The pace of Congressional deliberations on energy and climate change has picked up. Key House leaders released draft legislation and the Senate passed language restricting the spending of any revenues generated by any cap-and-trade program if the issue of climate change is considered as part of the budget bill instead of being advanced as freestanding legislation. This is significant because freestanding measures require 60 votes and are susceptible to Senate filibusters whereas the budget process requires only 50 votes.
The far-reaching House bill released by Energy and Commerce Committee Chairman Henry Waxman (D-CA) and Energy and Environment Subcommittee Chairman Edward J. Markey (D-MA) includes several provisions of interest to apartment firms. NAA/NMHC have prepared an analysis of the Waxman-Markey bill and the implications it would have for member firms.
Importantly, the bill includes NAA/NMHC-supported incentives for retrofitting existing commercial and residential buildings to improve their energy efficiency. It also seeks to promote renewable sources of energy and the development of a smart grid for electricity transmission that would allow for more efficient distribution of energy and would help improve reliability for end users.
The measure also would impose an energy efficiency resource standard (EERS) on utilities that would require them to implement energy efficiency measures to reduce electricity and natural gas use by ratepayers. How this will play out for multifamily housing property owners is not clear, though. It remains to be seen whether there will be incentives to property owners who reduce energy demand or some other more onerous mechanism to force reduced usage. Any effort to significantly reduce energy demand will require rehabilitating existing properties. To that end, NAA/NMHC applaud the incentive-based approach that currently offers owners rewards that vary depending on how much energy and water is saved.
Of concern to NAA/NMHC, the draft House bill would essentially mandate that states adopt advanced building efficiency codes that would impose stringent building code requirements on new construction and major renovations. Specifically, the measure requires the adoption of codes that exceed current codes by 30 percent and mandates a 50-percent improvement over codes released after 2015. NAA/NMHC are educating lawmakers about the serious limitations of this approach.
In a positive development, in response to our concerns that this requirement will subvert the consensus-based code process by requiring the Department of Energy to set codes if the third-party code-writing organizations are not able to do so, language has been included that would require that the modified code to "achieve the maximum level of energy savings that is technologically feasible and life-cycle cost effective."
The House version also includes "disclosure/labeling" provisions that could require property owners to disclose energy scores or performance ratings of their properties. Although NAA/NMHC support voluntary labeling programs, such as the ENERGY STAR program, there is concern that this provision could lead to mandatory requirements. Mandatory labeling requirements are more problematic for the apartment sector because there is no ENERGY STAR rating system for multifamily housing properties comparable to the one that exists for office properties. NAA/NMHC continue to argue against a one-size-fits-all approach and are educating lawmakers about the important differences between multifamily housing and other commercial real estate sectors.
Democrats have pledged fast action on the measure. Waxman set Memorial Day as his target for passing the measure in the House and has the support of Pelosi. The Senate, meanwhile, is considering several climate change proposals but it is unclear whether they will move a bill independently or will take up the issue in a conference on a House-passed bill. NAA/NMHC will continue to work with lawmakers to craft final legislation that recognizes the importance of considering economic feasibility and the potential impact of mandates on the nation's affordable housing.