A look at NAHB’s “Recommended Code Amendments”

In a recent email sent to NAHB members, I couldn’t help but click on the piece entitled; “NAHB’s Recommended Code Amendments Can Save Home Buyers and Home Builders Big Bucks”. Why that sounds so great, a deal where everyone wins… sweet. So is this really a win-win, win-lose, or plain lose-lose? Well let’s take a closer look at these amendments & see what they have to say.

The Sale’s Pitch:

NAHB’s successful effort to amend or prevent adoption of the 2012 International Energy Conservation Code (IECC) in several states was a victory for sensible, flexible, cost-effective regulation.

When a state moves to update or modify its energy code, the decision can have major cost repercussions for home builders and home buyers… Bringing the code up the 2012 version would be tremendously difficult and expensive in states that have not updated their codes in recent years… According to the Home Innovation Research Labs it costs $7,034 more to build a home to the 2012 IECC than to the 2006 IECC…

Numbers don’t lie, but liars figure…  While I am not accusing NAHB, BCAP or others of “lying” when it gets down to costs, savings, etc… there are numerous ways to skew the numbers to support your position. NAHB will typically tend to favor a higher cost  (for example having an insulation company come in afterwards to insulate pipes, instead of letting the plumbers do it). BCAP & others will tend to favor a materials and same crew approach which would be at a lower cost. So when you see these numbers or anyone else’s, just take it with a grain of salt & for luck throw it over your shoulder… Shoot was that supposed to be the left or right?

The Proposals versus Reality:

Eliminate requirements for insulating hot water pipes in a home

• NAHB: The estimated cost of this provision varies from $500 to $1,000 for an average size house. The energy cost savings would be $5 to $9 per year, meaning it could take as long as 200 years to recoup the additional expense.
• BCAP OCEAN: $100 (They do not break down savings – see insulation section below)
• SLS: I happen to agree with the NAHB for the most part on this (Myths & Misconceptions; Insulating Water Lines) though their costs are really overblown. BCAP’s price is probably a lot closer to reality especially for well-designed homes with short runs.

What is BCAP OCEAN? OCEAN is a take-off of the original Building Codes Assistance Project;  and stands for Online Code Environment and Advocacy Network. Their goal is to be an interactive resource designed to share experiences, best practices, educational resources, and news about building energy codes.

Reinstate energy-neutral equipment trade-offs

• NAHB: This would provide builders the flexibility to decide the most cost-effective way to comply with the 2012 IECC. For example, a builder could potentially choose to install a high-efficiency furnace rather than put in additional wall or attic insulation as prescribed by the code. This could reduce the overall cost to both the builder and the consumer.
• SLS: Anyone for putting a Ferrari engine in a Yugo? While there are certain items that can be traded off, this shouldn’t be one.  Sorry but it is time to realize that a naturally vented appliance has no business being in any house, especially one that is well insulated & sealed properly – oh they didn’t mention that is many builders favorite option did they… I wonder why? Shoot even if they pulled the first option, do they really think homeowners are going to really enjoy having cold feet & unusable spaces in their nice new home?

Provide the flexibility to ease the air tightness rating requirement for all homes

• BCAP:  $350 for air sealing & testing
• SLS: BCAP’s numbers are very low for someone new to doing this, but close for the builders / trades people after they have gotten some experience as it doesn’t take that much extra time (depending on test charges)
• NAHB: The 2012 IECC is the only version to mandate this type of testing for all residential building.
• SLS: Incorrect as it is mandated in the 2009 code though builders had a “checklist” option that could be completed instead.
• NAHB: Today’s new homes are already far more energy-efficient than the existing housing stock. Placing even more stringent requirements on new home construction would be prohibitively costly while only marginally improving energy savings.
• SLS: Actually one of the biggest energy wasters is uncontrolled leakage & leads to water intrusion, mold & a host of other issues. Besides that, isn’t a new home supposed to be better than an existing home?
• NAHB: The rating standard varies depending on the climate zone (1 through 8) where a house is located. Fewer than 10% of existing homes nationwide meet the requirements for Climate Zones 3-8 (3 ACH).
• SLS: True, Climate zones 1 & 2 go from 7 ACH down to 5 while the rest of the country drops to 3. With that you might want to check with your builder partners as over 1/3 of the homes undergo this test in order to get a HERS rating as a selling & marketing point with most easily hitting low 5’s without hardly even trying. In more northern climates most are doing a lot better as they understand the importance.

Ease wall insulation requirements in Climate Zone 3

• NAHB: The 2012 IECC increased the wall insulation requirements in Climate Zone 3 (Southeast and South Central U.S.) from R-13 to R-20. Based on NAHB calculations, this will add $1,199 to the cost of a new home. This mandate would provide an energy savings of only about $50 per year, and it would take 24 years to recoup the initial cost.
• BCAP: $1813 walls & $239 Attic — 18 month profit ROI (Tennessee) — see “Law” box for more info
• SLS: Wow what a change in numbers with BCAP actually going high (I think they went with foam exterior instead of just fiberglass)
• SLS: Just like the box above on numbers don’t lie, both are factually correct – of course NAHB’s is based on everything else being done & then taking it off to see the difference (see Looking Back – Modeling changes). BCAP rolls everything together as it is the sum of the whole that determines the final outcome.  The question becomes, would you rather pay your utility companies an additional $50 a year (assuming rates stay the same), or your builder $1200 if it results in a more comfortable house?

NAHB is using something called a SIR or Simplified Savings to Investment Ratio. It is about as good as taking the purchase price of your new home & dividing it by 360 to figure out your monthly payments.BCAP on the other hand uses an incremental cost approach and combines all the component savings together (as the house is a system) and divides by 12. They then take the increased cost & amortize them into the loan which includes a higher down payment. This then gives them a chart to see when you break even (money saved from utility companies to mortgage P&I) and start actually making a “profit” from the savings differential.The only issue with BCAP’s approach is that the savings aren’t flat like that at all, instead the savings vary based mainly on heating and cooling seasons. During March you might not see any “savings” while 2/3 of it comes during the heating season.

Reduce wall insulation requirements in Climate Zone 6

• NAHB: The 2012 IECC increased the wall insulation requirements in Climate Zone 6 (northern New England and upper Midwest) from an R-20 cavity insulation to R-20 cavity insulation plus R5 continuous insulation. This is the first time the energy code has included a prescriptive requirement for continuous insulation. Based on NAHB calculations, this will increase the cost of construction by $1,819 for an average house. With an estimated annual energy savings of $33, it would be 55 years before a home owner would save money on this insulation cost.
• BCAP: $881 – 6 Months profit  (Pennsylvania)
• SLS: So why the big difference in Pennsylvania’s cost to bump up to add R5 as compared to Tennessee’s? Well part of that has to do with most smart builders up there are using R13 + 5 right now which gets bumped up to R10 exterior. So not only do they have knowledgeable crews already doing this, but also lower prices due to demand. As for NAHB’s saving numbers, I would say they are very suspect.

Lower basement insulation requirements in Climate Zone 5

• NAHB: The 2012 IECC increased the basement wall requirements from R-10 to R-15 in Climate Zone 5 (a swath of states stretching from coast-to-coast across the central part of the nation). This increase in insulation is expected to cost an average of $590 per house with an associated payback of just $7 per year. That means it would be 84 years before a home owner would net any savings.
• BCAP: $134 – 9 months profit (Pennsylvania)
• SLS: but crawlspaces should be raised? All I got to say about this section is see above & hot goes to cold…  oh & yeah that is definitely a heating climate

Final Thoughts:

Unfortunately the NAHB is in a tough spot as they have so many varying interests to deal with. While over a 1/3 plus of the buildings built now are being voluntarily tested & certified for energy use that still leaves 2/3 of the builders still going “I hate change.” Well the times are changing, and by changing the NAHB Research Center which used to promote better building practices to the Home Innovation Research Labs which seems more keen on blocking them, you are doing your builders & their clients a major disservice.

If you really want to help homeowners save & let your builders not only make more profits but have happier clients, you might look into how you can sell those “energy savings” into raising the amount individuals can borrow. Hey call me stupid, but it has been done successfully before in Arizona with SRP & APS neighborhood programs. As for your argument of “for every $1.000 you price 100k / 240K / 300K out of the market” I don’t recall you worrying about that to much during the last housing boom where I watched developments raise their prices 10 – 30K a month for the same exact house… Just saying

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