New Energy Code in Minnesota Causes Performance Anxiety

A Minnesota homebuilders association chafes at the State’s new energy code, while Pennsylvania experiments with incentivizing high-performance homes.

MINNESOTA

The state’s new residential code took effect on January 24, 2015, and the energy code went into effect on Valentine’s Day. In late January, the Builders Association of the Twin Cities (BATC) took two legal actions against the state’s residential code and energy code. BATC filed a petition with the Minnesota Court of Appeals, disputing the Department of Labor and Industry’s (DLI) amendments to the IRC and IECC. BATC also filed a motion to delay enforcement of the new codes until the appeal could be heard.

The lawsuits arrive after several years of rule-making that resulted in an agreement between BATC and the DLI on most code changes. However, in the energy code, rather than a prescriptive approach, BATC advocated for more flexible, performance-based rules that they feel would be less expensive, yet just as effective. BATC also opposed a sprinkler requirement (as do almost all HBAs), claiming it is unnecessary and expensive. Their cost estimates claim that the codes will add $6,000 to $10,000 to the cost of an average new home, and almost $20,000 for a 4,500-sq.-ft. home with a basement. A former BATC official referred to the new code changes as “the largest regulatory tax on homebuyers in Minnesota history,” and stated that the costs exceed the value of the changes. BATC Executive Director David Siegel stated, “BATC believes the codes have substantial flaws, that the Minnesota Department of Labor and Industry did not properly analyze the impact of the rule and [that] these codes need to be sent back and fixed for Minnesota homeowners.”

While the DLI was silent on sprinkler costs, they produced DOE data, as well as their own, that directly refuted BATC’s claims. Scott McLellan, executive director of the Construction Codes and Licensing Division, explained:

“Based on research that was developed during the adoption of the codes, the new Minnesota Residential Energy Code is estimated to add around $0.75 per sq. ft. to the cost of a new home using conventional construction techniques. This amounts to around $2,500 for a two-story walkout house of 3,300 sq. ft. The U.S. Department of Energy estimates Minnesota’s new residential energy code will provide homeowners an average household energy savings of $669 each year with a (simple) payback of 5.7 years. The DOE’s publication Minnesota Energy and Cost Savings for New Single- and Multifamily Homes identifies the cost savings of going to the 2012 International Energy Code from our state’s previous Minnesota Energy Code.”

In mid-February, the appeals court denied the BATC’s request to delay. As of the end of March, the updated codes were still in effect. The appeals court will hear oral arguments on July 15, 2015, but won’t publish their decision until September at the earliest.

Observation(s):
The only thing new about this story is the location. We’ve seen this type of maneuvering in the past. The HBA puts out inflated cost estimates and claims the homebuilding industry will be irreparably harmed. The state agency touts a state-specific DOE analysis that refutes the aforementioned cost data. The (financial) truth usually lies somewhere in between, but neither side ever looks at the cost of ownership. The costs get debated at the “simple payback” level, and that’s really unfortunate. (I have long argued that, since most people finance their homes rather than pay with cash, we should consider the per-month cost of the upgrade rather than the total cost. This monthly increase can easily be compared with average monthly savings of the upgrade.)

On the topic of sprinklers, the ROI is harder to quantify. On one hand, the ROI is infinite if a life is saved. It’s also substantial if the sprinklers result in reducing property loss. It usually comes down to the perceived odds-of-a-fire event versus the initial cost. So far, most jurisdictions have amended that requirement out.

PENNSYLVANIA

In a slide presentation available through its website, the Pennsylvania Housing Finance Agency makes a case for building to Passive House standards.

In a slide presentation available through its website, the Pennsylvania Housing Finance Agency makes a case for building to Passive House standards.

The state briefly offered a tax credit for low-income housing that met the Passive House criteria. The Pennsylvania Housing Finance Agency (PHFA) offers loans and tax credits to qualifying multifamily project applicants. Applications submitted under the PennHOMES and low-income housing tax credit program are scored and numerically ranked. Projects can earn up to 130 points under five categories. This year, projects that were Passive House “certifiable” could earn a maximum of 10 points. An equivalent number of points were available to structures pursuing Enterprise Green Communities criteria. To qualify, the application needed to include pre-certification from a Passive House organization (either national or international); at the completion of construction, blower door test results and all other third-party test results must be submitted, although the project need not be officially certified. The state tax credit is highly sought after, with less than one-third of the applications receiving funding. (According to one article, only about 40 of 130 applications were expected to receive funding for 2015.)

In a pre-application slide presentation (which is still available through the PHFA website), the organization makes the case for the high-performance program as a step toward net-zero-energy readiness. The presentation also cites other progressive state and local energy codes. Pennsylvania currently follows the 2009 IECC.

Observation:
This was an unprecedented recognition of the high-performance energy program. Passive House has struggled to gain traction in the United States, with less than 200 projects obtaining certification. (Worldwide, there are over 40,000 such properties.) Accomplishments like this can only help the program, which certainly has its dedicated fans.

References
Builders group files suit with state over code changes” by Jim Buchta, Star Tribune. January 27, 2015.
“Building code changes prompt construction surge” by Jim Buchta, Star Tribune.February 26, 2015.
“Pennsylvania is First State to Offer Tax Credit for Passive House” by Stuart Kaplow, Green Building Law Update. January 4, 2015.
“Passive House in Pennsylvania” slide presentation by PHFA. October 1, 2014.
“Real estate notebook: Another look at the February construction bump” by
Jim Buchta, Star Tribune. March 5, 2015.