Buried deep within the minutiae of federal regulation is a seemingly tiny policy switch that, if flicked, would dramatically raise the energy efficiency standard for new homes. Such a move would save homeowners thousands of dollars on their energy bills and nudge the country toward its climate goals. But, after months of waiting to see whether the government would indeed flip it, eight Democratic Senators have grown impatient and, on Monday, implored regulators to act.
“We urge you to move quickly to adopt modern energy standards for new homes,” read a letter to the Federal Housing Finance Agency, or FHFA, which was provided exclusively to Grist. The little-known independent entity oversees Freddie Mac and Fannie Mae, the country’s two largest backers of mortgages, and has the authority to mandate minimum energy standards for those programs — which cover hundreds of thousands of new home purchases each year. This breadth means that any FHFA benchmark would effectively become a de facto national standard.
Currently, though, the agency has no efficiency standard at all and the senators — including Chris Van Hollen of Maryland, Bernie Sanders of Vermont, and Elizabeth Warren of Massachusetts — want that to change. Instituting minimum requirements, they said, “will support a stable, efficient housing market by reducing wasted energy, improving health outcomes, and lowering costs for both renters and homeowners across the country.” Establishing guidelines will also reduce planet-warming emissions and, they note, help protect families from the impacts of extreme weather.
Advocates contend that many new homes are less energy-efficient than they could be, which leads to higher utility bills that hit low-income households particularly hard. This, they say, is because only a handful of states require that new homes are built to the current International Energy Conservation Code, or IECC, which was last updated in 2021. Most adhere to outdated versions of the code, and some states have no requirements at all.
“Too many American families are stretched thin by the high costs of their energy bills,” Van Hollen told Grist. “Improving home energy efficiency will help lower those bills, and the FHFA can play a key role in saving both homeowners and renters money by adopting a minimum energy standard for new properties built using Enterprise-backed mortgages. I appreciate FHFA’s earlier commitments to taking this action, and now it’s time for them to follow through so we can pave the way for more cost-effective and energy efficient housing across this country.”
The IECC dates to the late 1990s and, despite its name, is predominantly used in the U.S. The code governs energy-conservation factors such as insulation, window efficiency, and air-sealing. It is revised every three years, and the 2021 version represents an improvement of approximately 40 percent in energy efficiency compared to the 2006 edition. The IECC also serves as the basis for more stringent standards such as the federal Energy Star program.
“This is not aggressive green building,” said Lowell Ungar, director of federal policy for the nonprofit American Council for an Energy-Efficient Economy, which is pushing the FHFA for change. “This is intended as a baseline that builders across the country can do.”
The Federal Housing Finance Agency declined Grist’s request for an on-the-record interview, and did not answer questions about if, and when, it would adopt energy efficiency standards for its mortgage programs.
This spring, the Department of Housing and Urban Development, or HUD, and the Department of Agriculture, or USDA, finalized a long-delayed update to minimums for its mortgage programs, which was based on the latest international standard. Around the same time, the FHFA told Congress that it was considering a similar step and that a decision was expected by the end of the second quarter — a deadline that passed months ago.
According to HUD and USDA estimates, the changes to its codes would come with an average upfront cost of about $7,200 per home, but save $950 in annual utility costs and around $15,000 over the course of a 30-year mortgage. An FHFA change would have a similar effect but with far wider reach, since Fannie and Freddie back well over half of the mortgages on more than 1 million new homes built each year.
“Energy poverty is a real problem,” said Alys Cohen, a senior attorney with the National Consumer Law Center. “It doesn’t make sense to keep building new buildings that lock in higher utility bills and guarantee that people have to pay more than they should on energy.”
The climate impact of an up-to-date FHFA standard could be enormous because it could reduce a home’s energy consumption by an average of one-third.
“It’s a big deal,” Ungar said, adding that, over time, as new homes become a larger part of the housing stock, the climate and financial benefits of more stringent FHFA efficiency standards will only grow. His organization estimates that, by 2050, the move to the latest international standard would save some 194 million metric tons of carbon dioxide emissions — or the equivalent of consuming nearly 22 billion gallons of gasoline.
Some, however, oppose the FHFA adopting a standard.
The National Association of Home Builders, which is one of the largest trade associations in the U.S., has argued that a “rush” to require new homes to meet the 2021 IECC will cause an unreasonable increase in up-front costs that will exacerbate the affordable housing crisis. The organization declined Grist’s interview request, but in a press release from May its representative, Sean Woods, said that that mandating the latest standard “will act as a drag on housing production and this will have a domino effect on the rest of the economy, with fewer jobs and housing options, higher housing costs, and a lower tax base.”
What, if any, steps the FHFA ends up taking on the issue remains unclear, as do more granular details such as how long builders might have to adapt to new requirements or how future iterations of the International Energy Conservation Code might be handled. Advocates and opponents alike eagerly await answers from FHFA director Sandra Thompson, whose five-year term leading the independent agency ends 2027.
”It would be a huge lost opportunity if it didn’t happen,” said Cohen, of FHFA standards. “The buildings being built now are the buildings lower income people move into later.”
