takes on the issue remains unclear, as do finer details such as how long builders might have to adapt to new requirements or how future iterations of the International Energy Conservation Code might be handled. Advocates and opponents are eagerly awaiting answers from FHFA Director Sandra Thompson, whose five-year term leading the independent agency ends in 2027.
“It would be a huge lost opportunity if that didn’t happen,” said Cohen, of FHFA standards. “The buildings that are being built now are the buildings with a lower income that people move into later.”
