A good friend and client of mine asked me to give him a quick opinion on the American Clean Energy and Security Act of 2009 (Cap and Trade Act) and to gauge its impact on the real estate market in the coming years. No big deal I figured, I’ll just grab a beer and see what this thing is all about …
What I found was disturbing. First of all, that beer needed to be a 12-pack, because the American Clean Energy and Security Act of 2009 is a 1,428 page document written in typical political gobilly gook, with far too many words and noticeably void of any pictures. If you’re really bored, you can download a copy from the sidebar on the Tallahassee Real Estate Blog.
Specifically, here are the words found all over the internet that concerned my friend.
You won’t be able to sell your home unless you retrofit it to comply with the energy and water efficiency standards of this Act. H.R. 2454, the “Cap & Trade” bill passed by the House of Representatives, if also passed by the Senate, will be the largest tax increase any of us has ever experienced.
Needless to say, this grabbed my attention and I began looking for more information.
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American Clean Energy And Security Act and Real Estate
An article in the Washington Post does a good job explaining the impact that the Cap And Trade Bill will have on new home construction and the housing market:
The bill would give the federal government power over local building codes. It requires that by 2012 codes must require that new buildings be 30 percent more efficient than they would have been under current regulations. By 2016, that figure rises to 50 percent, with increases scheduled for years after that. With those targets in mind, the bill expects organizations that develop model codes for states and localities to fill in the details, creating a national code. If they don’t, the bill commands the Energy Department to draft a national code itself.
ad_iconStates, meanwhile, would have to adopt the national code or one that achieves the same efficiency targets. Those that refuse will see their codes overwritten automatically, and they will be docked federal funds and carbon “allowances” — valuable securities created elsewhere in the bill that give the holder the right to pollute and can be sold. The Energy Department also could enforce its code itself. Among other things, the policy would demonstrate the new leverage of allocation of allowances as a sort of carbon currency — leverage this bill would be giving to Congress to direct state behavior. washingtonpost.com.
Disinformation Reigns On The Internet
Sometimes it is very hard to tell the “airbags” from the experts on the internet. People can write whatever they please and if they have a decent writing style, they will develop a following. I suspect that is what has occurred with the disinformation on the American Clean Energy and Security Act that we are reviewing.
This blog article started because my friend sent me a link to a forum where the following was posted (I have since found it verbatim on a number of forums…
Beginning 1 year after enactment of the Cap and Trade Act, you won’t be able to sell your home unless you retrofit it to comply with the energy and water efficiency standards of this Act. H.R. 2454, the “Cap & Trade” bill passed by the House of Representatives, if also passed by the Senate, will be the largest tax increase any of us has ever experienced.
The Congressional Budget Office (supposedly non-partisan) estimates that in just a few years the average cost to every family of four will be $6,800 per year. No one is excluded. However, once the lower classes feel the pinch in their wallets, you can be sure these voters get a tax refund (even if they pay no taxes at all) to offset this new cost. Thus, you Mr. and Mrs. Middle Class America will have to pay even more since additional tax dollars will be needed to bail out everyone else.
But wait, there’s more …
A year from now you won’t be able to sell your house. Yes, you read that right. The caveat is (there always is a caveat) that if you have enough money to make required major upgrades to your home, then you can sell it. But, if not, then forget it. Even pre-fabricated homes (“mobile homes”) are included.
In effect, this bill prevents you from selling your home without the permission of the EPA administrator. To get this permission, you will have to have the energy efficiency of your home measured. Then the government will tell you what your new energy efficiency requirement is and you will be forced to make modifications to your home under the retrofit provisions of this Act to comply with the new energy and water efficiency requirements.
Then you will have to get your home measured again and get a license (called a “label” in the Act) that must be posted on your property to show what your efficiency rating is; sort of like the Energy Star efficiency rating label on your refrigerator or air conditioner. If you don’t get a high enough rating, you can’t sell. And, the EPA administrator is authorized to raise the standards every year, even above the automatic energy efficiency increases built into the Act.
OK, enough of the forums … what does the American Clean Energy and Security Act of 2009 really say?
I believe that if the American Clean Energy and Security Act of 2009 is enacted, new home construction costs will go up, and home affordability will decline. It appears as if a “national building code” will be created, thus usurping some of the rights of State’s to control building quality as they see fit.
A cursory examination of the 1,428-page bill, in its current form, finds it does not call for mandating an energy audit on existing homes. However, according to the House Committee on Energy and Commerce, Section 204 of the legislation does call for building an energy performance labeling program for new home and commercial properties.
With all the government people in and around Tallahassee, maybe we can get a few to drop a comment or two here to give us the real scoop.
Happy Anniversary Mom And Dad
Today is the 49th Wedding Anniversary for Mary Lou and Trent Manausa (or at least that’s the story they gave me). If you happen to see them, wish them the best. They deserve it ….
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energy-efficiency requirements are extremely likely to net out considerable savings over the lifetime of a typical house. the upfront cost is higher, but you might notice a distinct lack of complaining about the higher costs of fluorescent light bulbs?
even the link between between the (nebulously-defined) up-front costs, and the cost of housing is tenuous. i as buyer don’t give a damn what the house cost you to build and/or retrofit. you’ll pass on your costs if you can, but you’d charge me that same higher price WITHOUT upgrading the house, if you could.
efficiency standards are good things, and a necessary accompaniment to having 7 billion humans living on the earth, consuming resources at the highest per-capita rate in history.
Thanks for commenting misanthropope,
I agree that we have to start being smarter about how we consume resources on our planet. I suspect that moving towards a national building code though might make the cost of housing spiral out of control at a time when many homeowners are trapped in homes they cannot sell.
Joe,
In responding to your comments if homeowners are trapped in their homes and the prices of new homes go up across the board then it would be much easier to sell a cheaper existing home now then before. This would in effect reduce the inventory of existing homes qicker than if new home prices remained the same. From the sound of it this could actually help out existing home owners. The same cannot be said for builders until that existing inventory is consumed. Once that inventory is consumed then buyers will have to pay what a builder is asking if they want a home.
Hey Brad, welcome back! I think I’m going to have to disagree with your logic. You state if
I don’t think this is true. I believe if the prices of new homes go up across the board, then it would be tougher to sell new homes. People will always be looking for value. Just because new homes are more expensive does not mean they will perceive a glut of resales as a steal. Supply and demand must come into balance before we see what you are talking about. Moreover, this market has already basically shut down new construction. We are seeing roughly 1/3rd the number of building permits as normal right now.
Joe, while I agree with your initial accessment, I feel as new, more expensive, homes are built, the effect will be to pull the prices of similar existing home upward…not as high, but upward. Also, right now is an excellent time for homeowners to take advantage of the federally funded “home energy improvements” such as attic insulation at an 80% savings, new energy efficient heat pump units with 50% rebates, etc. The list is long…and afforable. The improvements now will show up in lower utility bills, and will make your exixting home more attractive to buyers when the cap and tax homes start hitting the market.
1) Now is not the time for this or any other legislation that will increase taxes / costs for individuals OR businesses. America needs lower taxes to free up money so that people can buy and invest and so that business can hire and expand.
2) The whole cap and trade / global warming fiasco is nothing more than a global wealth redistribution scheme. It’s about power and money, not about YOU or the health of the planet. To assume otherwise is naive.
3) Increasing the cost of energy will further destroy this already damaged and weakened economy.
@ MmmmmHmmm:
Your points are ridiculous.
Global warming is real. Read the science, not the rhetoric.
Now IS the time to increase taxes on individuals who claim more than $500000 a year in personal income. Unchecked capitalism is failing; more buying and spending won’t improve things in the long term, the only way to improve things is to DECREASE the gap between the wealthiest and poorest people.
The great majority of our energy sources currently in use are non-renewable; the cost of those non-renewable energy sources will increase whether you want it to or not. Finding a way to disentangle our economy from non-renewable energy sources is the ONLY solution to keeping costs down. It is simple supply and demand.
A few things from my perspective:
-There are too many empty homes now that are refurbish-able for less than the cost of a new building. We don’t need new buildings. A nice policy of, “You can’t build something new unless you tear down something old in the same spot” would be nice to see.
-The actual build quality of new homes has reached an all time low. Terribly crappy engineering, terribly crappy materials, shoddy workmanship.
-”The Builders” are one of the most crooked and over-subsidized group of entrepreneurs out there. The number of loopholes generated near a construction site is staggering. It’s really about time we forced some higher quality standards on new construction, nevermind even enforcing the old ones.
-It’s about time US citizens actually got with the conservation program. We still continue to waste, waste, waste. Energy, Food, Time, Labor, Fuel, Land, all types of resources are casually exploited. My grandmother is spinning in her grave at all the inefficiency around the US these days, and all with the mark of “progress”! HA! No wonder the US is in a recession, we threw all of our money away!
(goes off to clean up the endless stream of plastic packaging and cups littering his lawn that are blown off from the road litterers)
Thanks Rick.
I agree with much of your perspective, as there are seriously too many houses out there.
What I do not agree with is using the government (meaning adding more bureaucracy/costs/gov’t waste) to create policy’s that violate our property rights. Rather, I would like to see consumers quit buying the garbage out there and buy the quality homes that most of our builders provide.
I do not agree that -”The Builders” are one of the most crooked and over-subsidized group of entrepreneurs out there. “ (though my experience is just in the Tallahassee market, where most of our builders work very hard and produce quality products).
Since when did we start judging a bill by its size? War and Peace is 1225 pages and it’s a classic. I mean, it’s not the size of the bill, it’s how you use, it – right???
Do we not already have the Universal Building Codes? Are they not the standard for every state? Don’t most states and municipalities already add additional requirements for safety, and many for energy efficiency? These standards are already good. Really, short of super-insulated or subterranean, what other options are available?
I build small. This works, and will surpass all these new demands. It’s easier to control costs, reduce material consumption and, in relative terms, reduce energy demand with smaller houses. What about quality? Easier again.
There are many answers, some good, others not so. I’m not overjoyed with government intervention, and have little doubt this legislation will be corrupted along the way. But I prefer to keep an upbeat attitude and embrace the change, after all it’s really up to us to get the job done.
This seems to me more a referendum on politics then on real estate. Since when is a safe, energy-efficient home a detriment for agents? Savings, as mentioned before, over the life of the home may well outweigh initial cost.
Capitalism is the FRIEND of freedom, free enterprise, and innovation. It has created more prosperity for more people than any other system the world has known.
Statist’s are the ENEMY of freedom, prosperity, and efficient markets. Statists lust for power- which is then concentrated among a small group of elitists who are convinced that they have the ONLY answer to any problem that might come up. It’s a “top down” system… with a few at the top Chavez and Castro find the Statist plan quite attractive for themselves and their small circle of “friends”.
As we allow a government to build ever increasing and conflicting “rules” ( some which are good and common sense .. and more which are conflicting and excessive), we run into radical ideas that cost real people their standard of living. No one is against a clean environment- There are good stewards of the earth among our citizens.. who happen to also be captains of industry.
This “cap and trade” fraud is simply an energy tax- and will do nothing to affect “global warming”.. but it will create massive transfers of income and wealth from free markets (that actually create terrific products and services) .. to 3rd world countries.. and we all can agree how well that works. Africa has received untold Billions.. and just exactly what has that done for the average person on the continent.
The recent revelations of consipiracy to alter data in order to get to the desired “outcome” by leading “climate” scientists who suck off the teat of the public trough shows just how far Statist thinking will go to steal from the public. They almost got away with it. Cap and Trade is a scheme dependent on fraud to exist-
Let free enterprise solve energy problems.. not some Elitist group that lusts for power and uses deception and fraud to support it’s abusive aims.
Rick you speak like someone who has never built a home or created anything of value. You have opinions but no knowledge of what it takes to create a structure, deal with local authorities who care more about their power than whether you are building a quality product. There are many craftsman who design homes for living and focus on the needs and desires of their client. Yet you throw all builders together. Your intolerant ignorant attitude speaks volumes about your lack thoughtful consideration of reality. You speak of wasteful spending but don’t consider that many people do not want to pay for green building or even efficient building. When you grow up you may discover that consumers will only pay for what they can afford or in the case of green building what they value. The homes I build are green because that is the way I design, I hate waste but it actually costs me money/profit to build them. Most of the people who look at my homes do not want the high maintenance that green components require. They are willing to pay more money for less efficient systems that do not require their personal time. You need to understand that the consumer drives the building business not the other way around. When you get off from your government job, post office, you obviously are definitely not working in the real world do a little reading about economics or better yet do something productive beyond moving your mouth about things you know nothing about.
Bill, I wonder, did you get your talking points from FOX? Let’s be clear: no political or economic system is perfect, and we’ve had a pretty good example of the failings of virtually unregulated capitalism. Government should be there to provide a counterbalance and to regulate. Not suffocate. Regulate. I am pro-business, but more accurately, pro-honest and responsible business.
I find it ironic that you talk about statists working for their friends. That’s exactly what Bush/Cheney were doing when they cut taxes, took a $250 billion surplus to a trillion dollar deficit and doubled your debt from $5 trillion to $10 trillion. These guys professed to be capitalists, but the evidence proves otherwise.
Government, in this case, can contribute by giving incentives for energy efficiency and alternative energy (you don’t think the petroleum industry isn’t already subsidized? Not like they need them). It can actually mandate real reductions in GHGs instead of cap & trade.
If building codes are going to be changed, there should be work on energy efficiency, but also to increase minimum code standards in other areas. This could also be viewed as consumer protection from shoddily built houses. In some cases energy efficiency is the least of a new homeowner’s worries.