Report puts price on green homes transition in Massachusetts

By Sam Drysdale

STATE HOUSE, BOSTON, JUNE 27, 2023…..Without additional financial support, climate-friendly building regulations could “push homeownership out of reach” for some Massachusetts families, according to a new report from the the Home Builders & Remodelers Association of Massachusetts.

The report estimates that the state’s new “net zero” residential building code updates are likely to increase the cost of home construction by roughly 1.8 to 3.8 percent — adding about $10,000 to $23,000 to the median cost of a single-family home. The researchers also estimated a 2.4 percent rise in construction costs for large multi-family buildings.

State laws call for the state to reach its climate target of achieving net zero greenhouse gas emissions by 2050. Currently, more than one-quarter of carbon emissions comes from the building sector, according to the report, most through on-site combustion of oil and methane for heating residential and commercial buildings.

New state regulations seek to make these buildings more energy-efficient, by requiring reduced emissions from heating, and by looking at alternatives to decarbonize heating and cooling altogether.

But in the midst of a crisis of housing affordability and access across Massachusetts, energy-efficient homes are more expensive to build, leading to increases in home prices and decreases in housing production, the report found.

The median price for single-family homes in Massachusetts was $553,500 in April — 1.2 percent lower than the median price in April 2022 of $560,000, according to the Warren Group.

As of December, municipalities have been able to opt-in to more energy-efficient requirements of a new specialized stretch code. The building code updates are meant to encourage builders to shift away from fossil fuel heating in favor of electrification — estimated to save the state 500,000 tons of greenhouse gas emissions by 2030.

Former Gov. Charlie Baker said at the time that the changes to the stretch energy code and specialized municipal opt-in code would have “no-to-minimal costs” to new construction. Baker had initially vetoed the code changes as developers warned that a net-zero stretch code would make the construction of new homes cost-prohibitive.

In a survey conducted by the reports’ researchers from the MIT Center for Real Estate and Wentworth Institute of Technology, homebuilders identified what they called “obstacles” to the construction of more affordable, energy-efficient housing.

They said restrictive land use rules, permitting delays, a lack of clarity around financial incentives, a shortage of workers skilled in green home building and continued supply chain issues have made it more challenging to build new residential units that both met the state’s climate targets and are affordable for working and middle class families.

“The economic modeling here shows that these increases in construction costs could push the median single-family home in Massachusetts out of reach for between 15,000 and 33,000 households, before taking into account any public financial incentives for green building. The increased energy efficiency of homes will potentially offset some of the increase in construction costs, but not all,” the report says.

Gov. Maura Healey announced the launch of a “green bank” last week to attract private investment and federal money to pay for building retrofits and new construction of decarbonized buildings. The Massachusetts Community Climate Bank is getting started with $50 million from the Department of Environmental Protection, run out of MassHousing, with a focus on affordable housing.

The program will lend directly to building owners, and looks to take advantage of affordable housing refinance cycles to help pay for heat pumps, building envelope efficiency upgrades, heat pump water heaters, high-efficiency appliances and solar panels as part of affordable housing renovations.

In addition to the Community Climate Bank, HBRA recommends that policy makers reform local zoning to address housing unaffordability and invest in energy-efficient construction.

“Since local land use regulations are currently a major driver of the high cost of housing, reform of local land use regulations to facilitate the construction of more housing units should accompany the strengthening of green building standards,” the report says.

The association also asks policy makers to streamline the permit process and restructure financial incentives to build green, to keep those incentives in place for longer periods of time. They point to the new “green bank,” seeing it as an opportunity to “expand financing resources” but also call for an improvement to underwriting of energy-efficient homes and greater use of the Residential Green and Energy Efficient Addendum by realtors and appraisers.

“State and local permitting requirements add substantial time, cost, and uncertainty to current home construction. State efforts to streamline these permit requirements could enable the construction of more affordable energy-efficient homes,” it says.

For much of the land where multi-family construction is allowed, residents or municipal officials must approve a special permit for these projects through town meeting or a city council vote, according to the report. Homebuilders also told researchers that permits for energy-efficient buildings can be delayed when inspectors are unaware of alternative code-compliant ways to use new “green” technologies.

“The combination of the current crises of climate change and housing affordability require bold action,” the report says, “More action is necessary to increase housing affordability, especially in those municipalities that have adopted these more stringent standards.”