BC Energy Step Code Responses to Inevitable Questions
Many BC local governments are consulting and considering if
and when to implement the BC Energy Step Code. Nido Design provided the following submission to the City of Kelowna as part of their consultation.
This post provides our response to inevitable questions decision makers will have. Refer to our previous post which identifies why we join other building professionals and Three for All for BC local governments to adopt Step 3 and provide a pathway toward Net-Zero Ready buildings by 2032.
“Implementing the Step Code will erode housing affordability.”
The Step Code Council’s costing analysis for implementing Steps 1 to 3 in Kelowna’s climate zone found that construction cost impacts of implementing Step Code 3 would less than 2.4% for all building types. Note that 2.4% is considered to be well below typical swings in construction costs and increases in construction cost do not necessarily translate directly to increases in housing costs.
The premise that increases in construction costs would directly erode housing affordability is a red herring. For this assertion to be true it would need to be proven that housing costs are directly tied to construction costs.
Real estate market data shows that price is driven primary by supply and demand. Between 2015 and 2016 the average house price rose 11.6% while active listing dropped 29.1%. That alone is an almost $50,000 price increase for the same minimum Code house! At the same time the construction price index (Vancouver) only rose 0.9%.
Sharp increases this year in local construction costs in Kelowna is chiefly because there aren't enough trades to keep up with the robust construction activity and record lumber costs due to forest fires and the NAFTA dispute. Isolated events therefore can have significantly greater impact on construction costs than Step Code measures. Still, house prices are limited by the price the market will bear, not spikes in construction costs.
The market also continues to exceed psychological pricing thresholds. An unheard price to pay for an average family home four years ago is now the going price. In Kelowna, the real estate price increase in 2015/2016 alone could pay for the construction of a Step 5 building!
Buildings are constructed to last for generations and the existing building stock represents the vast majority of housing. The greatest affordability will always be in the existing housing stock because they were built when both land and construction costs were cheaper. Still, resale prices well exceed their construction cost. Had R2000 (equivalent to Step 4) been mandatory when implemented in 1981 it’s likely that even with a marginal increase in the construction cost current market prices for those homes wouldn’t differ much and yet the comfort, carbon footprint, and energy cost of those residents would have been significantly lower.
To date, we’ve killed any value in the existing housing stock
with minimum Code construction as the shell is the only part of the building that doesn’t break down or go out of style. The equipment installed in new homes is just as bad. A recent survey of several newly construction luxury priced homes found the lowest efficiency air conditioners legally allowed are being installed despite much higher efficiency units available for only a few hundred dollars more. In one example, $950,000 won’t even buy you more than a minimum Code townhouse with no option to upgrade performance if you wanted to. Affordability is most eroded by the practice of building a home the cheapest way possible and selling for as high as the market will bear.
So long as this practice continues each new building will be a multi-generational mistake. Reducing energy demand later means inefficient equipment will be destined for landfills prematurely and building shells will be subjected costly energy retrofits (perhaps absurdly with government subsidy) or premature demolition.
In the future houses built today will be considered the affordable housing stock and their construction cost will long be forgotten. This makes the case why waiting to adopt the Step Code is a disservice to long term affordability.
“The Step Code should be voluntary.”
Voluntary Step Code adoption sends a poor signal to the construction industry. The building sector’s track record has proven that voluntary measures are not effective. R2000 was first introduced in 1981 as a voluntary standard. Over 30 years later, so few have been built that even if a consumer wanted one they would be unlikely to find one to buy. Today, almost all buildings are still constructed to minimum Code. In addition to having lower levels of insulation than R2000 homes, their average air leakage (a significant source of heat loss and measure of quality) is 3.5 times that in the R2000 standard and 8 times that of a Step 5 building! This poor track record shows there is no reason to believe voluntary implementation of the Energy Step Code would result more energy efficient homes to be built and help the industry transition to the 2032 net-zero goal.
One assertion for voluntary implementation as opposed to mandatory implementation has been a lack of local certified energy advisors to keep up with the pace of construction. A voluntary Step Code makes this problem worse because the private sector has no clear market signal to invest in training and creating energy advisor jobs.
Also, only with mandatory implementation will trades have the certainty that energy performance will be valued to justify investing in training for their workers to build beyond minimum Code construction.
A one year lead time for mandatory implementation would provide municipalities and industry time to develop the capacity needed to implement the Step Code, and provide certainty that existing and currently built higher performing buildings will be recognized.
“Implementing the Step Code will reduce our competitive advantage to neighbouring communities that do not implement the Step Code.”
Implementing the Step Code will provide Kelowna with a competitive advantage both for attracting new home buyers and developing highly skilled local trades whose services can be exported throughout the Province.
Land is a fixed asset that cannot be moved to other communities. A desirable place to live will always attract new residents and the Kelowna region is forecast to continue to be Canada’s fastest growing regions for a long time.
This desirability has been responsible for the sharp increase in real estate prices, highest in BC’s Interior. 2017 will be a record year for Kelowna building permits exceeding half a billion dollars in value. Most of these buildings will be constructed to minimum Building Code with no assurance of their energy performance. By these figures it’s evident that real estate costs are not killing Kelowna’s competitive advantage.
Implementing the Energy Step Code will only help Kelowna continue to be a highly desirable city to live and move to. Residents buying homes in Kelowna will know what they are paying for when it comes to housing performance. Consumer choice will be the winner. In the decision to make the greatest investment of their lives, the consumer will choose the tested high performing home in the City rather than the untested home outside of the city.
Kelowna’s construction workers, engineers, and architects will have an advantage over other workers in the region because they will have the experience building significantly higher performing buildings unlike their colleagues in laggard cities.
“Let’s wait and see what other municipalities do or if the Province will make Step Code mandatory.”
Leadership is taking action on something that hasn’t been done before.
The building industry has proven for decades that voluntary standards don’t work and it requires mandatory standards to create a level playing field to advance beyond minimum Building Code construction. The benefits for building better buildings to the community as a whole are clear: It provides consumer choice and value, lower energy costs, greater occupant comfort, greater productivity in workplaces, and avoided energy dollars being spent in the community.
Leadership therefore is required by local government to improve building energy efficiency.
The Bottom Line
Provincial legislation has a hard cap of 2032 for all new buildings to be net-zero ready. The BC Energy Step Code was developed with industry and local governments to help the industry transition within a reasonable period of time.
Buildings represent the second largest source of community greenhouse gas emissions next to transportation.
A community is either serious about meeting its climate action targets or not. If it is, waiting another thirty years to act is not an option as both the climate can’t wait and misaligned arguments to do nothing will not change. In fact, there is no better time to implement the BC Energy Step Code then when the housing market is strong. In fact, some local governments are seizing the opportunity to implement the Step Code in tandem with Greenhouse Gas intensity targets for buildings to meet their community targets.
Mandatory implementation of the BC Energy Step Code is for the benefit of all residents and the competitiveness of the region as it will enable higher quality buildings to be available that currently don’t exist in the market.