How California builders are adapting to state’s super-strict energy mandates

As Jimmy Ayala, Division President of Pardee Homes San Diego, leads me through a series of model homes at his company’s new Weston development in Santee, California, he explains that this master-planned community is both a vision of the future, as well as the last of its kind.

A four-neighborhood, 415-home, 204-acre project in the booming East County area outside San Diego, Weston might be one of the region’s last housing developments done at this scale. A co-development between TRI Pointe Homes and Pardee, this project was a decade in the making, owing to challenges securing permits and arranging parcels.

As Ayala takes me through a series of different-sized model homes, ranging from the $500,000s to the high $700,000s, all decorated with bright contemporary decor and lots of outdoor furniture, he also explains how Weston represents California’s future, specifically a turn towards increased solar power.

Weston is Pardee’s first master-planned community to offer solar for purchase or lease on every single home. This feature foreshadows a significant change in California’s building code, going into effect in 2020, that will make the state the first in the nation to mandate all new homes are net zero ready, meaning they’re built to use as much or less energy than they can generate with renewables. Passed last year, the updated code will also require that rooftop solar panels be installed on all new single-family homes and low-rise multi-family buildings to offset the expected annual electricity use.

“Consumers want solar,” says Ayala. “The difference is that now, we can build it at scale and make it more affordable.”

According to Ayala, these systems, and Pardee’s new solar-ready development, makes financial sense. Each home will come with SunPower solar system, ranging from 3 to 5 kilowatts, which can generate up to 8,000 kilowatt hours based on home orientation, which estimates suggest will cover 80 percent or more of a home’s energy usage. The renewable focus is part of Pardee’s LivingSmart branding, developments with smart home features, energy efficient construction, and access to on-site trails and parks (Weston is near a series of lakes and outdoor trails).

The exact savings of these installations will vary with a family’s home energy usage. Buyers can purchase or lease the systems, and those who make the investment will receive a 30 percent federal tax credit and an exemption from California property taxes.

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Rooftop solar has gone from fantastical to financially viable

When the state’s new energy efficiency rules for new construction were initially proposed in 2008, they seemed fantastical. But now, the aspirational idea of a home in sunny California efficient enough to meet its own energy demands is more than doable, it’s a pillar of the progressive state’s plan to reduce carbon emissions. Today, roughly 5.5 million homes in the state are solar powered, and prices for solar have fallen by 55 percent over the last five years. The Solar Energy Industries Association predicts residential installation will continue to rise through 2023.

Many California builders have complained that in a market with sky-high construction and land acquisition costs, and an acute shortage of affordable housing, these additional efficiency requirements will potentially add $25,000 or more to the cost of every home. Meeting these new standards requires a combination of better insulation, energy-efficient lighting and appliances, and double- or triple-paned windows, as well as renewable energy generation.

“Depending where you are in the California, you’re in the hole by at least $50,000 before you even put a shovel in the ground,” housing analyst Alan Ratner told Builder Online. “That makes it really challenging to build an affordable product there.”

Just as some builders are arguing higher efficiency standards and solar-ready requirement mean higher costs, data collected to determine the impact of other recent California building code updates suggest efficiency can save owners and renters money over time.

The state’s current standards are expected to save consumers $1.6 billion over the next 30 years, and homeowners have found that selling a home with energy-efficient certification commands a premium price. Renters, especially lower-incomes tenants, see relief on a monthly basis, since increased efficiency lowers utility bills (low-income households often spend up to twice the statewide average, as a percentage of income).

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Greener homes have become a potent marketing message for builders

Along with Pardee, other builders have focused on more energy-efficient construction, and a greener marketing message, to entice consumers. Meritage, a national homebuilder that’s active in Southern California, delivers nearly 10,000 energy efficient homes to the market each year. Due to its large scale and streamlined manufacturing process, Meritage claims it can charge the same, on a per square foot basis, for its net-zero-ready homes than other builder charge for standard construction. The focus on efficiency has helped the company “future-proof” their business, in light of regulatory changes in California and elsewhere.

Like Pardee, Meritage sees economies of scale, as well as improving technology, as the route to meeting the 2020 mandate without passing on too much cost to the consumer.

ABC Homes (Affordable, Buildable, Certifiable), a pilot project in Orange County, has been working on creating an affordable home that meets 2020 standards with standard building material, iterating through a series of more efficient model homes. City Ventures, another California builder, offers a line of Green Venture homes that save 70-80 percent on energy bills and includes features such as rooftop solar, pre-wired electric vehicle garages, and LED lighting.

“Home shoppers are as energy-conscious today as they are price- and mortgage-savvy,” Kurt Hummel, a manager at Vista Mar, told the San Diego Union-Tribune last year. “They are looking for ways to not only reduce their monthly bills but also their impact on overall energy consumption.”

Permits, not solar power, real hold-up for builders

Ayala says that renewable and solar technology have improved so much, what was once exceptional is now standard. Pardee built its first net zero home in 2003. Now, that level of efficiency is almost standard practice.

As teams of workers down the street assemble the frames that will soon become Weston homes, Ayala says that here in East County, far out of reach of the ocean breezes that hit the coastal areas of the city, air conditioning is a must. That energy cost alone makes home solar a better financial proposition for area homeowners.

Ayala expects homeowners to move in starting in October. So far, sales have been solid. Since the Weston started putting homes on the market last December, 32 of 34 have sold.

Ayala believes solar will become an even more common sight on California’s rooftops as the technology improves and costs decrease. He sees the renewable mandates as much less of a worry than the other factors putting pressure on homebuilders: land and zoning. When he looks at the time it took to start framing and building at Weston, he attributes much of the cost to delays in acquiring land and getting permits. The lack of density, and a scarcity of building permits and new land for construction, are much bigger hurdles to building future housing in California than energy efficiency mandates.