There are a few reasons as a real estate professional to care about the estimated 20% of greenhouse gas emissions created by residential housing in the United States—roughly equivalent to the entire output of Japan.
First, it almost certainly will affect you, personally. Scientists continue to warn that very few places will be safe from the longer-term effects of climate change, which has already exacerbated dangerous heat waves and extreme weather events.
But secondly, regarding your business, energy efficiency has become an extremely important element for homeowners and homebuyers, who may (or may not) be concerned about the climate, but are definitely starting to recognize the value of energy-saving improvements. And maybe more importantly, a huge portion of the nation’s housing stock just became eligible for a massive influx of government funding that can help make these improvements happen.
“That’s a real game-changer,” said Carlos Martin, project director at Harvard’s Joint Center for Housing Studies. Speaking at a lecture last week about the opportunities and challenges ahead for energy-efficient housing, Martin described both a long-term trend toward various energy-conscious housing as well as a huge short-term opportunity created by recent legislation that has the power to really change the market.
“This is a decade of transformation, particularly market transformation,” Martin continued. “Because all of the policy programs that are ahead of us are for .”
Two bills passed over the last year or so—the Infrastructure Investment and Jobs Act (sometimes known as the BIF) and the so-called Inflation Reduction Act (IRA), passed late this summer, provide some significant money for energy efficiency in housing. Both together are only a fraction of the $150 billion for housing that President Joe Biden’s failed Build Back Better bill would have provided, something Martin lamented.
“This is a good chunk of change. It’s going to get us moving the ball forward for equity in energy transformation, but it’s only going to take us part of the way there,” he said.
Exactly how many homes, or families will be able to take advantage of these programs? The exact number is hard to predict, but the number of people who are eligible for either tax credits, rebates or subsidies numbers in the tens of millions. More than half a million energy-efficient new constructions could be incentivized as well, according to an analysis from sustainability-focused nonprofit Rocky Mountain Institute that Martin cited.
A large portion of these programs, including much of the IRA rebate and credit programs, launch at the beginning of 2023, including energy audits, which Martin said was a great first step for homeowners.
The types of upgrades range from electrification upgrades to major performance-based retrofits to new appliances. Other monies from the BIF could also directly or indirectly upgrade homes and neighborhoods all over the country.
Martin said that nearly 51 million households will be eligible for tax credits, and about 39 million can qualify for WAP, or the Weatherization Assistance Program, which focuses on energy efficiency upgrades for low-income homeowners. About 25 million will have access to up-front rebates.
Exactly when this money is available and what projects it can be used for is complicated. Much of it is targeted toward low- and middle-income households, from people living below the federal poverty rate to families making 120% of area median income. Red tape promises to present barriers as states implement new programs or process an influx of applicants, with many potential buyers or owners unaware of where to start or if they qualify.
Another bottleneck is labor, with Martin noting that the actual work required to deliver all these upgrades will still fall on the same people and businesses that have strained to keep up with demand as skilled trades are struggling to find workers.
“Ultimately, these jobs fall on the same occupations and the same establishments that have traditionally filled these roles—we’re talking about your local remodeler, your HVAC repair person, your window repair person, your roofer,” he explained.
There are programs in the recent federal legislation to train and employ new workers who are capable of doing this work, but the fruits of that will not materialize for four to five years, according to Martin.
During the pandemic, it took between 30 and 50 weeks to deliver materials for a roofing or HVAC project, according to Martin, and even appliances might languish in transit for six months or more. That means the decade of transformation might in fact take the better part of a decade.
But the good news is, the longer-term movement toward more energy-efficient homes and amenities has proved powerful. In 1995, $27 billion was spent on energy-efficiency improvements, while in 2021, that number was $111 billion (though the proportion of remodeling projects focused on energy-related upgrades remained roughly the same).
In Florida, over 70% of new homes are all-electric, driven by local policies as well as advances in technology, Martin said.
Even relatively simple amenities like digitized air conditioning or smart thermostats are growing in adoption, as is their power in cutting down energy consumption. Martin said even some Harvard professors he has spoken to aren’t using these technologies.
In a lot of cases, educating consumers can make a huge difference in their choices, according to Martin. Many of them will need help understanding the technology, the opportunities and the value in these things, and connecting with the local vendors that can make it happen.
Martin specifically talked about the little things—cooking, for instance, where the perception remains that gas is somehow better even as newer electric stoves outpace natural gas in power and efficiency.
“There has to be a cultural change associated with this, and that’s true across all the interventions that we’re speaking about,” Martin said.