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The 2021 Washington State Energy Code (WSEC) is slated to take effect in Washington State on July 1 of this year and everyone in the real estate profession should take note - in Washington State or otherwise!
According to the Columbian, in 2019 Washington State reported that 25% of the state's emissions were from residential, commercial, and industrial buildings - 25.3 million metric tons, also equal to the emissions from 5.4 million gas-powered vehicles. However, the 2021 changes to the energy code are expected to reduce emissions by 12.1 million metric tons over 30 years according to research by the Pacific Northwest National Laboratory, hired to independently analyze the anticipated results from the code changes. That is equal to the equivalent to what 2.6 million gas vehicles produce in one year.
The updates to the Energy Code are a positive way to combat climate change. The latest updates (2021) to the Washington State Energy Code are expected to result in 18% greater energy savings than the 2018 code according to Madrona Building Performance.
The first energy code was adopted statewide in 1977. In 2012, Washington State set a goal to reduce net annual energy consumption by 70% in new buildings by 2031 as compared with the 2006 standards. The once every three-years updates to the code are a benchmark on the road to achieving those goals (with a goal to reduce energy consumption by 8.75% each reduction period compared to the 2006 code or 14% over the previous code).
The code is being updated for residential, which includes new single-family homes, townhomes, and multi-family buildings that are up to three stories tall. Other regulations apply for commercial buildings. The International Energy Conservation Code standards are the base regulations that the Washington State Energy Code is built on, and Washington has refined the code even further to meet the benchmarks.
There are many aspects of the WSEC that will be impacted. Outlined here are just a few of the more-major changes planned to take effect this July:
New updates and changes still being worked out, so keep your eyes open for those changes. For a full outline of the changes and expected costs and benefits, this is a good read on the Preliminary Cost Benefit Analysis of the Energy Code produced by the Washington State Building Code Council:
You might notice that many of the items include an estimated price tag (builder cost) along with an estimated savings amount in terms of energy for the consumer (homeowner savings).
You might be saying to yourself at this point, "Sounds great! We should be moving forward in a positive direction when it comes to saving energy and reducing pollution that causes global warming!"
And I agree with you 100%. However, we have another goal that Washington State is focused on along with most of the country and that is creating more housing inventory. The Washington State Department of Commerce has just released their final housing projections that Washington State will need in the next 20 years in order to put a damper on runaway housing demand and lack of affordability - 1.1 million homes in the next 20 years.
The Final Housing Projections document is a fascinating report that summarizes the type of housing needed by area median income groups by county. For example, King County (which includes both Seattle and Bellevue) needs 336,591 more homes. Snohomish County? 143,182 homes. Have you heard of Wahkiakum County? Me neither, but they still need 334 homes in the next 20 years.
Check your own county here:
To give you a sense of what we would need to achieve that goal, let's take a look at Whatcom County. Up here in the northwest corner of the state and the contiguous United States, we need 34,377 housing units in the next 20 years. That is 1,719 housing units per year. Between 2010-2020, we only built 9,637 housing units according to the Census Bureau - 963.7 per year. Therefore, little old Whatcom County would need to almost double the number of units in order to make that goal for a solid 20 years.
Yikes!
In order for builders to be interested in building, the risks can't outweigh the reward. New revisions to the energy code every three years is doing that in Washington State. If a builder has a large development that he or she wants to roll out over the course of several years, that is phenomenal for the housing stock. However, it can be a risky business venture when no one is sure how the energy code is going to play out. In fact, even though July is only months away, there are still codes and regulations being discussed and worked out at the state level. All the "what if" questions that builders have brought forth are not yet answered, including - the big one - what is this really going to cost, on average, per housing unit in the real world.
As a developer, I have had to make modifications in my own development to adhere to the previous code change as well as plan for the upcoming code change. In my development, the energy code changes for the 2018 code increased the housing costs between $20,000-$25,000 per home. Although these are costs borne by the buyer in the long run, and are predicted to closely even out over time in terms of energy savings, the bottom line is that these are expenses that will cost everyone in terms of time and money to implement.
The Building Industry Association of Washington (BIAW) has indicated that it expects these most recent changes to change an average home build costs by $14,850: that is $9,200 for residential energy code updates, plus $650 for EV charging requirements, and another $5,000 for heat pump water and space heating mandates.
For each update, builders and vendors need to relearn the rules, manufacturers need to update their standards, and all of that takes a lot of time and money. Builders are barely able to make forward momentum now let alone make stronger headway to begin to make a dent in the housing numbers.
Furthermore, local planning and building departments are already struggling with staffing and procedural issues. Giving them another roadblock when we should be streamlining is going backwards. According to the Building Industry Association of Washington, "on average, every week of delay adds $1,100 to the cost of a new home." The current proposed changes will undoubtedly cause additional delays and drive-up housing costs even more.
So, why am I writing about issues in the building industry in a news column for real estate agents? Because inventory affects you, it affects your buyers, it affects your sellers, it affects your kids who can't buy a place of their own, it affects our communities and those most vulnerable, it affects companies who can't hire workers because their workers cannot afford to live here!
There are two important things you can do right now:
We can balance advocating for the environment and advocating for the housing industry and tomorrow's homeowners when we make our voices heard. Contact your local Builder Association today, learn about their needs, and see what you can do to help.
For further reading, see these additional sources:
By Denise Lones CSP, M.I.R.M., CDEI - The founding partner of The Lones Group, Denise Lones, brings nearly three decades of experience in the real estate industry. With agent/broker coaching, expertise in branding, lead generation, strategic marketing, business analysis, new home project planning, product development, Denise is nationally recognized as the source for all things real estate. With a passion for improvement, Denise has helped thousands of real estate agents, brokers, and managers build their business to unprecedented levels of success, while helping them maintain balance and quality of life.