Two apartment buildings in New York, we need for housing to be more energy efficient in the U.S.
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Greater efficiency in housing

The Need for Energy Efficiency in New and Existing Housing Stock

Justin Wolf
November 21, 2023

The United States has a housing shortage. This fact has become as plain as death and taxes. But unlike those examples, the housing issue is a crisis that can be solved, not an inevitability that we must accept.

This shortage is the result of various interrelated factors, the first being the housing market’s persistent inability to build enough new stock relative to population growth, migration rates, and affordability versus market-rate averages. By some estimates, the country currently needs to create approximately 5 million housing units to assuage shortage rates and bring us out of crisis mode. But this number doesn’t paint a holistic picture. Consider that between 2012 – 2022, nearly 11.9 million new homes were completed in the U.S., 8.5 million of which were single-family homes, and the remaining 3.4 million were part of multi-family developments. This reveals a staggering (and growing) gap between homes that are considered market-rate and those that are predominantly rental units and are far more affordable, on average.

Therein lies the heart of the matter. Our housing crisis is an affordability crisis. The so-called American starter home (which should go for about $200,000 in today’s dollars) has become an antiquated concept, and modest single-family homes that sold for $250,000-$300,000 before the pandemic are now going for a cool half-million or more. This is all further exacerbated by restrictive zoning, parking minimums, and other policies that preclude things like smart-growth urbanization and high- and medium-density development.

Death and taxes, right? Not so fast.

Affordability = Efficiency

A vocal and emerging cadre of policymakers, real estate developers, urban planners, designers, manufacturers, and community leaders are touting the proven intersection between affordability and energy efficiency. As the thinking goes, the better a home performs in terms of airtightness, ventilation, air quality, heating and cooling efficiency, and other metrics, the more affordable it is over the long term due to reduced energy consumption costs.

Of course, creating that reality requires all kinds of tools and materials, ranging from electric heat pumps and high-performance windows to low-carbon insulation products with a high R-value. And those things don’t come cheap. So, what good is a money-saving investment if one cannot afford the upfront costs? Fortunately, that aforementioned cadre isn’t just paying lip service to a good idea.

The Inflation Reduction Act (IRA), signed into law in August 2022, represents the biggest and most significant piece of legislation undertaken by the U.S. Government to combat climate change. Of the nearly $400 billion in federal loans, grants, and tax incentives available through the IRA, a substantial portion is being directed at implementing clean electricity projects (renewable energy production and grid integration) and home electrification and efficiency upgrades (heat pumps, insulation, PV arrays). The 30% tax credit available to new and existing homeowners who invest in applicable clean energy technologies has been extended through 2032; and beginning next year, states will have access to portions of the $8.8 billion that’s been ear-marked for two rebate initiatives: the Home Efficiency Rebates program (up to $8,000) and the Home Electrification and Appliance Rebates program (up to $14,000).

To ensure new housing stock meets that affordability threshold, several factors need to align. Robust tax credits through the IRA and complementary programs like the Federal Buy Clean Initiative (which prioritizes the procurement of U.S.-made, low-carbon construction materials for federally funded projects) already enable builders to create higher-performing buildings for lower- and middle-income residents. What’s also required are progressive zoning laws and building codes, more public-private partnerships, and a greater capacity for U.S. manufacturing of clean energy solutions and construction materials. All of this will allow, respectively, for more high-density and public transit-oriented development, the ability to build affordable housing on public lands, and for cleaner and more efficient supply chains that support regional economies.

Clearly, the construction of more market-rate, single-family homes is not a viable solution to America’s housing crisis. Even if a few million mid-size, high-efficiency homes were to become available tomorrow, present market conditions won’t allow the millions of people in need of good and affordable housing from attaining it. What’s required are housing solutions that maximize land use, prioritize density, and are efficient and affordable from day one. This is not only achievable but, in many cities, it’s becoming increasingly practical. There is plenty of precedent to draw from. However, new housing construction alone is likewise not a viable solution.

Look to Existing Building Stock

If the U.S. has any hope of stemming the tide of its affordable housing shortage and abiding by its emissions reduction goals, per the Paris Agreement, then an outsized focus must be directed at retrofitting existing buildings. The benefits of doing so are twofold. Firstly, converting existing multi-family buildings (and other building types) that are inefficient and large consumers of fossil fuel-powered energy (and thus, large emitters of operational greenhouse gases) into homes that are efficient and clean is a win-win for residents and building owners.

Second, the act of not razing aging buildings and replacing them with new construction means avoiding the release of several thousand metric tons of embodied carbon. Keeping buildings in place translates to an investment in people, infrastructure, and the environment. Compared to new construction, reusing or rehabilitating existing buildings is invariably the smarter decision, both over the short and long term.

To be fair, designing and constructing anew with sustainable performance in mind provides builders with far more flexibility, whereas reusing and retrofitting can invite a journey of restrictions and unwelcome surprises. But to reach that approximate goal of 5+ million new housing units, all while mitigating the impacts of that new development, a sizable burden will rest on existing buildings.

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