• Cliff Majersik, executive director of the Institute for Market Transformation, is the Vision 2020 chair for Market Transformation.

    Credit: Eli Meir Kaplan

    Cliff Majersik, executive director of the Institute for Market Transformation, is the Vision 2020 chair for Market Transformation.

TOWARD 2020: CODE COMPLIANCE

The evidence suggests that improving energy code compliance could bring an economic jolt to cities, counties, and states.

IMT is conducting research on effective (and cost-effective) strategies for improving energy-code compliance. We’ve identified several so far; two of the most promising are the streamlining of regulatory processes and a third-party plan review.

Streamlining is the practice of improving building regulatory processes to remove overlap and duplication. It can make building departments run more efficiently, with faster turnaround of permit applications, giving officials more time to devote to core job duties like code enforcement. It can also improve customer service and save money for local government, and the citizens and businesses who submit plans.

Obviously, current IT offers many possibilities for streamlining, including computer software that can auto-check for code compliance, which is being piloted.

Additionally, more and more cities—such as Dayton, Ohio, and Washington, D.C.—are regularly allowing third parties to conduct construction plan reviews. This keeps expenses down for the local building department while increasing the level of quality assurance.

IMT found that both streamlining and third-party plan review will often benefit the builder or the developer by expediting the plan-review process. And for the local jurisdiction, it can realize tax revenue from the completed project sooner than under the traditional model—a major advantage.

Adopting strong energy codes and ramping up compliance with them will drive market transformation in multiple ways, some of which you might not guess.

Higher compliance could save American consumers $10.2 billion annually while improving air quality and home comfort. Well-enforced building energy codes also can provide tens of thousands of local jobs at all skill levels in the building inspection, construction, and design industries.

As more cities and states start to capture the job-creation and money-saving benefits of improved compliance, there will be positive ripple effects. One of them will be improved valuation of energy-efficient properties.

Conversely, better recognition of the value-add of green and efficient homes will result in homes being built to higher standards and codes being met. This mutual reinforcement is typical of the market transformation process.

VALUATION

Building green and energy-efficient buildings must be profitable to become mainstream. Green homes are worth more, but today they often don’t sell for more. If you renovate your house and put in a very efficient HVAC system and insulation, you’re less likely to get a higher appraisal for these improvements than for a new granite countertop (even though the former are going to pay for themselves over time, and the countertop won’t).

This creates an incentive problem. Builders, designers, and homeowners can only reap a share of the value they create by making homes more sustainable. Appraisers and lenders can derail good green projects by not ascribing them sufficient value.

The appraisal industry is intrinsically conservative: An appraiser’s job is to read the market, not set or change it. So appraisers are, understandably, reluctant to assign value to features that are new, uncommon, or imperfectly understood—and many green and energy-efficient features fall into one of those categories.

For instance, an appraiser may not have valid comparables for a house with a geothermal heat pump or high-efficiency windows; if not, he or she won’t accord them their proper value. Likewise, Realtors aren’t always informed about the value of efficiency and may list green and efficient homes for too low a price—especially because these features of a house are invisible.