It’s Time to Modernize Home Construction in the US

Ben Evans and Jonathan Harwitz

Monstrous wildfires, relentless heat waves and unprecedented storms mean millions of U.S. homeowners face sharply higher insurance premiums and, in some cases, limited coverage options for the gravest threats. Natural disasters are becoming so frequent and severe that insurance companies say they simply can’t remain solvent at current rates.

At the same time, taxpayers are picking up increasingly massive tabs for recovery. This is likely just the beginning of a new normal that eats further into government budgets while threatening the affordability of home ownership in America, particularly for low- and middle-income households.

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One of the best strategies for addressing this emerging crisis—along with reducing the greenhouse gas emissions that are exacerbating the disasters—is to begin building homes and buildings to modern codes that better withstand disasters. To protect households and taxpayers, it’s time for the federal government to play a stronger role in making sure that happens.

Because we have a hodgepodge of state and local building codes around the country, we still build hundreds of thousands of houses every year that leave occupants vulnerable. This not only puts people at risk physically and financially, it drives up insurance losses and government costs that we all eventually pay for.

At the same time, the federal government plays a big role in supporting home ownership through mortgages backed by Fannie Mae and Freddie Mac and programs at agencies like the Departments of Veterans Affairs, Housing and Urban Development, and Agriculture. Federal agencies, of course, also spend billions of dollars every year helping to rebuild communities stricken by disasters. The Federal Emergency Management Agency has spent $34 billion and counting so far this year.

In other words, U.S. taxpayers have a lot of skin in the game, and with the toll of disasters growing at an alarming rate, the government has a responsibility to limit financial risk as well as loss of life. The answer lies in stronger building requirements.

Federal support

The Biden administration took a key step forward by proposing recently to require the latest building energy codes for much of the new housing supported by HUD and USDA programs. Building energy codes, which establish minimum energy efficiency and envelope requirements, are just one of many codes covering everything from electrical wiring and plumbing to floodplain regulations. But energy codes deliver multiple benefits.

They can keep residents warm enough to survive in storms like the 2021 Texas winter freeze that killed nearly 250 people and reduce deaths from heat waves that are by far the most lethal weather events. They can prevent pipes from freezing and floors from buckling in extreme temperatures, and mold from growing inside walls. Strengthened wall assemblies, added insulation, and better windows create stronger structures in the face of hurricanes and tornadoes.

The HUD-USDA proposal is expected to impact nearly 170,000 new homes per year, or almost 15 percent of the new-construction market.

Meanwhile, the Federal Housing Finance Agency has a chance to influence a much larger swath of the market by applying the same requirements to Fannie and Freddie-backed new housing. The decision could be game-changing, covering a majority of new single-family and multifamily home construction in the U.S.—enough to make modern codes the norm rather than the exception.

Our organizations recently joined with others in calling for FHFA to do just that. Aside from disasters, building energy codes are also good for everyday household budgets. Study after study shows that while there is an upfront cost, houses built to the latest energy codes save more money on monthly energy bills than the relatively small upfront cost adds to a monthly mortgage payment. A recent federal analysis found that updating to the latest code would deliver net savings of $500 per year for a single-family home through lower energy costs, with lifecycle net savings of $14,500 on a typical 30-year mortgage. For multifamily buildings, the analysis found lifecycle net savings of $6,000 per unit or $188,000 per building for a mid-rise building with 32 units. Additionally, homebuilders can now receive generous tax incentives under the Inflation Reduction Act for building energy-efficient homes.

Housing affordability, improved energy efficiency, and disaster resilience are benefits that all homeowners want. They also should be top priorities on both sides of the political aisle. FHFA and the Biden administration have a golden opportunity to change housing for the better. Given that homes built today will likely be in use for at least 50 to 100 years, there’s no time like the present.

Ben Evans is federal legislative director at the U.S. Green Building Council and Jonathan Harwitz is director of public policy at the Housing Assistance Council.