Goal: Improve Residential Energy Efficiency
Policy: Set Standards and Offer Incentives


What tools are available to communities to catalyze energy-efficiency?

In addition to providing financing for energy-efficient retrofits, some communities have chosen to catalyze residential energy efficiency by setting standards and creating incentives. This section discusses four categories of such activities, each
of which targets a different audience:

Similar to traditional building codes, energy codes establish minimum requirements and guidelines for the performance of new construction and existing homes undergoing substantial renovation. Activated when a property changes hands, point-of-sale efficiency upgrade and audit requirements provide a mechanism for reducing energy use in existing homes when they are put up for sale or rent. Energy saving and emissions reduction laws create incentives for utility companies to implement energy-saving measures, including home retrofits; and Other incentive-based programs, including density bonuses and rebates on the purchase and installation of energy-efficient products, reward developers and residents that take steps to reduce energy consumption.

Photo courtesy of Potterhill Homes

Why is it important to catalyze energy-efficient improvements in new and existing homes?

The tools described in this section do not directly improve residential energy-efficiency in the same way that a home energy retrofit delivers direct results.  Rather, these strategies help to spur action on the part of builders and developers, homeowners, and utility companies, and are important for several reasons.  First, lack of familiarity with energy-efficiency improvements and the related up-front costs may serve as a deterrent that prevents homeowners and owners of multifamily properties from making upgrades, even when they stand to benefit from long-term cost savings.  Tools in this section help to overcome this inertia by triggering the requirement for an energy-efficiency upgrade or audit when the property changes hands.  Adoption and enforcement of energy codes moves energy efficiency into the mainstream by setting basic standards for all new construction and substantial rehab.  And programs that require utilities to achieve reductions in emissions or energy use often spur the creation of a second wave of programs targeting residential customers.  These programs may provide access to additional resources that can be used to make home energy upgrades.


Where are tools to catalyze energy efficiency most applicable?

Energy consumption levels, as well as the energy sources used, vary widely across the country. But people use energy everywhere. Many states and communities have already made substantial progress in adopting stringent programs to catalyze improved energy performance; those jurisdictions may wish to focus on the enforcement of these programs to ensure they are achieving desired results.  For other jurisdictions, this section provides an overview of tools to consider.

Learn more about setting standards and offering incentives for energy efficiency Go back to learn about other policies that improve residential energy efficiency

Goal: Improve Residential Energy Efficiency
Policy: Set Standards and Offer Incentives

Point-of-Sale Efficiency Upgrades and Audit Requirements

Photo courtesy of the California Housing Consortium

Policy tools described in this section use the sale of a new or existing home as a "trigger" for a range of energy-efficiency-related requirements. Whether the goal is to catalyze upgrades in older homes or to promote greater consumer awareness of building performance (which may indirectly lead to more energy-efficiency upgrades), these tools are activated when affected properties change hands. It is important to note, however, that their success depends in large part on proper enforcement. As with many of the tools discussed in this section, simply having a policy on the books is not enough -- communities must also have the administrative capacity to verify that upgrades have been completed. Click on the links below to learn more about point-of-sale efficiency upgrades and audit and disclosure requirements: Point-of-sale efficiency upgrades Audit and disclosure requirements

Point-of-sale efficiency upgrades

Research shows that older homes tend to be much less energy efficient than newer structures, which may have been built to higher standards in order to comply with an energy code or may otherwise benefit from advances in building technology. Point-of-sale efficiency upgrades represent one tool for addressing this imbalance and bringing existing single-family homes or multifamily properties closer to compliance with state or local building energy codes, which typically apply only to new construction or substantial rehab projects. In brief, point-of-sale efficiency upgrade policies "[require] compliance with certain energy (and sometimes water) efficiency requirements before buildings can be sold, transferred from one proprietor to another, or renovated beyond a predetermined total permit value." [1] To mitigate the financial burden imposed on owners of eligible properties, many policies include a cost ceiling. With the ceiling in place, requirements may be satisfied once homeowners or property owners have completed upgrades that are valued up to a specified dollar-amount, or that are equivalent to a certain percentage of the building's value. For example, Burlington, Vermont's Residential Rental Housing Time of Sale Energy Efficiency Ordinance [PDF] limits the total cost of required improvements to the lesser of three percent of the sale price of the property or $1,300 per rental unit. After completion of the upgrades, an approved inspector typically conducts an audit to ensure that the improvements have been made. (Learn more about home energy audits.) Realtors and other stakeholders have raised concerns about point-of-sale requirements, arguing that mandated upgrades and post-improvement audits may complicate and add to the cost of real estate transactions. Supporters counter that any costs associated with energy audits or upgrades would be recouped by savings on utility bills, and that point-of-sale upgrade requirements present one of the only opportunities for reaching the existing stock. back to top

Solutions in Action

Berkeley, California uses a Residential Energy Conservation Ordinance (RECO) to improve the energy efficiency of a spectrum of existing residential properties -- including single-family homes, multifamily buildings (rental and owner), live-work spaces, and residential areas of mixed-use developments -- as they come on the market. Improvements valued at or above $50,000 also trigger RECO requirements. As currently written, sellers of properties that do not meet the standards described in the Ordinance must complete items from a list of energy conservation measures prior to the sale of the home or property, up to a maximum expenditure of 0.75 percent of the final sale price for properties with 1-2 units, or $0.50 per square foot for properties with 3 or more units. Alternatively, the buyer may agree to take responsibility for implementing the upgrades within one year of sale. Proposed changes to Berkeley's RECO would offer two paths to compliance: (1) by completing a basic improvement package, developed using a building sciences approach and linked to a set of incentive programs; or (2) by obtaining a HERS rating for the home. Although this second approach does not yield any direct energy-efficiency savings, it will enable the city to develop a baseline measure of energy performance in among affected properties. Click here to find Berkeley's ordinance (navigate to Chapter 19.16).

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Audit and disclosure requirements

Similar to point-of-sale upgrade ordinances, audit and disclosure requirements are triggered by real estate transactions. However, these policies fall short of calling for energy-efficiency upgrades, instead promoting increased efficiency by empowering prospective buyers to obtain more complete information about home operating costs. Audit and disclosure policies help buyers to make a more informed choice about their prospective purchase by requiring sellers to make available the results of a residential energy audit or other standardized information about home energy-efficiency performance.

In some communities, audit and disclosure requirements provide a compromise when proposals to enact point-of-sale upgrade ordinances meet with overwhelming resistance. For example, when efforts to adopt an upgrade requirement faced opposition in Austin, Texas, the city instead enacted an ordinance requiring the completion of a Residential Energy Audit. [2] According to the ordinance, audits must be undertaken by a city-certified building performance analyst for most 10+-year-old multifamily developments and prior to the sale of most 10+-year-old homes. Prospective buyers and renters must have the opportunity to review audit results prior to the time of sale or signing of a lease; a copy of the audit must also be submitted to the municipality. The disclosure form includes information on potential energy costs, as well as anticipated savings that would result from energy-efficiency measures, and remains valid for ten years. See Austin's ordinance here. [PDF]

While energy audit and disclosure requirements do not impose any obligation on the buyer or seller to undertake energy-efficient improvements, they do help to elevate awareness of home energy consumption and enable families to choose homes fit within their budget over the long-term. To the extent that homeowners and renters begin to consider and prioritize efficiency when making housing choices, these policies can also help to create demand for energy-efficient homes. Learn more about efforts to integrate energy efficiency into the home-selling process by including home performance information in MLS listings.

Solutions in Action

In January 2010, Seattle passed an ordinance requiring the owners of nonresidential and multifamily buildings with five or more units to measure and report energy-efficiency performance data. Affected owners of buildings that will be occupied by January 1, 2011 have until April 1, 2012 to submit an initial assessment of the building's energy performance to the City's Planning and Development Department. (Buildings that will be occupied subsequent to January 1, 2011 have one year from the date of initial occupancy to submit the benchmarking report.) Building owners are also responsible for maintaining records on energy consumption data for the previous 12 months, and must submit an updated benchmark report on an annual basis. The ordinance calls for tenants to provide necessary information in the event that it may not otherwise be obtained by the building owner. Both owners and tenants may be subject to penalties for failure to comply with the ordinance. Click here to leave this site and view the ordinance.

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You are currently reading: Point-of-sale efficiency upgrades and audit requirements provide a mechanism for reducing energy use in existing homes when they are put up for sale Other pages in this section: Energy codes, similar to traditional building codes, establish minimum requirements and guidelines for the performance of new construction and existing homes undergoing substantial renovation Energy rating systems and green building rating tools complement energy codes but encompass additional sustainability measures that may result in greater energy savings Energy saving and emissions reduction laws create incentives for utility companies to implement energy-saving measures, including home retrofits Other incentive-based programs, including density bonuses and rebates on the purchase and installation of energy-efficient products, reward developers and residents that take steps to reduce energy consumption

[1] Regulatory Tools for Green Building. Web Site. Playbook for Green Buildings + Neighborhoods.
[2] Austin Energy Efficiency Retrofit Resolution passed Nov 6, 2008. Localism.com.

Goal: Improve Residential Energy Efficiency
Policy: Set Standards and Offer Incentives

Energy Saving and Emissions Reduction Laws

Emissions reduction targets or energy savings goals establish a target date by which greenhouse gas emissions or energy consumption must be reduced to a pre-set benchmark. When referring only to energy savings, these goals may also be called energy-efficiency resource standards (EERS). Energy-efficiency resource standards and emissions reductions goals often provide the impetus for adoption of energy-efficiency programs at the state and local levels.

Click on the links below to learn more about energy-efficiency resource standards and emissions reductions goals:

• Energy-efficiency resource standards
• Emissions reductions goals

Energy-efficiency resource standards

EERS's typically call for utilities to achieve a reduction in load growth or energy use over a specified time period, and may come with penalties for failure to achieve specified goals, providing a strong incentive for utility companies to enact residential energy-efficiency initiatives. Reductions may be reached through improvements in the efficiency of energy generation, transmission, and consumer use, and via a wide array of initiatives; for example, Minnesota's New Generation Energy Act of 2007 set a goal for utilities to achieve an annual 1.5 percent savings in retail sales through "energy conservation programs, rate design, energy codes, appliance standards, market transformation programs, programs to change human behavior, improvements to utility infrastructure, and waste heat recovery." [1] In some cases, EERS's also allow reductions to be achieved through a market-based trading system that permits utilities that exceed their target savings to sell credits to under-performing utilities. [2]

In order to pay for these and other energy-efficiency initiatives -- whether adopted in support of an energy savings goal or not -- many utilities assess a small fee on customers' utility bills, which is often called a public benefits charge but goes by many other names, including "public goods charge" (California), "energy efficiency charge" (Vermont), and 'system benefits charge" (New York). According to the Pew Center on Global Climate Change, as of September 2008, 23 states collected or had in development public benefit funds dedicated to energy efficiency and renewable energy projects and capitalized and sustained with the proceeds from public benefit charges. In most cases, the funds support related work as well, including research, consumer education, and energy assistance for low-income families. Renewable Portfolio Standards

Solutions in Action

In 1999, Texas became the first state to establish an EERS, which called for electric utilities to counterbalance five percent of load growth in 2002 through improved energy efficiency and reduced end-use energy consumption. Utilities were able to achieve this standard at low costs, and in 2007 it was increased to call for an offset of 15 percent of load growth by 2009 and 20 percent of load growth by 2010. Click here to leave this site and view a list of state EERS descriptions compiled by the American Council for an Energy-Efficient Economy. [PDF]

In some states, energy-efficiency goals have been adopted in conjunction with renewable portfolio standards (RPS's), which establish a target date by which providers must acquire a minimum share of energy through renewable resources. In many cases, savings achieved through energy-efficiency initiatives may count towards attainment of these goals. For example, Michigan Public Act 295, passed in October 2008, requires investor-owned utilities and others to obtain ten percent of retail electricity sales from renewable sources by 2015, with annual interim goals starting in 2012. The law also requires energy providers to adopt energy savings goals and file plans for achieving greater "energy optimization" -- or efficiency -- with the state's Public Service Commission. Energy optimization programs that improve efficiency through reductions in consumer use of energy, electricity, or natural gas may be used to meet a portion of the RPS requirement. To fund these efforts, utilities may assess surcharges on customers' bills, up to $3/month for residential customers. [3]

Recommendations for states considering adoption of an Energy-Efficiency Resource Standard Adapted from Nadel 2006: Energy Efficiency and Resource Standards: Experience and Recommendations Vest responsibility for administering the program with state utility commissions, which have jurisdiction over investor-owned utilities and, in some cases, public utilities Set initial goals at relatively modest annual levels (0.25 percent of the previous year's sales) -- savings are cumulative, and will grow quickly as programs ramp-up -- and increase goals and target periods as the program progresses In general, focus on achieving results at the end-user level; i.e., through energy-efficiency improvements in homes and commercial facilities Allow savings credits to be traded or purchased at lower rates from the program administrator to promote lower-cost solutions, and establish caps to keep costs relatively low Appropriate savings targets may be based on a percentage of energy sales or load growth, or in terms of absolute energy use, but the "share of sales" metric minimizes uncertainty and may be revisited with less frequency than other measures Ensure monitoring and verification of energy savings using accepted protocols To give standards "teeth," some states levy penalties for failure to achieve specified goals and/or provide incentives for exceeding goals

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Emissions reductions goals Emissions reduction goals, while similar in concept to EERS's, differ in that they seek to achieve reductions in greenhouse gas emissions, rather than energy consumption (although the two are related). For example, with passage of the 2008 Global Warming Solutions Act, the state of Massachusetts called for a reduction of greenhouse gas emissions to 80 percent below 1990 emissions levels by 2050, with interim targets to be achieved in 2020, 2030, and 2040. [4] Targets may be reached in a variety of ways, including adoption of emissions caps for new and/or existing power plants, increased reliance on renewable energy sources, and maximizing the energy efficiency of buildings and appliances, among many others.

Solutions in Action

With passage of Assembly Bill 32 in September 2006, the State of California adopted the country's first enforceable greenhouse gas emissions cap. AB32 calls for reductions in emissions by 2020 to 1990 levels -- a reduction of 30 percent from projected "business-as-usual emission levels" in 2020, or 15 percent from current levels. (A long-range goal, formalized by Executive Order, requires by 2050 an 80 percent reduction in emissions from 1990 levels.) A Scoping Plan, which was approved in 2008, lays out the specific activities that will be used to achieve this goal; these activities must be put into place by 2012.

In 2010, the National Housing Conference hosted the Partners in Innovation preservation forums, a series of three regional forums focused on strengthening and supporting affordable rental housing preservation efforts through innovative partnerships, policy development, and legislative reform. The regional forums took place in Boston, MA; Portland, OR; and Denver, CO in 2010. View the following presentations on establishing emission reduction goals from the Partners in Innovation: Preserving Affordable Rental Housing Through Energy Conservation in Boston on April 14, 2010. Frank Gorke, Massachusetts Department of Energy Resources, and David Farnsworth, Regulatory Assistance Project, presented during the breakout session, Regional Greenhouse Gas Initiative

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You are currently reading: Energy savings and emissions reduction laws create incentives for utility companies to implement energy-saving measures, including home retrofits Other pages in this section: Energy codes and standards, similar to traditional building codes, establish minimum requirements and guidelines for the performance of new construction and existing homes undergoing substantial renovation Energy rating systems and green building rating tools complement energy codes but encompass additional sustainability measures that may result in greater energy savings Point-of-sale efficiency upgrades and audit requirements provide a mechanism for reducing energy use in existing homes when they are put up for sale Other incentive-based programs, including density bonuses and rebates on the purchase and installation of energy-efficient products, reward developers and residents that take steps to reduce energy consumption.

[1] Energy Efficiency Resource Standards Around the U.S. and the World. [PDF] 2007. Washington, DC: American Council for an Energy-Efficient Economy.
[2] Energy Efficiency and Resource Standards: Experience and Recommendations. 2006. By Steven Nadel. Washington, DC: American Council for an Energy-Efficient Economy.
[3] Michigan Incentives/Policies for Renewables & Efficiency. Web Site. 2009. Database of State Incentives for Renewables & Efficiency.
[4] Climate Change 101: State Action. [PDF] 2009. Climate Change 101: Understanding and Responding to Global Climate Change. Arlington, VA and Washington, DC: Pew Center on Global Climate Change and the Pew Center on the States.

Goal: Improve Residential Energy Efficiency
Policy: Set Standards and Offer Incentives

Energy Codes

Similar to building and rehab codes, which lay out design and construction specifications to achieve minimum levels of building safety, energy codes (which are a subset of building codes) detail standardized measures intended to achieve minimum levels of energy efficiency in new homes and existing buildings undergoing substantial rehabilitation. Adoption of an energy code helps to ensure that all new construction and substantial rehab projects will meet or exceed these minimum standards, resulting in energy savings that extend over the life of the building.

Energy codes apply to a subset of activities addressed by traditional building codes, and cover areas most closely related to energy consumption, including: "Wall and ceiling insulation, Window and door specifications, Heating, Ventilation, and Air-Conditioning (HVAC) equipment efficiency, [and] Lighting fixtures and controls." [1]	Most states rely on national model codes to provide a foundation for a state-specific energy code. Learn more about model codes and their benefits.

The energy and cost savings that result from adoption of energy codes can be significant.
California's energy codes, some of the nation's strictest, apply to new construction, additions to existing buildings, and alterations that change the building envelope or space-conditioning, water heating, or lighting systems. [2] Through compliance with energy-efficiency regulations, the state has realized savings of more than $56 billion in electricity and natural gas costs since 1978. According to the California Energy Commission, projected savings are expected to grow by an additional $23 billion by 2013. [3]

Similarly, a recently-published study reveals the effectiveness of Florida's statewide Energy Code over the more than thirty years and 15 updates that it has been in place. Florida's code applies to new construction as well as additions to existing buildings and renovations that affect the building envelope or HVAC, lighting or water systems and exceed a specified cost threshold. (If costs over a one-year period equal or exceed a cumulative total of 30 percent of the assessed value of the structure prior to the improvement or renovation or prior to when damage occurred, if renovation is in response to damage, then the project must comply with the Energy Code.) Authors of the study report that with adoption of the 2009 version of the Energy Code, new homes built in Florida should be about 17 percent more efficient than homes built to similar model energy code published just three years before. According to the Department of Energy's Database of State Incentives for Renewable & Efficiency (DSIRE), all states at least make reference to an energy code in some way, although the applicable sectors and stringency of enforcement vary widely. For example, South Dakota has developed a voluntary energy code for new residential construction. However, builders and sellers of all new single-family and small multifamily (4 or less units) homes must provide information on the building's energy efficiency to the buyer. In contrast, residential and commercial builders in Vermont must comply with mandatory statewide codes, which undergo updates on a 3-year cycle. Several local jurisdictions, including Chicago, IL and Austin, TX, have also adopted their own energy codes. Local codes typically include more rigorous requirements than those at the state level. Prescriptive versus Performance-Based Codes In most cases, energy codes describe a series of measures that must be taken in order to achieve compliance with the code. For example, the code may specify certain types of acceptable insulation, or require that all furnaces installed demonstrate a minimum level of performance efficiency. This "prescriptive" approach assumes that buildings that conform to the code's requirements will achieve a desired level of energy efficiency. In contrast, performance-based energy codes use total energy consumption as a starting point, and give builders and developers more flexibility to adopt the energy-conserving measures needed to achieve this target. Under a performance-based code a builder may choose to install a relatively low level of insulation but a highly-efficient furnace, as long as these trade-offs result in the desired level of energy efficiency for the overall structure. [4]

Solutions in Action

In January 2010, a California state commission unanimously approved a new building code, CALGreen, which has been described as the most stringent state code in the nation -- both in terms of its energy-efficiency requirements as well as requirements related to other environmental goals. The mandatory code, which applies to all residential, commercial, hospital, and school buildings, became effective in January 2011 and includes the following requirements for developers of new construction in California: Reduce indoor water consumption by 20 percent, with voluntary standards for additional reductions; [5] Divert 50 percent of construction waste from landfills, with voluntary standards for achieving a reduction of 65 to 70 percent for new homes; Install low pollutant-emitting materials, including paints, carpeting, and flooring [6] The California Building Standards Commission, Department of Housing and Community Development, Division of the State Architect, and Office of Statewide Health Planning and Development developed CALGreen in consultation with builders and architects, environmentalists, local officials, and other stakeholders. Authors of the code drew from existing green building practices and rating systems to provide a minimum set of enforceable standards related to building safety and sustainability; however, municipalities that choose to do so may adopt more rigorous local energy codes through a local amendment process described in California's Building Standards Code. [7] Similar to processes used to enforce other building and fire safety codes, before a certificate of occupancy has been issued, all projects will be subject to field inspection and verification by state and local building inspectors.

Recommendations for Adoption of an Energy Code Adapted from Building Codes Assistance Project's Best Practices for State Building Energy Code Policy [PDF] - Adopt a mandatory, rather than voluntary, energy code for residential and other buildings - Put into place an automatic revision process to ensure that codes undergo regular review and stay up-to-date with newly-released model energy codes that reflect innovations or clarifications in the building and energy-efficiency industries - Increase code uniformity across building sectors (residential, commercial, etc.) to make development easier and more cost-effective, and facilitate enforcement of code requirements - Mandate code enforcement and provide support for local building inspectors through trainings, education materials, and other resources - Enhance existing energy codes with voluntary "above-code" energy rating systems and tools that encourage innovation and provide incentives for adoption of energy-saving and other green building measures that go beyond those mandated in the code Look at the Department of Energy's Status of State Energy Codes map to see which energy codes states have adopted.

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You are currently reading: Energy codes, similar to traditional building codes, establish minimum requirements and guidelines for the performance of new construction and existing homes undergoing substantial renovation Other pages in this section: Energy rating systems and green building rating tools complement energy codes but encompass additional sustainability measures that may result in greater energy savings Point-of-sale efficiency upgrades and audit requirements provide a mechanism for reducing energy use in existing homes when they are put up for sale Energy saving and emissions reduction laws create incentives for utility companies to implement energy-saving measures, including home retrofits Other incentive-based programs, including density bonuses and rebates on the purchase and installation of energy-efficient products, reward developers and residents that take steps to reduce energy consumption

[1] Energy Codes 101. Web Site. Washington, DC: Building Codes Assistance Project - Online Code Environment and Advocacy Network.
[2] 2008 Residential Compliance Manual, Chapter 1 - Introduction. [PDF] 2009. Sacramento, CA: California Energy Commission.
[3] California's Energy Efficiency Standards for Residential and Nonresidential Buildings. Web Site. 2010. Sacramento, CA: California Energy Commission.
[4] Energy Codes 101. Web Site. Washington, DC: Building Codes Assistance Project - Online Code Environment and Advocacy Network.
[5] This requirement helps to achieve goals related to both water conservation and energy consumption. As noted in a 2005 report from the California Energy Commission, energy use related to the collection, treatment, delivery, and disposal of water accounts for 19 percent of the state's energy usage.
[6] 2013 CALGreen Residential Mandatory Measures. [PDF] 2013. Sacramento, CA: Department of Housing and Community Development.
[7] California's Next-Generation Upgrade to Title 24. Washington, DC: US Green Building Council.

Goal: Improve Residential Energy Efficiency
Policy: Set Standards and Offer Incentives

Model Codes

While several states have developed their own energy codes, most rely on one of two national model codes to provide a baseline reference: the International Energy Conservation Code (IECC) and/or the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) Standard 90.1. These codes have been designed to be compatible with one another, and

may be adopted in tandem to cover different segments of the building stock; the IECC most commonly for low-rise residential buildings and single-family homes and Standard 90.1 primarily for commercial development, including multifamily residential buildings over three stories. States do not always adopt model codes as-is, and many make additions or modifications to reflect local energy-saving goals or other unique conditions. This process, as well as subsequent amendments to the code, typically occurs through an advisory body that includes state and local practitioners and other key stakeholders. [1] Along with the state or local energy and code enforcement departments, members of the advisory body may also help to plan and lead outreach efforts prior to code adoption, ensuring that all affected individuals and organizations have the opportunity to weigh in on upcoming changes and become familiar with new requirements. Signing on to a model code yields several benefits for states and localities:

Photo courtesy of the Board of Trustees of the University of Illinois, (c) 2001

• Consistency -- Adoption of model codes promotes consistency in building materials and design requirements between jurisdictions and across state lines. Greater coordination enables builders and developers to realize efficiencies, and may facilitate cross-jurisdictional cooperative efforts to train building officials and other practitioners and develop enforcement materials. [2]

• Updates -- Code organizations bring together a diverse group of national stakeholders from the building and energy industries to revise and update both the IECC and ASHRAE 90.1 on a three-year cycle. (Administrators of the ASHRAE 90.1 also adopt interim revisions on a rolling basis.) This overarching structure helps to alleviate the burden on states and localities to keep up with the latest advances in building materials and equipment, construction techniques, and energy performance. In many cases, state energy code updates are scheduled to coincide with the release of new editions of model codes. [3]
  

• Enforcement -- Adoption of a model energy code also provides access to a set of tools that may simplify enforcement of the code. The US Department of Energy, which is mandated by the federal government to help states adopt and enforce energy codes, makes available for free a set of software packages and web-based tools, called REScheck and COMcheck, intended to simplify the process for verifying compliance. Developers, building inspectors, and other officials can use these programs to certify residential and commercial compliance with the IECC and Standard 90.1 or state codes based on these model codes. (REScheck and COMcheck also support some state- and locally-developed energy codes.) Learn more about how states and localities can help promote robust code enforcement.

It is important to note that many states have not yet adopted the most up-to-date versions of model codes, even though states agreed to adopt and enforce residential and commercial energy codes that meet or exceed the 2009 IECC and 2007 90.1 Standard as a condition for receipt of State Energy Program funds allocated in the Recovery Act and moving forward. (Click here to leave this site and view a white paper issued by more than a dozen energy-efficiency and green building organizations for more information on energy code requirements in the Recovery Act.)

For example, builders in Colorado currently must comply with the 2003 IECC for residential development in jurisdictions that have not adopted a more stringent code, while Connecticut requires compliance with the 2006 IECC and Iowa uses the most-recently published version (currently the 2009 IECC). [4] This variation results in energy savings differences that can be significant: a recent analysis documents several changes between the 2006 and 2009 versions of the IECC that may substantially improve energy efficiency, including requirements for installation of compact fluorescent and other energy-efficient bulbs in at least 50 percent of lighting fixtures, more stringent air duct leakage testing, and increases in some insulation levels. [5] An analysis prepared by ICF International for the Energy Efficient Codes Coalition estimates that homes built or renovated to comply with the 2009 IECC would consume nine to 14 percent less energy than those meeting 2006 IECC standards. Other analyses place the savings at 15 to 20 percent. [6]

Continue learning about energy codes


[1] Adoption of Energy Codes on the State and Local Level. Web Site. 2010. Washington, DC: US Department of Energy.
[2] Model Progressive Building Energy Codes Policy for Northeast States. [PDF] 2009. Lexington, MA: Northeast Energy Efficiency Partnerships.
[3] Adoption of Energy Codes on the State and Local Level. Web Site. 2010. Washington, DC: US Department of Energy.
[4] Status of All State Energy Codes. Web Site. 2010. Washington, DC: US Department of Energy.
[5] Impacts of the 2009 IECC for Residential Buildings at State Level. [PDF] 2009. Prepared by Pacific Northwest National Laboratory for the US Department of Energy, Building Energy Codes Program.
[6] An Analysis Prepared for the Energy Efficient Codes Coalition (EECC) by ICF International. [PDF] 2008. Washington, DC: Energy Efficient Codes Coalition.

Goal: Improve Residential Energy Efficiency
Policy: Set Standards and Offer Incentives

Energy Rating Systems and Green Building Rating Tools

In contrast to energy codes, which are usually mandatory, energy and green building rating systems are models of excellence in performance that are not generally enforceable. To achieve a high rating in one of these systems -- which some owners use to help market the properties as energy-efficient -- building owners or developers typically apply to the third-party entity that has developed the standard for certification to verify that their development meets specified criteria. Common energy and green building rating systems include: LEED (Leadership in Energy and Environmental Design for Homes Rating System), developed by the U.S. Green Building Council; the U.S. government-backed ENERGY STAR for Homes; the National Association of Home Builders' Green Building Standard; and Enterprise Green Communities Criteria, which focuses exclusively on affordable homes.

Learn more about energy and green building rating systems that are commonly referenced in above-code programs. Relationship between codes and rating systems Energy codes are mandatory minimum requirements that must be met by all buildings that are newly constructed or, in most cases, substantially rehabilitated. Some states and localities choose to go beyond adoption of a code to adopt a voluntary "above-code" option that layers energy rating systems and green building rating tools on top of existing building energy codes. Compliance with the above-code option, which may be included as an Appendix to an existing energy code, results in energy savings greater than those specified in the code. To receive certification in many of the rating systems discussed in this toolkit, builders and developers must also implement a wider range of green building and environmental sustainability measures, beyond those that improve energy efficiency. Testing is used to verify that the requirements of the rating system have been met, which qualifies new homes or rehab projects in some jurisdictions to receive expedited permitting or other special incentives. In addition to adopting voluntary above-code measures, some jurisdictions go a step farther to reference energy rating systems in their energy codes. For example, San Francisco's mandatory energy code calls for certain types of residential buildings to meet LEED standards. A local jurisdiction that builds its energy code around an existing energy standard may be able to reduce

Solutions in Action

With passage of the Green Building Act in 2006, Washington, DC became the first major city in the US to require both public and privately-owned buildings to meet energy-efficiency and green building standards. [1] Phased in over a five year period from 2007 to 2012, the Act established Enterprise Community Partners' Green Communities criteria as a standard to be met by all publicly-owned residential new construction or substantial renovation projects over 10,000 square feet, as well as by all privately-owned buildings that receive public financing (a) through the DC budget or (b) in an amount over a specified threshold (15 percent) of total project cost. (Commercial developments over 10,000 square feet must achieve LEED Silver certification.) The Act also created a nominal green building fee, which is assessed on new construction and rehab projects valued over $1,001. The fee helps to fund several related activities, including expedited permitting and other incentives for developers who use LEED standards in their projects and public education initiatives on how to build green. Fee proceeds are also used to expand green building plan review and inspection capacity at the District's Department of Consumer and Regulatory Affairs.

implementation and enforcement costs, as a third party takes
primary responsibility for developing and maintaining the standard and verifying that associated requirements have been satisfied.

However, this approach also preempts use of a model code and shifts the added cost (and time) associated with obtaining certification to builders and developers. (While up-front costs associated with obtaining certification may be significant, lower operating and maintenance expenses over the lifecycle of the building should balance out this initial investment.) In an effort to balance these competing demands, some communities require that projects be certifiable under a specified green standard, but fall short of requiring developers to obtain certification. For a thoughtful analysis of these and other approaches, view the City of Seattle's Green Building Task Force report.

Solutions in Action

In 2007, Boston's Zoning Commission adopted a Green Building article requiring that all new and rehabbed buildings larger than 50,000 square feet be built to the appropriate LEED Certifiable standard. The City's Department of Neighborhood Development (DND) also established a Green Affordable Housing Program, which requires developers of all DND-funded affordable housing to build to LEED-Homes or LEED-New Construction Silver standards (depending on project size). Some DND-financed projects must also meet the Energy Star for Qualified Homes standard. (This requirement applies to residential buildings up to 3 stories tall and 4- story mixed-use buildings with ground-floor commercial and 3 stories of residential units.) Importantly, the City and DND require only that homes be LEED "certifiable" - not that developers actually obtain LEED certification - a process that can be both lengthy and expensive. Certifiability will be determined through a design and construction review process, including requisition approvals, coordinated by DND. (Visit DND's Green Affordable Housing web site to learn more.) The City worked with the Massachusetts Technology Collaborative (MTC), a quasi-public state agency, from 2005 to 2011 to provide grant money to help developers comply with these standards. Through its pilot Green Affordable Housing Initiative, MTC partnered with eight organizations involved in the development of affordable housing to provide funding and help them build to energy-efficiency standards. The program, which was funded with proceeds from the state's systems benefit charge, also featured a renewable energy component that provided assistance with the installation of energy-generating photovoltaic systems or wind turbines. Click here to leave this site and learn more about the Green Affordable Housing Initiative.

Listen to a podcast from June 2008 with Dana Bourland, senior program director for the Green Communities Initiative at Enterprise Community Partners. She highlights how Enterprise's Green Communities Criteria provide affordable housing developers with proven, cost-effective standards for creating healthy and energy-efficient homes. Also in this podcast, Paul Freitag, development studio director for Jonathan Rose Companies, discusses David and Joyce Dinkins Gardens, Harlem's first green building for low-income families, and the many ways that the development benefits its residents, the community and the environment.

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You are currently reading: Energy rating systems and green building rating tools complement energy codes but encompass additional sustainability measures that may result in greater energy savings Other pages in this section: Energy codes, similar to traditional building codes, establish minimum requirements and guidelines for the performance of new construction and existing homes undergoing substantial renovation Point-of-sale efficiency upgrades and audit requirements provide a mechanism for reducing energy use in existing homes when they are put up for sale Energy saving and emissions reduction laws create incentives for utility companies to implement energy-saving measures, including home retrofits Other incentive-based programs, including density bonuses and rebates on the purchase and installation of energy-efficient products, reward developers and residents that take steps to reduce energy consumption

[1] Legislating Green Communities. January 2009. By Casius Pealer. GreenSource.

Goal: Improve Residential Energy Efficiency
Policy: Set Standards and Offer Incentives

Commonly-Used Energy Rating Systems and Standards

Researchers, practitioners, and others involved in the energy and building industries have developed an array of rating systems and tools for use in evaluating home energy performance and other facets of green building. The list below describes some of the most well-known rating systems - please contact us to add other resources.

• ENERGY STAR Qualified Homes

• Green Communities Criteria

• GreenPoint Rated

• Home Performance with ENERGY STAR

• LEED (Leadership in Energy and Environmental Design) for Homes
  

• National Green Building Standard

Continue learning about above-code rating systems or learn more about how certification through energy ratings and green building ratings systems helps to verify that energy-efficiency upgrades and other improvements have been successfully installed.

Goal: Improve Residential Energy Efficiency
Policy: Set Standards and Offer Incentives

Other Incentives for Encouraging Energy Efficiency and Green Building

In many communities, builders, developers, and apartment managers face a substantial learning curve when using green materials and design techniques and maintaining high efficiency systems. The added cost and time associated with moving from "business as usual" to a more sustainable approach can be a deterrent to implementing green technologies and other energy-efficiency measures. Moreover, while energy-efficient upgrades have been shown to reduce operating and maintenance costs, generating significant cost savings over the life-cycle of a home, the up-front costs associated with making some of these upgrades can put them out of reach for working families and others that may not have the cash on hand. To promote broader adoption of energy-efficient upgrades, and to make their benefits more readily accessible to low- and moderate-income households, many local and state governments have developed incentives programs that reward developers, owners of multifamily properties, and homeowners that go green. Many utilities have also adopted incentives programs, often to help reach state-mandated energy savings or emissions reductions targets. (The tools discussed in this section are designed to provide limited or one-time assistance to catalyze

Midtown Exchange - Minneapolis, MN

investment in energy-efficient upgrades. Learn more about tools for financing energy-efficiency measures.)

Click on the links below to learn more about types of incentives offered for energy efficiency:

• Land-use and planning incentives
• Rebates
• State and local tax incentives
• Preferences for Low Income Housing Tax Credit awards
  

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Land-use and planning incentives

Many energy-efficiency programs provide some sort of financial benefit to prompt developers and homeowners to take steps to enhance the performance of existing buildings and build in greater efficiency in new construction. However, several states and localities have adopted programs that offer non-monetary incentives which, while not providing upfront payments or financial assistance, may nevertheless result in a valuable pay-off for participants. These programs may apply specifically to measures that improve residential energy efficiency, or they may reward a more holistic approach that includes other green building measures. Specific programs vary from place to place, and common incentives include:

• Priority permitting and plan review -- Fast-track or streamlined permitting and review can significantly reduce development time and associated "soft costs," such as property taxes, insurance payments, and other fees. Available to builders and developers of new homes that will be built to green specifications, or buildings undergoing substantial rehab to these standards, priority consideration may be particularly valuable in areas with high levels of development activity and slow response times. Learn more about expedited permitting.

Density bonuses -- For new construction or adaptive reuse projects, density bonuses allow developers to build more (or larger) units than ordinarily allowed by the underlying zoning code, resulting in greater profits as those additional homes are sold or rented. While density bonuses are most commonly used as an incentive in inclusionary zoning programs, some localities also reward developers who are on track to achieve a specified green rating with the right to build at a higher density. As an added environmental benefit, higher density development also helps to support public transit and mixed-use neighborhoods, reducing residents' need to rely on private vehicles. Click here to view examples compiled by the US Green Building Council of communities that award density bonuses for developers who achieve LEED certification or meet LEED standards.

Photo credit: Mark Ballogg, Ballogg Photography, Inc.; courtesy Landon Bone Baker

• Marketing assistance -- Assistance in publicizing green homes for sale or rent can take many forms, including listings in local promotional materials and real estate guides, free signage advertising a project's "green" credentials, and recognition at public events. As consumer preference for sustainable housing grows, these extra steps can give developers and homeowners an edge and help to boost sales or rental rates, especially in a sluggish housing market.

• Technical assistance -- To help developers achieve certification in a green rating system or otherwise improve the energy efficiency of a project, some communities, including Coconino County, Arizona, offer a variety of technical assistance services, including free consulting for developers interested in green building. [1]
  

Through its Green Permit Program, Chicago's Department of Buildings offers an expedited permitting process and, in some cases, fee waivers to encourage sustainable building design, construction, and renovation. To be considered for the program, projects must include elements from a menu of eligible strategies that improve efficiency, ensure affordability, or promote economic development. In addition, smaller residential projects must comply with local Green Homes criteria developed by the city's Department of Environment or LEED for Homes certification. Typically, developers of new construction projects make up about 60 percent of program participants, and 40 percent are undertaking renovations or retrofits. Participating developers benefit from a streamlined permitting process up to 30 business days to permit issuance, depending on the project's level of sustainability and energy efficiency. Exceptional applicants may receive partial permit fee waivers.


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Rebates

According to the U.S. Department of Energy's Database of State Incentives for Renewables & Efficiency, as of February 2010, state and local energy-efficiency rebate programs could be found in all states except West Virginia. Most commonly, utility companies administer these programs, although some states and a few municipalities also sponsor their own rebate programs. In many cases, rebates target individual households to encourage and lower the cost of weatherization and energy-efficient upgrades. Alternatively, some rebate programs focus on the owners of multifamily properties, manufacturers, contractors, or developers to encourage broader-scale adoption of measures to
achieve energy-saving goals.

Rebates provide full or partial credit for the purchase and installation of eligible products, including high-efficiency appliances, such as air conditioners, washing machines, and furnaces, as well as lighting, insulation, windows, and doors. Home energy audits are another popular target of rebate programs. Generally required as a prerequisite for additional energy-efficiency upgrades, audits for single-family homes can range in cost from $150 to $600. Many programs provide a rebate for the cost of the audit upon implementation of the recommended energy-saving measures. (Households that fail to proceed with any upgrades do not receive a rebate.) Although beyond the scope of this toolkit, many rebates also cover the installation of renewable technologies such as photovoltaic solar panels. Some states also issue reimbursement grants that cover a portion of energy-efficiency upgrades or payments associated with obtaining LEED or other green certification. For example, through the State Home Oil Weatherization program, Oregon will refund one-quarter of the cost of energy-related improvements, up to a total pay-out of $500 per household. Families of all income levels that heat their homes with oil, propane, kerosene, butane, or wood are eligible, and apply directly to

Solutions in Action

In 2008, Kansas City Power & Light began offering customer rebates of $600 through the Home Performance with Energy Star program to residential customers who underwent an energy audit, made a recommended improvement, and provided verification through a post-improvement assessment. The following year, the utility teamed up with Missouri Gas Energy and the Metropolitan Energy Center to double the rebate, making available $1,200 in bill credits, and offer an improved audit that includes modeling software and projections of post-improvement cost savings. Between 2007 and 2009, more than 400 households received audits, and nearly half of those implemented improvements. Click here to learn more about the program.

the state's Department of Energy to receive a cash refund. Similarly, in
Louisiana, families participating in the Home Energy Rebate Option program can receive compensation for up to 20 percent of costs associated with measures that improve energy efficiency in existing homes by at least 30 percent, up to a total payment of $2,000.

Some utility programs specifically target existing multifamily homes, helping to encourage energy-efficient improvements in a sector of the housing stock that may be otherwise difficult to reach. For example, the Austin, Texas Energy Multifamily Power Saver Program provides rebates of up to $100,000 to owners, developers, and managers of multifamily properties with four or more units. Rebates may be used to help cover the cost of a range of upgrades that improve energy performance, including installation of new air conditioning systems, heating pumps, insulation, and lighting. Applicants must participate in a free walk-through energy survey to be eligible for the program; rebates are granted on a first-come, first-served basis depending on funding availability. As of June 2010, more than 48,000 apartments had received rebates for energy-efficient investments through the Power Saver Program.


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State and local tax incentives Tax-incentive programs related to green building generally allow eligible participants to take a deduction or receive a credit on their income or property taxes. The incentive may apply to purchase of a specific product or set of products or costs associated with measures to improve energy efficiency. In Arizona and the District of Columbia, homebuyers also may receive a tax credit to offset the cost of purchasing a home that exceeds energy efficiency standards specified in the 1995 Model Energy Code. Other communities, such as Howard County, Maryland, offer a property tax credit on buildings that meet specified green standards. In January 2008, Cincinnati, Ohio began offering a 15-year residential property tax abatement valued up to $530,450 for new LEED-Certified, Silver, or Gold homes (there is no value limit on projects certified as LEED-platinum), and a 10-year abatement on residential remodeling improvements that meet LEED certification requirements.

Combining Sources of Funding for Energy Efficiency The National Housing Trust and Enterprise provide four examples of using Neighborhood Stabilization (NSP) and/or Weatherization funds, sometimes in connection with the allocation of low income housing tax credit, to improve and preserve multifamily housing. Click here to view their examples.

Solutions in Action

Oregon's Business Energy Tax Credit provides an incentive for the owners of rental housing to weatherize their properties. Eligible activities include caulking and weather stripping, replacement of doors or windows, and insulating floors, walls, pipes and ducts. These improvements must increase energy efficiency by at least 10 percent, as calculated by the state's Department of Energy. Businesses may then receive an income tax credit worth 35 percent of eligible project costs, which can be taken in one year for smaller projects or over five years for projects costing more than $20,000. Non-profit organizations or public entities that do not pay state income tax may benefit from the program by using a pass-through alternative that transfers the credit to a party with state income tax liability in exchange for a cash payment. Oregon rental property owners that purchase new, energy-efficient appliances for their properties can also apply to receive a tax credit. By investing in pre-certified refrigerators, dishwashers, furnaces, and other appliances, owners benefit from an income tax credit in the amount of 35 percent of the purchase price. Click here to learn more. New Mexico's Sustainable Building Tax Credit program allows developers that build to specified green standards in new commercial or residential projects to claim a credit on their income taxes. The amount of the credit is based on the level of energy efficiency achieved, which is determined by a third-party audit. Residential developers in New Mexico may measure their efficiency against several benchmarks, including the Home Energy Rating System (HERS), the Build Green NM rating system, or LEED standards. According to the program website, "a LEED Silver-certified 2,000 square-foot home that is at least 40 percent more energy efficient than a home built to the standard building code can receive a $10,000 tax credit." The credits are currently available through 2013, and annual residential allocations are capped at $5 million.

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Preferences for Low Income Housing Tax Credit awards

Despite challenges associated with the recent financial downturn, the Low Income Housing Tax Credit (LIHTC) remains one of the most important sources of federal financing for the development of new affordable rental homes. The LIHTC entitles recipients to a dollar-for-dollar reduction in federal income tax liability, up to the permissible credit amount, which developers typically "sell" to investors in exchange for the up-front equity needed to complete their projects. While the IRS issues the tax credits, the program is administered at the state level, with housing finance agencies responsible for processing applications and making decisions about how LIHTCs should be allocated.

The state agencies that administer the LIHTC program are required to prepare a Qualified Allocation Plan (QAP), usually on an annual basis, that details how applicants will be scored and describes the state's preferences and eligibility standards. Federal code required that states use certain selection criteria when designing their QAPs, including project location, income mix of tenants, and developer characteristics, among others; with passage of the Housing and Economic Recovery Act of 2008, two additional criteria have been added: historic character of the project and energy efficiency of the project. Even prior to the addition of this requirement for consideration of energy efficiency, however, many states had already been including preferences for energy efficiency in their QAPs. According to the Energy Programs Consortium, in 2007, some 39 states awarded extra points to applicants whose developments included energy-efficient investments. Points can be earned in a variety of ways. For example, in its 2009 QAP, New Jersey offered up to three points for installation of Energy Star-labeled appliances within residential units, and an additional point for communal laundry areas that use Energy Star-labeled equipment. Developers are entitled to one additional point for each of the following: complying with New Jersey's Green Future guidelines (a voluntary set of "green building" measures that includes energy-efficiency measures); installing a solar photovoltaic system; or obtaining LEED certification.

In 2010, the National Housing Conference hosted the Partners in Innovation preservation forums, a series of three regional forums focused on strengthening and supporting affordable rental housing preservation efforts through innovative partnerships, policy development, and legislative reform. The regional forums took place in Boston, MA; Portland, OR; and Denver, CO in 2010. View the following presentation on tax incentive programs from the Partners in Innovation: Preserving Affordable Rental Housing Through Energy Conservation in Boston on April 14, 2010. David Abromowitz, Center For American Progress, presented during the breakout session, Funding Programs for Green Preservation.

The LIHTC program can be extremely competitive, with demand surpassing supply by a ratio of 2-to-1 or more in some states. As a result, rewarding green development with extra points can be an effective catalyst for incorporation of energy-efficiency measures. An alternative approach, taken by some jurisdictions in their QAPs, is to set aside a portion of credits for green buildings. Some states also use the QAP to encourage building design and placement that promotes reduced household energy use through smart development patterns, such as transit-oriented and multi-use development. Learn more about how states are using their QAPs to promote the preservation of affordable rental homes on location-efficient sites.

In addition to incentives linked to the Low Income Housing Tax Credit program, other financing programs play a major role in encouraging and making possible energy-efficient development and rehab in existing properties. These tools are covered in a different section of the toolkit. Click here to learn more about financing mechanisms that help to support residential energy efficiency.


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You are currently reading: Other incentive-based programs, including density bonuses and rebates on the purchase and installation of energy-efficient products, reward developers and residents that take steps to reduce energy consumption. Other pages in this section: Energy codes and standards, similar to traditional building codes, establish minimum requirements and guidelines for the performance of new construction and existing homes undergoing substantial renovation Energy rating systems and green building rating tools complement energy codes but encompass additional sustainability measures that may result in greater energy savings Point-of-sale efficiency upgrades and audit requirements provide a mechanism for reducing energy use in existing homes when they are put up for sale Energy savings and emissions reduction laws create incentives for utility companies to implement energy-saving measures, including home retrofits

[1] Counties & Residential Green Building Standards. NACo Green Government Initiative. Washington, DC: National Association of Counties.