How The Cap And Trade Bill Affects Real Estate

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 Bill) 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 Cap and Trade Bill (American Clean Energy and Security Act of 2009) is a 1,428 page document written in typical political gobbledy-gook, with far too many words and noticeably void of any pictures.

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 on the Cap and Trade Bill.

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.

States, 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 About The Cap And Trade Bill

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 Bill, 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 Cap and Trade 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 Cap and Trade Bill) 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 (Cap and Trade Bill) 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 on the Cap and Trade Bill.

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 ….

Topic: Cap and Trade Bill