SACRAMENTO–Proposed legislation aimed at dramatically cutting greenhouse gas emissions will drive up the price of homes, price households out of the housing market, dramatically increase the number of Californians living in poverty and result in an annual loss of billions of dollars in California's gross state product, according to a report released by the former department of finance director and legislative analysts' office former chief economist. Furthermore, the report indicates that the immediate effect of Senate Bill 32 would be a sharp reduction in new construction activity until contractors and developers could gain expertise to adapt to the new requirements that would require on-site energy production for every unit built.
The report, authored by former department of finance director, Michael Genest, and former legislative analyst chief economist, Brad Williams, now of Capitol Matrix Consulting, and commissioned by the California Building Industry Association, analyzed SB 32 by senator Fran Pavley. The study found that, should the bill become law, the imposition of a zero net energy mandate on all new construction in California would have to be immediately implemented to achieve the goal's objectives. Zero net energy homes produce at least as much on-site energy as the home consumes.
Williams tells GlobeSt.com: "In a state where home prices and rents are already among the highest in the nation, a further $58,000 increase in construction costs would have far-reaching and negative consequences for builders, prospective home buyers, renters and the broader economy."
As written, SB 32 proposes a statewide greenhouse gas emissions limit of 40% below 1990 levels by the year 2030 and 80% below the 1990 levels for 2050. With current laws already governing new construction through the California Environmental Quality Act, the likely effect of SB 32's passage will be that all new construction be built according to zero net energy standards in order to meet SB 32's goals.
Williams states that SB 32 would create a de facto mandate, that all residential construction after its enactment be constructed to a minimum standard of zero net energy, regardless of whether it is cost-effective for the consumer.
"This mandate will have troubling negative impacts on the state's economic recovery including instability in the housing market,” he says.
The California median home price is already two and a half times the national average at $440,000, and rents are 50% higher than the national average. A variety of factors are responsible for California's high housing costs, but the legislative office stated that a shortage of housing is a significant contributing factor. According to the report, SB 32 would continue the imbalance between supply and demand in the market, further escalating home prices and slowing new construction activity.
"This is another case of putting the cart way before the horse, but with serious consequences for California," said Dave Cogdill, president and CEO of the California Building Industry Association. "SB 32 will, in effect, require emerging technology be built into every new home in the state. The market will not bear this premature and extreme policy, and frankly, Californians just climbing out of a catastrophic housing slump shouldn't be asked to shoulder the extra cost."
The California Building Industry Association is a statewide trade association representing homebuilders, remodelers, subcontractors, architects, engineers, designers and other industry professionals. Capitol Matrix Consulting provides expertise, insight and judgment on a wide range of fiscal, economic and policy issues.
As previously reported, governor Jerry Brown revealed an ambitious plan to address the impacts of climate change.
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Lisa Brown
Lisa Brown is an editor for the south and west regions of GlobeSt.com. She has 25-plus years of real estate experience, with a regional PR role at Grubb & Ellis and a national communications position at MMI. Brown also spent 10 years as executive director at NAIOP San Francisco Bay Area chapter, where she led the organization to achieving its first national award honors and recognition on Capitol Hill. She has written extensively on commercial real estate topics and edited numerous pieces on the subject.
