Gold Dome, Housing, Joshua Sharf, Uncategorized

Sharf: Driving up the cost of housing with ‘green’ building codes

Colorado’s housing prices are skyrocketing.  Denver is the among most unaffordable cities for homebuyers.  Housing inventory is reaching an all-time low.  Rental vacancy rates are plummeting.

So naturally, Colorado’s Democrats want to make things worse.

A draft legislative bill would require local governments to adopt energy codes, that achieve “equivalent or better energy performance” as the 2021 International Energy Conservation Code (IECC), as well as model electric and solar ready codes.  This would improve the energy efficiency of the house, but also increase the up-front price of the house.  What’s at issue is how much.

Last year, the federal Department of Energy estimated that including energy codes in new home construction standards would cost roughly $4800 for the average new home in Colorado.  It also estimated that they would pay for themselves in three years, and that the present value of the total savings over 30 years would be a little over $7100.

At the time those estimates were made, the interest rate assumptions were realistic, although they used a long-term inflation rate of 1.4%, and a mortgage rate of 3.0%, both of which probably make the numbers look better than they really are, since we’re already seeing higher inflation and higher mortgage rates.  Discounting future savings with those higher rates would result in a lower present value.  On the other hand, if electricity and natural gas prices rise faster then inflation, then the savings would be greater.

They certainly don’t square with what victims of the Marshall Fire are experiencing.  Trying to rebuild their homes after losing everything, they’re finding out that the costs of the new 2021 IECC standards enacted by the Louisville city government run upwards of at least $20,000, and that in many cases their insurance doesn’t cover the increased cost.  And the Home Builders Association of Metro Denver has pegged that cost at nearly four times that amount.  Several weeks ago, a number of once-and-future homeowners protested outside the Louisville city government buildings asking that the standards be suspended for their rebuilds.

Xcel and others are offering subsidies to partially offset the costs, which is awfully sporting of them, but they can’t do that for everyone or for every new home built in the state from now on.  They won’t come anywhere close to covering the full cost of the upgrades, they still need permission from the Public Utilities Commission (PUC) to even offer them, and even then that money won’t likely be available until 2023.  Homeowners need to know now whether or not they can count on those funds, before they commit to these expensive changes.

If they were to try, it would mean that you, the ratepayer, would not only have to pay for the increased price of construction on your own home, and before you even got there you’d have been paying for other people’s upgrades in higher energy rates, for years.  That’s because Governor Polis’ PUC will almost certainly let Xcel charge you for those subsidies.

Fortunately, at its March 1 meeting, the Louisville City Council decided to allow victims of the Marshall Fire to opt out of the 2021 codes.  Unfortunately, the codes remain in force for everyone else.  So if you live in Louisville and your house happens to burn down tomorrow, God forbid, or if you need to replace your furnace or boiler, you’ll need to pay full freight for code-compliant replacements.

All of this comes as housing in Colorado is already among the nation’s least affordable.  In 2019, the American Enterprise Institute found Denver to be among the worst places to be a first-time homebuyer, both because people are moving in, and because not enough new housing is being built.

Colorado’s housing inventory is among the lowest in the country, leading house prices to greatly outpace wage growth here.  In ATTOM Data Solutions’s latest home affordability report, the lower the number, the less affordable the housing, where 100 is the historic average.  Ten of the 11 Colorado counties surveyed came in under 90 (only Boulder came in at 91), and Weld, Adams, Arapahoe, El Paso, and Pueblo came in under 80.

All of this may explain why fewer people are looking to move here.

Rather than piling additional costs onto those looking to buy a home in Colorado, the legislature and Gov. Polis (D-Affordable) ought to be trying to lower costs.  That starts with not making things worse.

Joshua Sharf is a senior fellow in fiscal policy at the Independence Institute, a free market think tank in Denver.


Our unofficial motto at Complete Colorado is “Always free, never fake, ” but annoyingly enough, our reporters, columnists and staff all want to be paid in actual US dollars rather than our preferred currency of pats on the back and a muttered kind word. Fact is that there’s an entire staff working every day to bring you the most timely and relevant political news (updated twice daily) from around the state on Complete’s main page aggregator, as well as top-notch original reporting and commentary on Page Two.

CLICK HERE TO LADLE A LITTLE GRAVY ON THE CREW AT COMPLETE COLORADO. You’ll be giving to the Independence Institute, the not-for-profit publisher of Complete Colorado, which makes your donation tax deductible. But rest assured that your giving will go specifically to the Complete Colorado news operation. Thanks for being a Complete Colorado reader, keep coming back.

Comments are closed.