Aerial photo of San Juan County, Washington

After new requirements laid out in the 2018 Washington State Energy Code went into effect in February 2021, multiple groups representing the state’s construction industry made public announcements in August and September 2021 asking Governor Jay Inslee to pause the changes until early 2022.

The Building Industry Association of Washington (BIAW) and San Juan Building Association (SJBA) worked together to draft an open letter to the governor, claiming that even though the organizations “[support] the energy code changes and regulations to better improve our environmental impact…the choice to proceed with the implementation of these codes during covid has the added cost that has become a large financial hardship during this crisis.”

Notably, the organizations are claiming that the code changes have caused an average of $15,000 to $20,000 in increased costs per new home build, with BIAW noting that “These cost increases are due, in part, to enormous and unprecedented supply chain delays for building materials, many of which are needed for compliance with the new residential energy code.”

This could be a major issue for Americans looking to start new construction — and a significant number of people are looking to do so. According to Levelset’s Samuel Votaw, home construction jumped 22.6% from June to July 2020 in what was a 10% increase over the same time period in 2019, and all-time low mortgage rates may encourage more people to look towards building projects.

The letter to Governor Inslee notes that delays in the delivery of HVAC components and insulation are impacting contractors, but points out a number of specific examples of problems, as well:

  • Windows that are compliant with the new code “are taking up to 30 weeks for delivery, as there is only one [Northwest] manufacturer producing them” — a major jump over eight weeks delivery time for windows compliant with the previous code — and contractors are seeing prices that are “40-50 percent higher” than previous.
  • Heat pumps compliant with the new code are reportedly in very short supply, with the open letter noting that “Delivery times have increased from 30 to 90 days and costs for those new systems have increased up to $6,900.”
  • Newly-required 400-amp service panels are especially difficult for contractors to source, with the letter noting that “delivery times are no longer even being provided by manufacturers.”

Citing these issues, the organizations requested Inslee to “provide relief to Washington’s future homeowners by pausing the new residential energy code through March 31, 2022,” stating that “[Washington State’s] housing crisis needs real solutions and a pause will provide relief while supply chains across the globe recover from shutdowns and slowdowns.”

The letter notes that the prices of new construction are making it so that large groups of people are being priced out of housing, adding that “Already the average new home price is over $522,000 — meaning roughly three-quarters of families are priced out. For every $1,000 increase 2,500 families are priced out of new home ownership opportunities.”

The codes in question were intended to be phased in during 2020, but were pushed back due to the COVID-19 pandemic, with Inslee repealing a further extension that would have pushed the implementation further back to July 2021.

Throughout 2020 and 2021, contractors have been concerned about issues with the supply chain; as per prior Levelset coverage, summer of 2021 saw a number of the problems that new construction has faced exacerbated.

Similar to BIAW and SJBA’s concerns over the affordability of new construction, as well, Caitlin Walter, vice president of research for the National Multifamily Housing Council, recently noted that “Material shortages and cost increases will lead to development cost increases and potential project delays…longer term, these disruptions could challenge the already supply-constrained market and threaten to derail housing affordability efforts.”

“New units need to be built at a variety of price points, and cost increases only make building those units more difficult,” Walter says.

BIAW Executive Vice President Greg Lane claimed that the proposed pause would bring direct significant benefit to local governments and construction businesses.

“Granting this pause allows builders and industry leaders to make the necessary adjustments to their operations without hasty decision-making and less than thorough implementation, saving time and money,” Lane says.

Other rises in costs may be on the horizon for contractors in California & the Western US

Though the BIAW and SJBA are only speaking for the concerns of Washington State builders now, they may be speaking for a larger group soon enough. 

In what energy experts have called one of the most significant environmental updates attempted by a government agency, August 2021 saw California similarly update its building code to require certain new homes and commercial buildings to have solar panels and batteries, as well as wiring needed to switch from natural gas heaters to electric heat pumps.

Though people once again agree that the changes are great for the environment, many are concerned that the changes will put even more stress on the already dire state of affordable housing in the state. 

As The New York Times recently noted, “The median single-family home in California sells for more than $800,000 compared to about $360,000 nationwide, and businesses pay more for rent in cities like San Francisco and San Jose than anywhere else in the country.”

Donald J. Ruthroff, a principal at Dahlin Group Architecture Planning in Pleasanton, California, said of the code changes that “You’re going to see the impact in office rents. You’re going to see it in the cost of the milk in your grocery store…There’s no question this is going to impact prices across the board.”

However, the state government is standing behind the changes for the time being, focusing instead on the importance of the climate and the idea that the increased costs are better used in the quest to save the environment.

“The urgency of climate change has gone up,” says Andrew McAllister, a member of the California Energy Commission. “We know we’ve got to get on the stick and do something.”

Not everyone in California is convinced, though, with some noting that the state’s issues with wealth disparities could make it especially difficult for people to affordably implement the plans.

“If we push it and we do things that are modern and efficient and green, we tend to be able to do it in Los Angeles,” says Michael Marini, co-owner of California’s Planet Home Living. “That’s not entirely true in the rest of the country. We can’t do that in San Bernardino. At the end, the consumer absorbs the cost.”