This past May, the Colorado state legislature approved HB 22-1362, a bill that aims to significantly reduce the state’s carbon emissions and fossil fuel dependence through several building code changes at the state level.
It’s an ambitious bill, part of the state legislature’s goal to reduce statewide greenhouse gas emissions by 26% by 2025 and by 50% by 2030. Senior Architect Travis Hendrix at KGA is following the new code development process closely and has been involved in Denver’s green code commission as the city plans to roll out its own building code changes in 2023. Many thanks to him for his leadership and insights about the bill’s passage and subsequent state code adoption. In this blog, we’re walking through several key advantages and potential challenges for Colorado builders and homeowners in 2023 and beyond.
Next Steps for Colorado HB 22-1362
Now that the bill’s been passed and signed into law, an energy code board will be appointed to develop language for two model codes that will provide the minimum requirements for counties, cities and state agencies. The 2021 International Energy Conservation Code (IECC) will be used as a baseline for the new code language that will address the following:
- Development of minimum code requirements for electric and solar-ready homes and commercial buildings by June 2023
- Model language for improved energy efficiencies and carbon reductions in homes and commercial buildings by July 2025
Colorado is a home rule state, meaning that building codes have been historically developed and implemented at the local level as long as they meet established minimum safety requirements. The state’s new building greenhouse emissions bill centralizes the code development process while raising the minimum standards for developers or builders on any new construction. Home rule will be retained for all other code sections, which may add complexity and confusion.
Additionally, following the IECC, Colorado will eventually require existing homes and structures to adopt these new standards as part of any remodeling, renovation, or refurbishment project. The rollout timeline of these changes has yet to be determined, and the board is expected to take a more pragmatic approach to retrofit requirements. For example, dual fuel options may be available to help ease the transition.
We continue to be hopeful that all necessary stakeholders will be represented on the new energy code board for a transparent and fair process. From our own experience in Colorado residential building, we’ve seen firsthand how sustainable innovation is achieved through design. We look forward to helping our clients adopt these new building codes in a way that balances measurable environmental impacts with housing affordability.
Green Code Benefits
Most of us can agree that the built environment should have minimal impact on the environment and improve the health and safety of everyone. Durable homes built with quality materials and technological innovation create healthier and more resilient communities. While long-term data is unclear, Colorado’s updated building codes aim to achieve several positive outcomes.
Decreased Dependence on Natural Gas
The new state code language will include electric and solar requirements in all new construction — homes and buildings must be built to accommodate electric vehicles, high-efficiency electric appliances, and rooftop solar. This will reduce the state’s dependence on natural gas and greenhouse gas emissions. And in light of geopolitical events that are constraining the world’s fossil fuel supply, Colorado’s updated building codes will help push the country toward a more energy-independent future.
The other side of this argument is the lack of infrastructure investment to support full electrification as well as the higher costs that will come during the transition — both for natural gas and electricity. These changes will add to the 54% increase in natural gas costs Colorado customers are already facing this December. We’ll touch on natural gas and electricity costs in more detail below.
Increased Home Durability
Homes built with better quality and more sustainable materials will last longer and extend the construction lifecycle. High-performance homes are good for homeowners because they reduce the lifetime cost of ownership. Fewer home improvement projects translate to less waste in landfills.
Another positive outcome to improved materials and construction methods is less household energy usage — potentially reducing monthly utility bills. While it’s still too soon to tell how much of a reduction Coloradans can expect to see, some early estimates suggest $33 to $66 per year.
Healthier Indoor Environments
Greener building codes may also help regions already challenged with air quality issues, like the dangerously high ozone levels impacting the Front Range. Indoor air pollution will be reduced with lower-carbon construction and reduced reliance on natural gas for a home’s major systems. Tightening a home’s or building’s envelope will also require improving ventilation to address air exchange between indoors and outdoors.
Green Code Challenges
These upcoming building code changes are already drawing some concerns on a few different fronts, namely housing supply, costs, and existing energy infrastructure.
Increases Housing Costs
It’s no secret Colorado’s housing market is in a supply and affordability crisis. A perfect storm of interest rate hikes, a low housing supply, and inflation is making it more expensive to buy or rent a home in most areas of the state. Housing is at a three-month supply on average statewide — a balanced market is around a six-month supply. Housing affordability is at a record low of 52 out of 100, according to the Colorado Association of Realtors.
There are real concerns about what these new code requirements will do to the cost of Colorado housing in the next couple of years — at a time when many households are struggling to afford the median price of a home and even everyday essentials. Numbers crunched by the Common Sense Institute indicate that these updated code adoptions will add $6,450 to $22,352 to the price of a new home. Local production builders have shared with our team estimates closer to a $5,000 increase per home under the 2021 IECC, and full electrification will add about $7,000, netting in $12,000 in total. Of course, these cost increases will vary widely and often depend on construction volume. High-volume builders will see a smaller differential than boutique custom home builders. Only time will tell what the builder’s and homeowner’s financial burden will be.
Part of HB 22-1362 allocates 13 million dollars to help offset a portion of these expected cost increases. Additional funds are also expected from the federal Infrastructure Investment and Jobs Act, and the board plans to use them to provide needed grants to soften the financial burden during the transition.
May Hamstring Housing Supply
For developers and builders that are already struggling to increase or maintain home production, these new codes may add even more logistical challenges. Material shortages and cost increases, increasing impact fees (such as tap fees), the lack of skilled and unskilled workers, and lengthy permit reviews already affect predictable construction timelines and costs. The addition of new material requirements may further jeopardize their ability to develop land and build homes. Suppliers of these new materials and systems may not have the capacity for meeting the surge of demand. New systems could also require trades with specialized skill sets that aren’t widely available throughout the state, jeopardizing how quickly new homes can be built.
Lack of Local Control
Operating under a home rule state, Colorado local governments enjoy a certain level of autonomy to pass laws and regulations appropriate to their region’s unique needs. State-level minimum code requirements may be a constraint for some counties and municipalities and negatively impact local developers to maintain construction volume and pricing. In other words, what works in Denver might not work in Alamosa or Sterling.
Colorado has a history of spirited independence and a bootstrap mentality that is deeply woven into our cultural fabric and approach to problem-solving. Centralizing green building code language at the state level may prove difficult for local governments to adopt for their region’s specific characteristics. Other regions beyond our major metros should be part of the code board and receive appropriate representation to ensure their concerns and challenges are addressed.
The eventual full electrification of new structures and the gradual retrofitting of existing homes and buildings may present short-term yet significant cost increases to Colorado residents. The cost of full electrification is not yet known, and a surge in electricity usage could affect the reliability of the state’s electrical grid without proper infrastructure investment.
Another potential downstream effect of full electrification is the cost of natural gas. Fewer natural gas customers will raise energy costs for those who cannot afford the transition to electric power, which tends to fall disproportionately on lower-income households that are already burdened with high housing costs.
Looking ahead, we at KGA will continue to provide our home builder clients with data-supported design and material innovations that maintain or improve the construction lifecycle and home affordability. For our custom home clients, we remain committed to offering measurable objectives that improve sustainability and energy efficiency. We continue to monitor the new model code process closely and will share more details as they become available.