New Law Looks to Transform Housing

On August 16, 2022 President Biden signed the Inflation Reduction Act into law.  Cited as “the single biggest climate investment in U.S. history by far,” it contains a number of initiatives aimed at putting the U.S. on a path to roughly 40 percent emissions reductions (below 2005) levels by 2030, among other goals.

To do so, it creates and/or refines a number of clean building and clean energy efforts that are designed to influence how the new homes and communities of the future are designed and built.  Equally important, it includes several incentives intended to compel consumers to upgrade their existing homes to improve their energy efficiency and resilience to climate-related impacts.  

Specific programs impacting the single-family construction and remodeling industry include:

  • Advancing Energy Codes.  Grants to state and local governments to adopt energy codes that meet or exceed the 2021 International Energy Conservation Code and additional funding if the adopted codes meet or exceed the IECC’s zero energy provisions or an equivalent stretch code;
  • Clean Building Incentives.  Consumer home energy rebates and tax credits for improving overall energy efficiency, appliance upgrades, and/or non-appliance upgrades, such as adding insulation, making ventilation improvements or installing new doors or windows;
    • HOMES Rebate Program. Funding for state energy offices to develop rebate programs to reimburse homeowners $2000 – 4000 for whole house energy improvements. (Cannot be combined with High-Efficiency Electric Home Rebate).
    • High-Efficiency Electric Home Rebate. Funding for state energy offices to develop rebate programs for qualifying electrification projects, such as appliance upgrades or other actions. (Cannot be combined with HOMES Rebate). 
    • Modified 25C Nonbusiness Energy Property Tax Credit. Improves program to allow homeowners to claim a credit of up to 30 percent of the cost of qualified products or equipment that help reduce energy use, up to $1200 annually.
    • Modified 25D Residential Clean Energy Tax Credit. Provides homeowners credit for installing solar electric, solar water heating, fuel cells, small wind, biomass fuel stove and geothermal heat pumps and now allows battery storage also.
    • Modified 45L New Energy Efficient Home Tax Credit. Provides homeowners $2000 credit as allowed in 2021 for meeting certain efficiency requirements until December 31, 2022, then provides $2500 credit for meeting EnergyStar requirements or $5000 for meeting the Department of Energy’s zero energy ready home program stipulations.
  • HUD Affordable Housing.  Grants and loans to make affordable housing units more resilient and energy and water efficient.

Although many of the tax credits for building retrofits are available immediately, it will take the agencies some time to determine how these programs will be implemented and how any funding will be dispersed. In the meantime, designers, builders, and remodelers should start to consider if and how they might be able to use these programs to their (or their clients’) advantage.  

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