America’s Housing : WASHINGTON : Energy-Efficiency Rating Plan May Come to Homes

Washing machines and refrigerators have come with yellow-and-black energy rating stickers for several years, and soon whole houses may too.

With such an energy rating system, consumers would know for the first time exactly what the new home is going to cost them--taking into account principle, interest and staying warm--long before those first utility bills arrive.

Potential home buyers could use such energy ratings to comparison shop. For example, take two comparable houses with the same number of bedrooms, baths and list price. But if one is energy efficient and its monthly utility bills are half the others, the decision about what to buy may be a whole lot easier.

Sen. Dale Bumpers (D-Ark.) has proposed legislation to establish a voluntary national home energy ratings system, much like the appliance energy rating system now on your refrigerator and elsewhere.

“A national home energy efficiency ratings system will have energy conservation benefits, expand the pool of affordable housing and, by reducing demand for carbon dioxide-producing fossil fuels, have a positive impact on the greenhouse effect,” Bumpers recently told the Senate subcommittee on energy regulation and conservation.

A 1986 study done at the Joint Center for Housing at Harvard University described the potential of a uniform energy rating system in stark numbers: up to 22% more families could qualify for home ownership. That is about 250,000 more families a year.

Bumpers says home buyers and sellers could benefit from his proposal. If companion legislation establishing an energy-efficient mortgage program passes, homeowners also could use the rating system to qualify for mortgages in which the usual debt-to-income ratio has been stretched. Sellers of energy-efficient homes would have a new marketing tool.

Bill Prindle, a senior program manager for the Alliance to Save Energy, said that energy conservation is cost effective in both new and existing housing.

“It is not difficult to achieve a 25% savings in average energy costs,” he said. “And if everyone did that, you could reduce the nation’s total housing expense by 4%, or $25 billion.”

Bumpers’ legislation would encourage the adoption of a national energy efficiency rating system for all homes, new and existing. The bill, which is co-sponsored by Sen. James Jeffords (R-Vt.), is modeled after pilot programs in five states--Arkansas, Rhode Island, Alaska, Vermont and Mississippi. Texas and South Carolina will start programs soon.

The bill would direct the Department of Energy to contract with the nonprofit organization running the Arkansas program, Energy Rated Homes of America, to develop a rating system by working with other federal agencies, trade associations and state officials.

The pilot programs rate homes on the basic elements that make up a monthly energy bill, such as insulation, solar gain, air leaks, heating and cooling systems, water heating, lights and appliances

They use a five-star, 100-point scale. Each star represents 20% of the possible energy efficiency. One star is the lowest rating and four stars would be required to label a house “energy efficient.”

Almost everyone loves the concept of the home energy rating system, although there is some disagreement about its implementation.

The proposed structure of the Bumpers’ program to set up programs administered on a state-by-state basis through nonprofit organizations, rather than the Energy Department, is important, said Ron Hughes, president of Energy Rated Homes.

“In general, the shelter industry opposes government interference and regulations telling them how to run their business,” he said. “We have been very successful running these as not-for-profits, with boards of directors drawn from the shelter industries, so that they are cooperative efforts.”

In the states where Hughes has helped establish programs, different segments of the industry have taken the lead role. In Rhode Island, the utility companies have set it up; in Vermont, it was the state financial agency, and in South Carolina, it was the realtors.

Not surprisingly, the greatest opposition seems to be coming from the Department of Energy, which has toyed with the concept for 10 years now and is acting a bit like a disappointed suitor.

“We are generally opposed for a number of reasons, although we support the concept,” said an Energy Department official who declined to be identified.

A uniform rating system, rather than guidelines, might preempt state programs that are already up and running.

Nationally, the realtors, who don’t usually support anything that could endanger a real estate deal, have adopted a “wait-and-see position,” said Lois Clinton, an official with the National Assn. of Realtors.

Don Stafford, vice chairman of the energy committee of the National Assn. of Homebuilders, testified before the Senate that the bill is “just one piece of the puzzle. Acting on individual pieces without full recognition of all the components will hinder full development of a comprehensive plan.”

He said the rating system could turn out to be merely a shopping tool that would devalue less-efficient housing, leaving it to those who can least afford the higher energy costs.

For some time now, builders have supported a more comprehensive energy program that would rate homes and put in place an energy-efficient mortgage that would stretch traditional debt-to-income ratios for buying energy-efficient homes.

Several bills under consideration would develop energy-efficient mortgages. For several years now, it also has been possible to include the cost of weatherizing in a mortgage with the government-backed Energy Efficient Mortgage program.

Although he applauds the concept, Prindle, of the Alliance to Save Energy, questions some of the narrower provisions of the Bumpers’ bill.

“The bill takes the process of developing standards out of the executive branch and places it with a not for profit. We feel the (Energy Department) really ought to be in charge. It’s a question of credibility,” Prindle said.

If all the conflicting opinions are resolved, there appears to be real consumer benefits from a home energy rating system.

New legislation, designed to take some of the bite out of the credit crunch hitting the nation’s home building industry, has been introduced in the House of Representatives.

The Loans to One Borrower Transition Act of 1990 (HR 4565) would phase in over two years the new restrictions on loans to one borrower imposed on lenders by the Financial Institutions Recovery and Enforcement Act (FIRREA).

The problem arose because immediately upon becoming law last year, FIRREA reduced the maximum total amount a savings and loan can lend to any one borrower from 100% to 15% of the thrift’s capital.

The limit means that despite previous loan commitments, a savings and loan often can lend only a portion of the amount a builder might require to build a housing project, or even to finish one already in progress.

Historically, more than half the builders nationwide have used savings and loans to finance their projects. Almost immediately those builders began to experience a credit shortage and they have spent the last few months scrambling to find new financial sources.

Martin Perlman, president of the National Assn. of Home Builders (NAHB), described the situation as a “crisis.”

Of the builders responding to a recent NAHB survey, 52% said that savings and loans are no longer making loans for land acquisition, 46% said that loans are not available for land development and 30% said they couldn’t get loans for construction.

“The purpose of a two-year transition rule is to give both lenders and borrowers sufficient opportunity to adjust to the new law,” said Rep. Peter Hoaglund (D-Neb.) when he introduced the bill before the U.S. House of Representatives.

“Many developers have been left with half-finished projects, unable to borrow additional funds for project completion. This caused housing projects to stop in their tracks, and led to the layoff of workers and defaults on loans.”

The legislation would establish a two-year transition period. For the first year, thrifts could lend up to 60% of capital and during the second year they could loan up to 30% of capital. In the third year and beyond, a thrift could lend up to 15% of capital.

Forty-three congressmen, including 22 members of the House Banking, Finance and Urban Affairs Committee, to which the bill has been referred have signed on as co-sponsors. A similar bill is being considered in the Senate.