Realtors’ association questions aspects of possible ordinance

Realtors’ association questions aspects of possible ordinance

Written by Christi Covington Friday, 22 August 2008

Austin’s Energy Efficiency Upgrades Task Force is finishing discussions for the basis of a possible ordinance with the ability to affect the city’s real estate market. Some say it could increase housing prices.

However, Matt Watson, who is Mayor Will Wynn’s policy director, said the effort so far is not only about environmental protection. It is about housing affordability. He notes that since 1994 Austin Energy has not changed its base rate, which covers the cost of operating the utility. What is increasing is the cost of fuel, which the consumer directly pays.

“[Energy] keeps going up, and it’s going to keep going up,” he said.

At the beginning of the year, the task force started meeting to develop the next steps in the Austin Climate Protection Plan, which promotes the policy of making the city a leader in reducing global warming.

Now with final recommendations possibly ready by the end of August, the biggest questions are how much of a new ordinance should be voluntary and how much should be mandatory for property owners?

As far as the Austin Board of Realtors is concerned, all but an energy audit should be completely voluntary.

Socar Chatmon-Thomas, who is chairman of ABOR and sells homes in Southwest Austin, has attended the task force meetings throughout the process. She said that for commercial properties, the recommendation is to make almost everything voluntary, but that is not the case for single-family or multifamily developments.

“If it is all voluntary for the commercial, why can’t everything else be?” she said.

On the home front

For single-family properties, owners would be required to have energy audits before selling their home. These would probably be conducted by a third-party contractor, who would disclose efficiency information to prospective home buyers. How much the audits will cost is not known, but estimates have run between $150 and $350.

In theory, the audit would take place at the time of the state-required home inspection. It will likely include both a visual and an air conditioning’s duct system test.

“Home buyers, for the first time, when they go to make this investment — which, for most of us, is the biggest investment we will make all of our lives — will get information about the energy efficiency of a home,” Watson said. “You get a home inspection and find out if there is a crack on the back steps, but you don’t know what the energy efficiency is? This is a big deal for consumer protection.”

ABOR agrees, Chatmon-Thomas said, and even came up with the energy audit recommendation. It is the second element, which deals with energy efficiency upgrades, that she would like to see change. Home sellers or buyers would have the option to participate in an Energy Savings Program by performing the upgrades recommended in the audit.

To be counted, the upgrades would have to take place within the first year of the home’s purchase and cost up to 1 percent of the home’s sell value or the amount that is equal to upgrades that would not exceed a five-year payback period for energy savings. Watson said the paybacks would be determined by industry standards and Austin Energy, and eventually far outweigh any expenses.

“It is a positive cash flow deal,” he said.

However, the task force has set targets of a percentage of the housing market it wants to participate. If the targets are not met for two consecutive years, then the program becomes mandatory. Chatmon-Thomas argues this provision takes out the voluntary aspect.

“It is mandatory,” she said. “It is just deferred mandatory. If we had set the goals for 10 percent of homes to participate in the next 10 years, I could see [that] we could make that happen, but not with these targets.”

In the first year, the goal is to get 25 percent of nonexempt homes that are sold to participate in the program and by the fourth year, to get 85 percent of the market.

If the upgrades became mandatory, the burden would be on the buyer.

“Under no circumstances would a seller ever be required to make upgrades to a home before they could sell a home,” Watson said.

Multifamily living

He does acknowledge it is a little more difficult to get the multifamily market wanting to participate because it is mostly renter based. Apartment and condominium development owners typically do not have to pay utilities, and the payback is not enough incentive for tenants.

“Slightly more than half of the residents in Austin are renters,” he said. “These are the folks who, generally speaking, can least afford to have high utility bills.”

Working by decade periods, each development owner would be required to conduct an energy audit, and 80 percent of all units in the city would need recommended upgrades. For apartments built before 1970, those upgrades would have to take place within two years and Austin Energy would increase its existing rebates to 150 percent. Younger developments would have more time to complete upgrades, but with fewer rebate options.

An owner would not be required to spend more than the amount equal to what the upgrades would generate in energy savings for a five-year payback period. Again, the program is initially voluntary, except the audit, if enough participate. That changes if targets are not met.

Commercial

The last element of the draft recommendation, the commercial group, is the least formed, with basic mandatory and voluntary goals tentatively defined in late July. All commercial buildings would be required to receive a rating generated by the Energy Star Portfolio Manager or other rating system approved by Austin Energy that must be complete within two years. After that, any upgrades are all voluntary, which Chatmon-Thomas applauds. It is what she hopes to see happen to the entire draft recommendation.

“Austin embraces green,” she said. “Given two homes to choose from, we are going to choose the one that is most energy efficient on the disclosure. That one is going to win all day, every day.”

Energy upgrade - For single-family homes

• The city of Austin’s Energy Efficiency Upgrades Task Force has written draft recommendations that could become a city ordinance, which would affect the local real estate market. The final recommendation is expected by the end of the summer before going to board and commissions and then city council this fall.
• Mandatory
  • What: A home seller must get an energy audit and disclose the results to buyers.
  • When: Before the home is sold.
  • Cost: Estimates range between $150-$350.
• Voluntary
  • What: Following an energy audit and disclosure, home sellers or home buyers can participate in the Energy Savings program by installing energy efficiency upgrades recommended in the audit. Austin Energy is expected to continue its existing energy efficiency financial incentives, including cash rebates or low-interest loans.
  • When: To count in the Energy Savings program, upgrades must be completed before or within one year of the home being sold. The completion will be valid for as long as the current owner owns the home or 10 years, whichever is a longer period.
  • Cost: Homeowners would make upgrades that pay for themselves in five years in energy savings or cost no more than 1 percent of the home’s sale value. For a home valued at $190,000, that would be $1,900.
• Possibly mandatory
  • What: If targets to get homeowners to participate in the Energy Savings program are not met, the voluntary element would become mandatory. Following an energy audit and disclosure, home buyers would be required to participate in the Energy Savings program by installing energy efficiency upgrades recommended in the audit. Some homes would be exempt.
  • When: Upgrades must be completed before or within one year of the home being sold. The completion will be valid for as long as the current owner owns the home or 10 years, whichever is a longer period.
  • Cost: Homeowners would make upgrades that pay for themselves in five years in energy savings or cost no more than 1 percent of the home’s sale value. For a home valued at $190,000, that would be $1,900.
• Energy Savings program targets
  • If any of the targets are not met for two consecutive years, the voluntary elements would automatically become mandatory the next year.
  • Year 1: 25 percent of nonexempt homes sold participate in the program
  • Year 2: 45 percent of nonexempt homes sold participate in the program
  • Year 3: 65 percent of nonexempt homes sold participate in the program
  • Year 4 and thereafter: 85 percent of nonexempt homes sold participate in the program

Commercial options

• Of the three development groups, the commercial real estate initiative is the least formed, but basic mandatory and voluntary goals were tentatively defined in late July. If the draft becomes a recommendation and ultimately a city ordinance, reassessment of goals and targets will occur every two years based on new information.
• Mandatory
  • What: All commercial buildings will be required to receive a rating generated by the Energy Star Portfolio Manager or other rating system approved by Austin Energy.
  • When: The rating must be complete within two years.
• Voluntary-interim goal
  • What:
    • A) At least 40 percent of the square footage of commercial properties in Austin will come from buildings that have achieved the greater of:
      • A score of 50 or other equivalent, according to the rating system. This is the national median score.
      • A 20 percent improvement in their initial energy efficiency rating up to a score of 75 or other equivalent. or,
    • B) At least 80 percent of the square footage of commercial properties in Austin will come from buildings that have achieved either:
      • An improvement in the initial rating by half the difference between the original score and a score of 50 or other equivalent. Fifty is the national median.
      • A 10 percent improvement in the initial energy efficiency rating up to a score of 75 or other equivalent.
  • When: These goals will be met within three years after the audit completion period.
• Voluntary-overall goal
  • What: At least 80 percent of the square footage of commercial properties in Austin will come from buildings that have achieved the greater of:
    • A score of 50 or other equivalent, according to the rating system. This is the national median score.
    • A 20 percent improvement in their initial energy efficiency rating up to a score of 75 or other equivalent.
  • When: These goals will be met within five years after the audit completion period.

Requirements for apartments

• Similar to the single-family homes participating in the Energy Savings program, multifamily properties will initially not be required to complete energy efficiency upgrades, according to the city’s current Energy Efficiency Upgrades Task Force draft. However, if each target is not met, then that group of apartments, designated by year built, will all be required to complete the upgrades in the future. None of these proposals are finalized.
• Before 1970
  • What: All owners of multifamily properties built before 1970 must complete an energy audit on all units and perform or commit to perform upgrades to 80 percent of units • Estimated to affect 539 properties
  • When: Audit and upgrades must be completed within two years. During this time, the property owner will be eligible for 150 percent of normal Austin Energy rebates.
  • Cost: The amount is equal to upgrades that would not exceed a five-year payback period for energy savings.
• 1970-1980
  • What: All owners of multifamily properties built between 1970 and 1980 must complete an energy audit on all units, and 80 percent of units in the city would need recommended upgrades • Estimated to affect 434 properties
  • When: Audit and upgrades must be completed within four years. During this time, the property owner will be eligible for 125 percent of normal Austin Energy rebates.
  • Cost: The amount is equal to upgrades that would not exceed a five-year payback period for energy savings.
• 1980-2000
  • What: All owners of multifamily properties built between 1980 and 2000 must complete an energy audit on all units, and 80 percent of units in the city would need recommended upgrades • Estimated to affect 353 properties
  • When: Audit and upgrades must be completed within six years.
  • Cost: The amount is equal to upgrades that would not exceed a five-year payback period for energy savings.
• 2000 and forward
  • What: All owners of multifamily properties built in 2000 and forward must complete an energy audit on all units, and 80 percent of units in the city would need recommended upgrades • Estimated to affect 96 properties initially
  • When: Audit and upgrades must be completed within eight years.
  • Cost: The amount that is equal to upgrades that would not exceed a five-year payback period for energy savings.
• Energy Hogs: The exception
  • Owners of multifamily properties whose buildings use more than 150 of the average energy intensity will be required to complete an energy audit within 120 days and sign an agreement with Austin Energy to have necessary upgrades performed within nine months. The owner will be eligible for enhanced rebates.
  • If the owner does not perform the audit and sign the agreement, the owner will lose enhanced rebate options. Austin Energy may require an audit and upgrades to be performed within 12 months of notice.