Michigan home energy efficiency standards stalled amid homebuilders lawsuit

• Homebuilders are suing Michigan over a proposed code that would mandate more insulation in the name of greater energy efficiency
• The state has agreed to hold off on implementing the code while the suit is pending, slowing down the already-delayed process of updating Michigan’s energy efficiency mandate
• Experts say housing supply issues stem more from restrictive zoning laws than energy codes

Michigan’s attempt to adopt new home energy efficiency standards is facing more delays because of stiff resistance from homebuilders.

Implementing the changes — already in place in neighboring states — would save new home buyers 10.7% in energy costs, equal to $396 in annual utility bill savings, according to the US Department of Energy. Over 30 years, homebuyers could net approximately $7,300 in savings from the code that would require builders to use more insulation in new home construction.

However, a federal study indicates the increased upfront cost of transition to the new code could be as much as $5,000 per single-family home, which homebuilders argue could stifle the state’s efforts to build more affordable homes.

The new standards were supposed to go into effect in August but are on hold while a lawsuit filed in June by representatives of the construction industry plays out in court.

The Home Builders Association of Michigan and the Michigan Manufactured Housing Association sued the Michigan Department of Licensing and Regulatory Affairs, or LARA, claiming the department’s proposed code update would be too costly for builders and that the department is violating its rulemaking procedures.

RELATED: 

• Updating Michigan energy rules on new homes faces pushback from builders 
• Michigan allots $5.4 million for worker housing, down payment help 
• Q&A: Michigan housing director says tariffs, ‘uncertainty’ posing challenges 

LARA’s proposal is based on the 2021 International Energy Conservation Code, or IECC, a model used by many states to guide energy efficiency in building. Michigan’s current code is based on the 2015 IECC.

Advocates for updating the building code say the suit is further jamming up an already delayed updating process and allowing builders to build less energy-efficient homes at the expense of ratepayers and the environment. 

State law says Michigan is supposed to update its building codes every three to six years, meaning LARA is already two years behind schedule.

“It does a disservice to the people who live in our state who aren’t seeing those energy efficiency benefits and lower utility bills in their new homes,” said Carlee Knott, the energy and climate policy manager at the Michigan Environmental Council.

But representatives for the homebuilding industry argue that the state’s proposed codes force builders to use costly, unnecessary materials and consequently drive up home costs. 

“The state has moved in a tremendous way to help support more workforce housing, attainable housing across the state,” said Bob Filka, CEO of the Home Builders Association of Michigan. “Unfortunately, in this area, a lot of that momentum will be lost if they actually do get the ‘21 (code) implemented.”

A spokesperson for LARA declined to comment for this story, citing ongoing litigation. 

The proposed standards for Michigan’s new home constructions call for several inches in added ceiling insulation above current standards, more basement wall insulation, tighter air seals around windows and ceilings, rigid foam insulation on all exterior walls and LEDs for all light sources.

The federal government estimates those changes would cut statewide carbon dioxide emissions by 44,850 metric tons in the first year and could create 10,000 more jobs by spurring more construction and increasing homeowners’ disposable income over the next 30 years.

Homebuilders say the code is riddled with redundancies that don’t actually improve energy efficiency but do up costs. They say the state should skip over the 2021 IECC and instead base the state building codes on the newly released 2024 IECC that allows more flexibility and rolls back some mandates.

“The ‘21 code is great for insulation manufacturers, but the ‘24 code is great for homeowners and builders,” said Filka.

Filka pointed, for example, to a proposed requirement in the 2021 code that builders insulate all heating and cooling ducts, even if they’re inside the building envelope, which is already insulated.

Isaac Elnecave, of Phius, a Chicago-based nonprofit that promotes energy-efficient construction, expressed skepticism that homebuilders couldn’t learn to mitigate costs under the 2021 code.

“I always try to make the point that the market catches up,” Elnecave said. “They learn how to build more efficiently.”

Michigan law requires code updates to be “cost-effective,” meaning the economic benefits of the proposed standards should exceed the upfront costs of meeting those standards within seven years. 

However, state regulators and the builders disagree on how to measure cost-effectiveness.

The construction industry points to a Department of Energy finding that it would take just under nine years for the sum of the annual savings to match the cost of new standards. That so-called “simple payback” is commonly used to measure cost-effectiveness, the report says.

Meanwhile, state regulators say spreading out the upfront costs and long-term benefits over a 30-year mortgage period shows homeowners would see a positive cash flow within two to six years.

Twenty-six states have updated past the 2015 IECC, with 12 on the 2021 IECC, according to the Department of Energy. Michigan and seven other states’ codes are based on the 2015 IECC. The other 16 states are either on earlier versions of the code or don’t have statewide building codes.

The homebuilders’ lawsuit alleges that adopting the building code in Michigan would come into “direct conflict” with the state’s ability to address an ongoing housing shortage because it would drive home costs up.

Experts on the housing shortage told Bridge Michigan that rising home costs are the result of several factors and energy efficiency mandates play a relatively small role.

While the code definitely plays a role in driving up costs, teasing out its influence from other factors like materials price increases and labor shortages is incredibly difficult, Elnecave, of Phius, said. 

“Regulatory barriers are a major reason for the housing shortage,” said Alex Horowitz, the director of housing policy research at Pew. “Energy efficiency is not one of the primary ones, though.”

Rather, Horowitz said, restrictive zoning policies that require large minimum lot sizes for apartment buildings, ban them from being built on land zoned for commercial use and require two stairwells in small buildings are more to blame for rising construction costs that are passed onto consumers.

The state could pull some levers to spur more construction, Horowitz said. States like Maine and Texas have passed laws allowing homes on smaller lots so people aren’t forced to buy more land than they can afford, for example. Connecticut and Hawaii have passed laws making it easier to convert empty office space into apartments. And 18 states have passed laws to allow property owners to have “accessory dwelling units” built in their back yards.

The Michigan State Housing Development Authority recently released a guide designed to help local governments address some restrictive zoning laws, including recommendations that they allow backyard cottages, eliminate minimum lot size requirements and ax off-street parking requirements.

However, the state Legislature hasn’t addressed those issues and no lawmaker has introduced a bill this session attempting to change zoning restrictions.

“We know that reforms to make it easier to build housing are effective,” Horowitz said. “But Michigan hasn’t enacted reforms like that, yet, even though other states have.”