Cost additions offset by energy efficiency tax credits

In downtown Frederick, Md., blocks from a Starbucks and Barnes & Noble, four new duplexes nearing completion were sold with complimentary iPads to monitor energy use.

For nearly the same price as other new homes, they have solar panels, geothermal wells and ultra-efficient, factory-made exterior walls. They’re designed to generate as much power as they use, along with thousands of dollars in renewable energy tax credits.

“We think of ourselves as early adopters,” says Mike Muren, of Nexus EnergyHomes, which is building 55 zero-energy homes in the historic town. “Our homes go way beyond energy codes.”

His company may be ahead of today’s curve, but that curve is changing so fast that net-zero homes may soon become archetypical. Despite the concerns of builders, an increasing number of states are adopting codes that require new homes and commercial buildings to use considerably less energy.

Maryland is leading the charge. It became the first state nationwide, beginning last month, to require new residences to meet the 2012 International Energy Conservation Code (IECC), which requires an estimated 30% more efficiency than those built five years ago. Durham, N.H., also adopted it last month, and Houston did so with a three-year phase-in.

More are coming. Next month is the official release of the first International Green Construction Code, a voluntary guide for commercial and public buildings to improve indoor air quality, as well as cut energy and water use. Maryland plans to adopt it, along with — in varying degrees — Florida, North Carolina, Oregon and Arizona’s Scottsdale and Phoenix, says the International Code Council, an association that develops the widely used codes for the construction industry.

“There’s definitely been a lot of movement by states to adopt more energy-efficient codes,” says Max Neubauer of the American Council for an Energy-Efficient Economy, which advocates them.

He says states see them as a cost-effective way to reduce pollution and were given Recovery Act funds to adopt them. He adds: “The movement is going to continue.”

Energy building codes are generally updated every three years, but the last two cycles have required the biggest leaps in efficiency. The 2009 IECC required 15% greater efficiency than the 2006 code, and the 2012 version adds about another 15%.

The number of states adopting the 2009 code for homes jumped from six in January 2010 to 23 as of Feb. 1, 2012. In that two-year period, the number of states enacting a similar code for commercial projects jumped from seven to 30, according to Paul Karrer of the Building Codes Assistance Project, a project of groups seeking energy efficiency.

Karrer estimates that moving from the 2006 code to the 2009 version adds an average of $840.77 to the cost of a new home but saves $243.37 in lower utility bills each year. When amortized over a 30-year loan, “you basically break even at month 10,” he says.

Many home builders balk at the tougher codes, citing higher costs and design constraints at a time the housing industry is still struggling. As a result, Pennsylvania moved away from adopting the 2012 residential code and Albuquerque, which had adopted it, voted in December to revert to the 2009 version.

“Design options have been taken away,” and that’s costly, says Donald Surrena of the National Association of Home Builders (NAHB). He says the codes only give builders flexibility to meet the efficiency targets if they provide detailed calculations.

“This (2012 code) is a train wreck,” says Tom Marston of Energy Services Group, a Massachusetts-based consulting firm. Although the state is allowing a six-month transition, he says many home builders, as well as building officials, are not ready for its requirements.

“The industry in Maryland will be in a pickle,” Marston says. He says it’s already building many homes to meet the U.S. government’s voluntary Energy Star program, which has efficiency criteria, so the mandatory code is unnecessary and costly. He adds: “I don’t think the consumer today is that interested in energy efficiency.”

Muren disagrees. “Everybody wants to talk about energy” when they tour Nexus’ homes. He says the homes are selling quickly and prove that it’s possible, though not easy, to meet and even exceed code with little or no price increases.

He says his company, one of 17 builders nationwide to win an “energy value” award last Wednesday from the NAHB Research Center, is tapping federal and state incentives for renewable energy and using smart, low-cost building practices such as insulating under the house and sealing air leaks.

Its duplexes in Frederick, about 50 miles north of the nation’s capital, have 1,600 to 1,700 square feet and sell at prices starting at $275,000. Muren says they may cost 5% to 8% more than similar-size new homes, but the buyer gets tax credits that offset the difference. He adds: “We’re competing head-to-head with average-built homes.”