New HUD energy rules will raise the cost of home construction by imposing stricter building codes. Payback time is 90 years. 
Homes To Become Even More Unaffordable
The Wall Street Journal comments on Biden’s New Plan for Unaffordable Housing.
The Department of Housing and Urban Development is mandating costly new energy standards for new homes insured by the Federal Housing Administration (FHA), which will become de facto nationwide building codes.
HUD last Thursday announced that it will require new homes financed or insured by its subsidy programs to follow the 2021 International Energy Conservation Code standard.
Many governments have declined to adopt the 2021 standards because of their higher costs. The National Association of Home Builders says the energy rules can add as much as $31,000 to the price of a new home. It can take up to 90 years for a buyer to realize a payback on the higher up-front costs through lower energy bills.
Not to worry, HUD says taxpayers will help cover the cost. It “is anticipated that many builders will take advantage” of numerous tax incentives in the Inflation Reduction Act “as well as rebates that will become available in 2025 or earlier for electric heat pumps and other building electrification measures,” the rule says.
These incentives include a $5,000 per unit tax credit for “zero energy” multifamily construction that meets prevailing-wage requirements that also raise building costs. HUD adds that builders may also “take advantage of certain EPA Greenhouse Gas Reduction Fund programs, especially the Solar for All initiative” and an investment tax credit that can offset 50% of a solar project’s cost.
Even with the subsidies, HUD estimates the price of a new home will go up by $7,229.
You get a $5,000 credit but only if the builder pays union wages for everything. How much will that cost?
My general rule of thumb is to take government estimates and triple them. That’s for short projects like building a home. But 10x would not be surprising. And this is with subsidies.
Generational Homeownership Rates
Who Are the Renters?
The answer is younger voters and blacks.
Generation Z homeownership is dramatically lower than the home ownership rate of millennials.
And according to the National Association of Realtors, the homeownership rate among Black Americans is 44 percent whereas for White Americans it’s 72.7 percent.
That’s the largest Black-White homeownership rate gap in a decade.
Home Prices Hit New Record High
The latest Case-Shiller housing data shows home prices hit a new record high. Adding insults and costs, the 30-year mortgage rate ended last week at 7.50 percent
Youth Poll
On April 20, I commented People Who Rent Will Decide the 2024 Presidential Election
Q: What is it that young voters really have on their minds?
A: Rent
Many with rent as their top concern will switch to Trump. They are fed up with rising inflation. Rent is up at least 0.4 percent per month for 30 months.
Young voters propelled Biden over the top in 2020. Things look very different today. Many voters who do not like either Trump or Biden will sit this election out.
Not much of a future for younger people as the gov. has to pay for all these illegals incl rent, food, etc . Few will find jobs and will be on the dole their whole lives. This country is evolving into a third world nightmare,some cities already ruined.
Well, he’s going to raise tyhe price significantly, but the taxpayers will pick up a big chunk of it … and he’s going to codify our Ukraine tens of billions into law so that if sanity ever returns, that will be quite hard to get rid of. This would be a big issue were it not for our running such big surpluses every year (sarc)…. $35T is just the beginning.
It’s all part of Klaus’s ” You will own nothing and like it.” plan from the world economic forum. You know the elitist’s who want to control your entire life from cradle to grave
This wouldn’t affect the majority of homes as FHA financing isn’t the majority of loans. Most loans are conventional and a lot of rental properties have no mortgage. People that buy new construction don’t usually use FHA financing. Prices of new construction aren’t cheap and a lot of builders won’t even guarantee a price due to drastic increases in materials.
Laura – read the article again: these will become the new de facto building codes by which all homes will be built moving forward.
Individual cities/towns, etc. determine what their building codes are.
Except in Cubafornia where Gov Handsome drives the bus right through City Hall.
Any house I build now they are not going to even know about.
In a state so singularly totalitarian state that it bans you from building an additional story on your house: Whether it also tells you to add an inch of insulation to your walls, is what the textbook definition of roundoff looks like.
And: As soon as you have anything named a Federal Housing Administration,nothing housing related, no matter what, can make things any worse than they already are.
We live in a totalitarian manurehole no freer, nor in any way better, nor even really different, than North Korea. That’s it. Acting as if this particular one, among all of Kim’s entirely arbitrary fits of overreach, is in any way worse than any other, is what the textbook definition of useful idiot looks like.
Besides: Houses are not priced cost+. Nothing is. Instead, they cost what people are able to pay. Which, since there is no real competition, is way, way above cost-to-build. Hence, prices will hardly be effected at all. People will just get more house for their far-too-much money. The added cost largely coming out of idle land and permitted square footage prices. Since those are currently at least an order of magnitude above free-market levels, this mandate would almost inevitably result in housing being nudged closer to what a free market would result in.
Still nothing other than totalitarian five year planning. Just a marginally less destructive five year plan than the current one.
Anything Biden does by executive decree can also be undone next January by executive decree. Its well established that Biden is a zombie, and engaged in scorched earth policy changes.
If congress (not Biden) did the change, that could take longer to fix. But usually there are grandfather clauses implicitly or explicitly. Labor costs are usually the big variable with construction — “prevailing wages” is definitely a Biden thing that can be quickly reversed after he is gone.
Perhaps most important, it would be a really really good thing to get big government out of the mortgage lending business. It was a terrible error in judgement when Bill Clinton appointed a worthless political hack (Franklin Raines) to control FNMA — which turned what was created to be a mortgage insurer into an incompetent mortgage lender without any concept of risk control.
Raines has never been a banker — not before, not during, and not since. His incompetence made a mess of the mortgage markets. He isn’t even a good politician. Getting government out of that business all together would be good for America (and the world). Bring back competition. Government monopolies are just as bad as private ones, the profits just get misdirected into political corruption.
Some will claim a need to provide credit insurance for the bottom 30% income earners? But GNMA already does that. There is no need for multiple government agencies and multiple avenues of corruption. 40+ intelligence agencies failed to anticipate the collapse of the soviet union, failed to anticipate 9/11, just plain failed to help America — but they made a lot of money for politically connected. Same with multiple redundant housing agencies.
FNMA should have been allowed to fail and put into wind down. All the failed banks should have been put into wind down.
Could be undone… if his opponent hadn’t lost the election because he committed a bunch of crimes.
Bribery is a crime. So is extorting federal prosecutors to get your son out of a felony charge. So is using intelligence agencies to go after your political opponent.
The supreme court does not want to be used as a political weapon. And Biden would be the first (of many) to go to prison if they did. Biden is going scorched earth because he knows *he* won’t be around. maybe a republican. maybe a different democrat. But Biden is done for. If the grim reaper doesn’t get him first, the legal precedent he is trying to create will.
Stop writing stupid comments
You have no proof of any Biden bribery. None. Does it exist? Who knows. The republicans spent a few years looking for it. Must be pretty well hidden if it exists.
Trump has been convicted of bank fraud. He owes half a billion dollars that he can not raise. That alone disqualifies him from acting in anyone’s interest but his own… but that’s never happened anyway. He wasn’t qualified to be president before. He’s an idiot, worshipped by idiots.
All you know is what the shrieking heads on the Short Bus News channels like OAN make up. You have a head full of lies, you well know it, and are absolutely terrified of admitting it.
Everybody sees. You aren’t fooling anyone but yourself.
Considering that AI computing, EV auto charging and overall demand increase will eat up all the electricity, it makes perfect sense that energy needs to be rationalized or efficiency needs to be improved.
If you think electricity is bad now, wait a few more years when Google, Microsoft and Apple start buying up all the utility companies. You’ll be able to get a bundle of internet+electricity+OS and app subscriptions soon enough.
Plenty of profits to be made for the prudent investor that knows what’s coming and how to play it.
The USA used to have manufacturing industries all over the place. Factories use a **LOT** of energy. If the USA could provide plenty of energy before, we can obviously do it again with more advanced technology.
Electricity and energy are leadership problems, not technology problems.
Remind me in a few years when you are here whining about Biden and the high cost of electricity.
I am saying its a LEADERSHIP problem.
We used to have factories using lots of electricity, and barring incompetent leadership, we could again.
And I am saying there won’t be enough electricity for:
You won’t have to wait long. My electric rates already went up 30% and it’ll likely double again in a year or two, just sit back wait and watch it happen like all the other things I’ve called here because I pay attention to the data not the whining.
The population may continue to grow, you have a point there. But its not a surge, its a steady growth that (most of the time) is easily managed by utilities.
EV cars are not going to happen. The industry is failing even with massive tax subsidies. This is just a red herring.
AI data centers do not use more electricity than big factories running massive (and generally less efficient) electric motors. Many factories used huge AC systems — to control humidity in the product as much as for worker comfort.
Out with the old factories and machinery, in with data centers. Energy use is perhaps the same, or perhaps less. If you watch nvidia presentations, Jensen Huang spends a lot of time talking about how GPU compute is much more energy efficient than traditional CPU… so the energy use is getting more efficient not less. Cooling a GPU with liquid coolant is more efficient than cooling a factory machine with a gas (air) — that’s physics.
I have invested in utility companies and nuclear power — but its a slow and steady growth thing, once you account for the leadership problems.
My electric rates surged – similar to yours. But it was all the environmental taxes and fees, plus a bone headed decision to close a nearby nuclear power plant. The plant could be re-opened, and probably will out of necessity. The taxes are a political decision, not a requirement.
Many things worked better when government was half the size it is now. Not zero government, but not this bloated corrupt monstrosity either
You make a lot of blanket statements backed up by nothing! Just random generalizations. Why should I believe any of those statements?
Which government is bloated? Federal? The Federal government employs just 1.9% of the entire workforce.
What data do you have that says EVs are failing? US EV sales increased 3.3% to 270,000 vehicles in Q1 24.
What time frame are you talking about? And what do you mean by leadership? Corporate? Government?
Perhaps you should look at US electricity use since 1950. It has skyrocketed in all sectors since 1950.
Industrial use of electricity is 5x what it was in 1950. Commercial is 14x. And Residential is 15x.
And we are now adding new forms of consumption; AI, EV, crypto.
link to eia.gov
I never claimed system wide electrical use was unchanged. Don’t put your words into others comments.
I said factories from a century ago are far more energy intensive than data centers — both the machines and the AC. Yes, William Carrier (of Carrier AC fame) invented AC in New York to prevent paper from tearing (to control humidity). Jensen Huang (nvidia) also said GPU data centers are far more energy efficient. This is not controversial.
The USA produced enormous amounts of energy in the past, and we are technologically capable of doing so now. The problem is regulators, stupid rules, and environmental taxes… other countries are building nuclear plants, the G7 morons are building windmills and solar panels that cannot replace the coal plants.
I have read the sales promo from Larry Fink (blackrock) about the need for other people to invest in energy for data centers. The guy’s last name reminds me of the short king in an old cartoon (the Fink) — a tiny, short napoleon wanna-be who went around issuing absurd commands to people who generally ignored him.
If Larry Fink is selling it, instead of buying it — that’s a warning sign if not a red flag. He is usually selling stuff after the price has run up, or he is pushing political nonsense cooked up at WEF / davos. Either way, hard pass on whatever he is selling.
The EV thing is a dead horse. Stop beating it. Its just animal cruelty at this point
You misunderstand. I do not own an EV. Nor am I trying to promote EVs.
I merely recognize that people are still buying them; 270,000 of them in the first 3 months of the year. A 3.3% increase. Plus PHEVs.
Yet you seem to believe that EVs are “dead.” While ignoring the actual sales data. You’re like Yogi Bera (nobody goes to that restaurant anymore because it’s too crowded).
And as EV and PHEV sales continue, that will increase demand for electricity; as will AI and Crypto expansion. It’s just another piece of the electricity demand story.
Not sure why we’re just taking their word for it. Anyway with regular blackouts occurring now in some states (cough cough, Texas) you’d think energy efficiency would be considered a good thing.
Blackouts are not happening in TX. We had one issue a couple years ago due to a once in a lifetime freeze. Our system could not handle it. No different than people in Maine if they had to deal with 130 deg heatwave for 5 days. They would be screwed.
The people in Maine have underwear with an R-factor of 30.
Blackouts happened (past tense) in Texas, because of a freak (rare) freeze. They addressed the biggest weaknesses of their grid, because Texas has good leadership.
California has regular brownouts, seasonal blackouts (some planned, many not). California has the highest electricity prices in the mainland (48 states). California has a leadership problem — the state is run by morons.
New York and Illinois are both old factory centers that had the best (and lowest cost) electricity in the world. Public power was created in NYC years ago. Yet today both NY and IL have incompetent leadership, and really high electricity rates. Its a leadership problem.
Biden’s housing regulations are also a leadership problem. While Biden shuffles around lost and confused, white house staffers obsessed with Califorina style “environmentalism” caused yet another problem.
Better leadership (either old school democrat or republican) will fix what Californians broke. The USA solved this technology problem more than a century ago, then incompetent leadership messed things up
Anything that can be done by unelected government employee fiat can be undone.
Using a government mortgage insurance program to create a national minimum building code is an interesting strategy.
I wonder how they intend to enforce it. Local inspectors have no training on this code. Does the seller attest that the building is compliant? Who checks? How is it enforced?
Builders can dodge the requirements by providing mortgages that aren’t insured by the FHA, but that might suck for buyers.
“Homes To Become Even More Unaffordable”
I thought people here believe in supply and demand in the housing market? If the construction of houses becomes more expensive but people don’t buy them because they are more expensive, then prices of housing will go down. Most of the price of housing isn’t the construction, but the cost of the plot of land.
In other words, this is just moving money from land-owners to builders. I have no objections to that.
There are two flaws in your reasoning. First, the cost of land is not the major part of the final price. Second, you assume that builders would still be building houses that they knew would bring them losses. Trust me, those people are not stupid and they’d rather build no homes. Case in point – San Francisco with its crazy building codes and zoning laws. Good luck with finding new, affordable construction
The problem is much like price-floors. If building codes, standards, etc., result in higher prices that buyers can’t afford, then the number of houses sold will fall, followed by the number of houses built. – As for would be buyers, housing could get to look like old-time ghettos, with an increasing number of people crowded into what housing they can find. + California-style increased homelessness.
Home prices are set by the dingbats that bid them up, and have little basis in reality beyond how much Joe Howmuchamonth can borrow. This 30k comes out of developer profit.
Do not know if this prevailing wage requirement is the same as the Davis Bacon requirement for Federal construction projects. If it is the same the effect on construction labor costs will be dramatic (based on my experience a couple decades ago ).
The ITHICA green homes plan the feds will follow estimates well over $50k upgrades needed
Most houses do not last 90 years. They are made of wood chips, glue, and plastic.
mines 107, second owner after original family. still going, update a few items as we go
“Never underestimate Joe’s ability to f#@k things up.”
— Barack Obama
The war on the American middle class continues. FJB! FI!
Answer: get six couples together, with two kids each and buy a $500,000 6 Bedroom/4 bath home, with a Basement and split it even Stephen. Unfortunately, this means buying a Home in Louisiana in the sticks.
There are over 300 houses on the market in Baltimore for under $100k. link to redfin.com
I wouldn’t put those houses in my landfill.
There’s a reason those houses are so cheap. Look up the crime stats for those zip codes.
Detroit has some really cheap housing too.
Yep, you need to make compromises to get a cheap house.
In neighborhoods no one should be forced to live in. I’m from Baltimore, I know!
Keep those new houses “tight” on airflow – great for mold growth!
Is that frost on the windows? No, just the new double/triple windows failing.
Heat pump? Good luck below +10 deg. F.
surely those unable to afford these nice homes will rent them instead
just buy what you can afford and remodel as YOU SEE FIT
A more affordable way to live is with a mobile home, though I would not want one in Tornado Alley. The new ones are much better built than those of the past and a very nice one (1600+ sq ft) can be had for $150K or less + the cost of a lot.
Most would not consider it and many would feel it is beneath them. With the craziness in houses though even older mobile homes have gone up substantially in price over what they sold for 5-10 years ago here in north central Florida. They won’t appreciate like a home would, but they are a far better option than throwing away money on rent. Taxes are generally lower to boot.
So they can own nothing and be happy!
(/sarc)
Whatever costing rules applied 50 years ago do not apply for the future. Surely even simple folk, even Yanks, understand that it is stupid to build housing that has energy efficient of a tent and it is not realistic to rebuild a house every 50 years when we have 7 billion people.
Unless of course you are somewhere that Israel or other expansionist empires wish to occupy and destroy in which case the minimalist solution is best.
Improved energy efficiency juice is obviously not worth the squeeze with a timeline of damn near a century to get the drops. Standards are actually pretty good right now if properly installed.
I restore 70’s homes on the side. I do focus on improving efficiency with new doors, windows and check walls with a temp gun but even with these improvements the standards were decent back then.
The window replacements are actually a cosmetic thing. Nothing wrong with those old aluminum windows. The new ones add curb appeal, double pane so quieter and open from the inside for easy cleaning but there is almost no improvement in energy savings. If people want to pay more though for the look and want to believe it saves them coin I will absolutely make it so.
Home buyers will then bid up prices of existing homes without those energy mandates until they equal those of the homes with energy mandates. 90 years to break even effectively means there is no break even from the home owner’s perspective. Don’t forget, equipment will need to be replaced 3-4 times in 90 years.
“…Payback time is 90 years…”
Lol…you can’t make this shit up!!!!
So average life expectancy is 76.3 years in the US….13.7 years shy of getting your money back. I’m no financial genius, but that doesn’t seem like a good return on one’s money.
On a different note, I just read that the Biden admin will be requiring that all new cars have some sort of collision detection system. This will add thousands of dollars to the cost of new vehicles.
link to nbcnews.com
I thank God daily that I’m old.
Lol…my dad says the same thing all the time.
My Dad is working it so he will be broke in 5 years and hopes he dies by that time.
I’m 79, so I’ve been old for a while. By far, its the best time in my life. No job, no forced military service etc. I don’t want to be young and broke again!
The only reason I would want to be in my 30’s again: I know that I could retire by 35, instead of my actual 38 years old and that could have been done by getting rid of EXTRA SHIT, such as 4 motorcycles (yep, I was THAT stupid), RV, three cars, big house….all extra SHIT that kept us paying out month after month.
At 38, three years later than my estimated better time frame, is a LOT of time in Travel years. We did it and sold EVERYTHING we could, got rid of 3 bikes, and two cars and lived in that RV for four years, traveling around the USA for an avg of $17 a night (FLA was higher in Winters)…but, it was a BLAST.
We towed a Toyota V6 Pickup, and carried Mountain Bikes and tools in it with a shell. It was the smartest thing we ever did.
Spray foam closed cell insulation will produce insulation R values required.
Average costs for new home construction are in 30,000 to 40,000 USD range.
Encapsulating Lumber in Foam yet to be known as to long term effects as a Home must breathe to avoid condensation buildup in walls.
Also when insulation is very tight air quality within that home deteriorates and respiratory health concerns do arise. So air purifiers come into play, an additional cost of construction.
Still quite a lot of unknown consequences resulting from all the energy mandates.
Rebuilding the middle class so as to allow people to afford Housing rather then simply mandating building codes making housing unaffordable for stagnant wage earners,. in my view would be a smarter course of action.
Am in agreement with Mish that Bread, Butter and Housing issues will decide the 2024 election.
There is a practical side to Life
Oh and by the way Housing gets built by climbing a ladder and putting a fastener into a piece of material that has been cut to size.
Doing that in a Plumb and square manner is called good trade practice.
Not being taught in Universities but being how many years of a persons life will get consumed by paying debt for that product,worth knowing something about.
Politicians Rhetoric does not build housing. Tough to understand but non the less quite True.
I have 2 homes that are pretty airtight – less than 2.0 ACH50 and monitor the temp/humidity. The AZ home has an ERV (energy recovery vent) that cost about $500 it’s sitting at 72 degrees / 35% humidity. The WA house which has no ERV is at 68 degrees / 40% humidity. Both houses are all electric with ductless mini-splits and heat pump water heaters. Last winter in WA we had a cold snap into the single digits and people were wailing about their $500, $800, $1000 electric bills mine was $168
I have no problem with energy efficient homes. I do like having low heating bills in winter.
The problem for me with Government mandates is they are never thought thru as to all the side effects and ramifications involved. Anytime some hot off the press Political decision gets made it ends up causing problems whether that be runaway costs or complications arising from simpletons like Biden deciding off the cuff that something is a good idea.
We just this year discovered the revelation that EV’s are not going to make good upon that hype. Kinda demonstrates that Reality and Political decisions are far apart.
I do not subscribe to the State Religion which is Climate change. Too many unknowns and the Data it is all based upon hardly any time having passed since satellites made Temperature variations possible to follow.
This is why there aren’t any starter homes being built. Ever more stringent codes have made it too expensive to build starter homes.
On the plus side, maybe no one will use FHA insurance and this government program to build HUD homes at the federal level will disappear. Then States can do it at the local level and set regulations at the State level where they belong (homes in California don’t need Florida’s hurricane proofing and homes in Florida don’t need California’s earthquake proofing). The Federal government has no business setting building codes.
The governmetn does the same for automobiles. They’re much more expensive because of stupid government requirements that are not related to safety.
plenty of starter homes all over the place…they’re called Tents
That’s not it at all. First time home buyers want all the bells and whistles they see on those HGTV building shows. When we used to build affordable homes they had vinyl flooring and crappy carpet, formica countertops, fiberglass tub/showers, tiny bedrooms that would barely allow a queen sized bed, 5’x7′ bathrooms. Nobody wants that today.
Trust me, nobody wanted it then either (I was born mid 60s and I’ve seen older homes).
But you buy what you can afford and then upgrade gradually (your starter home itself or start gradually buying better/larger homes with more features). It’s no different than your first car. No one wants an old beater but that’s what you can afford as a teen (sans rich parents) even if you really want a Porsche. Over time you upgrade your car.
The Clown Show continues. The government is totally disconnected with reality.
That’s what happens when the politicians reside in Washington DC for the majority of their lives. Most would have a hard time picking out their home state on a map.