ENERGY-EFFICIENT HOMES

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ENERGY-EFFICIENT HOMES
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POLICY

• This presentation will analyze the potential
  effectiveness and benefits of Energy-Efficient
  Homes.

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ISSUES

• A 25 reduction of foreign oil imports would
  cause the price of oil to increase.
• This in turn would cause the cost of heating a
  home (that uses oil for its heat) to increase.
• Also, the price of gas at the pumps would
  increase, creating greater monthly expenses for
  all who drive.
• Energy efficient homes create other benefits not
  related to oil.

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CONCLUSIONS

• Energy efficient homes can dramatically decrease
  the cost of maintaining the average home.
• Energy efficient homes also have the benefit of
  using renewable energy sources, which conserves
  existing energy resources.

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BACKGROUND

• Industries aside, our homes are the chief
  consumers of many energy sources.
• The amount of energy wasted just through poorly
  insulated windows and doors is about as much
  energy as we get from the Alaskan Pipeline each
  year.
• The amount of electricity generated by fossil
  fuels for a single home puts more carbon dioxide
  into the air than two average cars.

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• Almost every home in the United States could be
  powered by renewable energy of some kind to a
  greater or lesser extent.
• Converting existing homes to energy-efficient
  homes, and building only new homes which are
  energy-efficient, would result in a myriad of
  benefits, both long term and short.

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EXISTING HOMES

• Improvements to an existing home, to make it an
  energy efficient home, focuses chiefly on
  ensuring that every aspect is properly installed,
  insulated, and all equipment is energy efficient.
  The major areas of concern are
• Building Envelope
• Space Heating and Cooling
• Water heating and supply
• Waste water
• Appliances
• Garbage
• Lighting

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NEW HOMES

• Construction of a new home can take advantage of
  a concept known as Whole Building Design.
• Whole Building Design takes an integrative
  approach to building design so that all elements
  of the building help achieve an optimal energy
  performance. The building has to interact
  effectively with the outdoor environment a
  concept known as climate-responsive architecture.
• Whole Building Design combines
  Energy-Efficiency with Solar Technologies to
  boost energy savings, and it reduces the amount
  of energy required to operate a home compared to
  conventional houses.

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NEW HOMES (CONT.)

• The Energy Efficiency aspect of Whole Building
  Design is concerned with the same areas as
  mentioned with Existing Homes.
• The Solar Technologies incorporated into the
  Whole Building Design involves the use of
  Passive Solar Design and Solar Thermal Technology.

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NEW HOMES (cont.)

• Passive Solar Design
• Is the technology of heating, cooling, and
  lighting a building naturally with sunlight
  rather than with mechanical systems.
• Some design features include large south-facing
  windows and building materials that absorb and
  slowly release the sun's heat.
• It can also involve the use of Photovoltaic (PV)
  technology. PV is basically "solar electricity"
  that results from converting sunlight into
  energy.
• PV systems help preserve the Earth's finite
  fossil-fuel resources such as coal, oil, and
  natural gas. It also helps reduce air and water
  pollution associated with these energy sources.
• Incorporating passive solar designs can reduce
  heating bills as much as 50.

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NEW HOMES (cont.)

• Solar Thermal Technology
• Is the use of solar water-heating systems.
• Solar water-heating systems use collectors
  generally mounted on a south facing roof.
• These collectors heat water either Passively or
  Actively (Active being the most energy efficient).

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NEW HOMES (cont.)
External Whole Building Design Features
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NEW HOMES (cont.)
Internal Whole Building Design Features
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THE BIG QUESTION

• Relatively few homes (existing new
  construction) across the U.S. are
  energy-efficient homes.
• Considering the environmental benefits that an
  energy-efficient home creates, why havent more
  people chosen to make their homes an
  energy-efficient home?

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The Human Barrier

• Reluctance on the part of consumers to undertake
  the conversion of their homes to energy-efficient
  homes can be summed up in one word
• MONEY
• The upfront costs that are required to make the
  conversion are often too great a barrier for the
  average consumer to overcome.

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• Some energy efficiency improvements involve
  little or no implementation cost.
• However, there are also improvements that can
  cost a great deal of money.
• Replacing a heating system can cost up to 5,000
  in a large house or even more if you are
  converting from electricity to another energy
  source.
• Installing new windows, while very beneficial to
  your home and the environment, can be a financial
  strain to implement.

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Overcoming Human Barriers I

• Knowledge of the long-term benefits and monthly
  utility savings that an Energy-Efficient Home can
  provide.
• Knowledge about Energy-Efficient Home financing
  programs (government backed conventional loan
  programs).

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THE BOTTOM-LINE

• The average homeowner spends close to 1,300 a
  year on utility bills.

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• But an energy-efficient homewith such features
  as proper insulation, high efficiency heating and
  cooling systems, and energy-efficient windowscan
  lower utility bills by 10 to 50 percent.
• This would all be reflected in a myriad of
  benefits, both long term and short.

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Where the Money Goes
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FINANCING AN ENERGY EFFICIENT HOME

• Because an energy-efficient home is
  cost-effective, there are financing programs
  available from mortgages to home improvement
  loans, which allow more people the opportunity to
  live in such a home.
• Consumers can benefit from energy-efficient
  financing whether buying, selling, refinancing,
  or remodeling a home.

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• People looking to buy an energy-efficient home,
  can qualify for a better, more comfortable home
  because with lower utility costs, they can afford
  a larger mortgage payment.
• Most Energy-Efficient financing programs will
  encourage you to have an ENERGY RATING for your
  new or existing home, which will tell you and the
  lender how energy efficient it is.
• A rating typically involves an inspection by a
  professional energy rater who is certified under
  a nationally or state accredited Home Energy
  Rating System (HERS).

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• An energy rater will inspect the energy-related
  features of a home, such as
• insulation levels
• window efficiency
• heating and cooling systems
• air leakage
• After inspection, the inspector will generate a
  report that includes the home's energy rating
  along with an estimation of annual energy use and
  costs.

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• To help qualify for most energy-efficient
  financing, the report usually must show that the
  home is energy-efficient or that any recommended
  improvements are cost-effective and will save
  more money than would be needed to be borrowed to
  install them.
• While calculating whether a borrower qualifies
  for a mortgage, a lender can recognize these
  savings and add the cost of the improvements into
  the mortgage.

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• Or, if the home is already energy-efficient, the
  lender can stretch the debt-to-income qualifying
  ratio (a borrower's monthly payment obligation on
  long-term debts divided by the borrower's net
  effective income or gross monthly income).
• An energy rater will inspect the energy-related
  features of a home, such as insulation levels,
  window efficiency, heating and cooling systems,
  and air leakage.

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• Energy-Efficient financing is offered through
  either government-insured or conventional loan
  programs.
• There are 2 types of Energy-Efficient Mortgages
• For a New Home
• For an Existing Home
• You can purchase or refinance a home that is
  already energy-efficient, or you can purchase or
  refinance a home that will become
  energy-efficient after energy saving improvements
  are made.

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ENERGY EFFICIENT FINANCING PROGRAMS

• Government Insured
• U.S. Department of Housing and Urban Development
• FHA Energy-Efficient Mortgage
• FHA Section 203(k) Rehabilitation Mortgage
  Insurance
• FHA Energy-Efficient Home Mortgage
• FHA Mortgage Increase for Solar Thermal Systems
• FHA Title I Property Improvement Loan Insurance

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• Government Insured (cont.)
• U.S. Department of Veterans Affairs
• The U.S. Department of Veterans Affairs (VA)
  guarantees mortgage loans for veterans.
• It can be used to purchase or refinance a home
  along with the cost of making energy-efficient
  improvements.

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• Conventional Programs
• Most of the national lenders who offer
  energy-efficient financing operate through one of
  the following programs.
• ENERGY STAR Mortgage
• Fannie Mae
• Freddie Mac
• E Seal
• DETAILS

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HOW AN EEM SAVES MONEY
Standard Mortgage New EEM
Energy Improvement Costs 3,000
Appraisal Value 100,000 (add cost of improvement) 103,000
Down Payment 10,000 10,000
Mortgage Amount 90,000 93,000
P I 614 634
Energy Savings (Monthly) 0 (50)
Total Monthly Payments 614 584
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HOW AN EEM INCREASES BUYING POWER
For a standard home without energy improvements For a standard home without energy improvements For a standard home without energy improvements
Buyer's total monthly income 3,000 5,000
Maximum allowable monthlypayment 28 debt-to-income ratio 840 1,400
Maximum mortgage at 90 of appraised home value 132,900 221,500
For an energy-efficient home For an energy-efficient home For an energy-efficient home
Buyer's total monthly income 3,000 5,000
Maximum allowable monthly payment 30 debt-to-income ratio 900 1,500
Maximum mortgage at 90 of appraised home value 142,400 237,300
Added Borrowing Power Due to the Energy Efficient Mortgage 9,500 15,800
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THE ENERGY EFFICIENT MORTGAGE PROCESS SIMPLIFIED
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Overcoming Human Barriers II

• It has been suggested that the only way to
  encourage widespread use of Energy-Efficient
  Homes is through Governmental Legislation
  requiring energy-efficiency.

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Existing Legislation

• Most existing legislation is done at the state
  level.
• The Model Energy Code (MEC), published and
  maintained by the International Code Council
  (ICC), has influenced most legislation.
• While not all states have a requirement regarding
  the energy efficiency of homes, most states have,
  in some form, adopted provisions of the Model
  Energy Code (MEC).
• Other states have adopted the MEC as recommended
  practice but have no statewide-requirement that
  all new construction use it.

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• The MEC contains energy efficiency criteria for
  new residential and commercial buildings and
  additions to existing buildings.
• The MEC covers the buildings ceilings, walls,
  and floors/foundations and the mechanical,
  lighting, and power systems.
• While some states have adopted the MEC without
  modification, some states have adopted one of the
  MEC editions with state-developed amendments.

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• In an effort to harmonize building codes across
  America, the MEC was revised to become the
  International Energy Conservation Code (IECC),
  first printed in 2000.

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FEDERAL INVOLVEMENT

• Federal involvement in the effort to encourage
  energy efficient homes has chiefly come in the
  form of tax incentives.
• Example The Omnibus Federal Energy Bill
• Passed by the House on August 2nd
• Awaiting approval by the Senate

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The Omnibus Federal Energy Bill

• This Bill contains several tax credit provisions
  aimed squarely at residential real estate.
• It provides federal tax credits for homeowners
  who install energy conservation items such as
• New insulation
• Energy-efficient windows
• Doors
• Solar hot water
• Photovoltaic equipment

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• For owners of existing homes the credit will be
  20 of the amounts spent on Qualified Energy
  Efficiency Improvements", up to a maximum credit
  of 2,000.
• Tax credits are more valuable to taxpayers than
  deductions because they are subtracted
  dollar-for-dollar off the bottom line of a
  taxpayers federal tax bill.

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• There is a separate credit available for the
  installation of solar and photovoltaic
  energy-production equipment.
• These tax credits are similar to the credits for
  conservation, with a maximum allowable credit of
  2,000 during a tax year.

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• Under this Bill, home builders and contractors
  also get a shot at tax relief.
• When they install energy-efficient heating and
  cooling systems in a new home they are
  constructing, they may be able to qualify for up
  to a 2,000 credit per home.

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• These new federal tax credits are expected to be
  extremely popular.
• The congressional Joint Committee on Taxation
  estimates that the home improvement incentives
  alone will lead to 1.6 billion worth of tax
  credits to homeowners in the coming decade.
• The solar and photovoltaic credits are estimated
  to put 125 million back into home owners'
  pockets during the same period.