Friday, March 06, 2009

New markets and obsolescence

Daniel R. Patterson is an Arizona State Representative in the current legislature, and he has a blog (fun to find these things from our elected officials). He, along with other House democrats, are pushing through a bill that passed the Water and Energy Committee.

Now, I'm NOT a legislator -- nor do I play one on TV -- but I started to give the bill a read and found some of it interesting pertaining to the future of housing (i.e. construction).

Here is the bill in its original form here. Now I won't say that I've read all 37 pages of the PDF file, in fact I've only read lines 5-27 on page of the proposed bill. I've scanned through some other pages but that is it. So my comments from here are based only on those lines of the bill at this point.

Below, I'm copying some from the House Summary pertaining to new construction of residential and commercial property.


· States that it is the goal of the state to promote the construction of energy efficient buildings.

· Establishes voluntary statewide goals for the construction of energy efficient residential and commercial buildings as follows:

· 15% of new buildings are on average more efficient than the 2006 IECC in 2012.

· 30% of new buildings are on average more efficient than the 2006 IECC in 2016.

· 50% of new buildings are on average more efficient than the 2006 IECC in 2020.

· Requires DOCEO to track the number of energy efficient buildings constructed in the state and submit an annual report to the Legislature with the number and percentage of energy efficient buildings and an estimate of the percentage of new residential and commercial buildings that were more energy efficient, beginning in 2010. The DOCEO must also present the information to the House of Representatives Committee on Water and Energy and the Senate Committee on Natural Resources, Infrastructure and Public Debt.

· Requires cities, towns and counties to report to the DOCEO the total number of building permits issued and the percentage of those that were issued for energy efficient residential and commercial buildings, including the energy rating system value, beginning February 1, 2012.

· Defines energy efficient buildings.

The bill states plainly that all cities and towns shall report to the Department of Commerce Energy Office (DOCEO) whether new building permits meet the energy efficiencies referred to above. Starting on or before February 1 of 2010 all Arizona cities and towns will report to DOCEO all building permits and the percentage of the new buildings that will be energy compliant.

I'm removing the politics of this bill in my line of thinking here. I'll pretend that this bill goes through whether I want it to or not, I think this bill will deliver a couple of things. One is obsolescence and the other is a new market. In the current state of the housing market, neither is a bad thing right now in my opinion.

I know that I'm viewed in some circles as a champion for alternative energy products, like wind turbines for instance, and really I don't care if that is actually true or not. I see products like wind turbines and solar panels as potential property enhancements more than anything else really, products that could increase value and marketability. Property owners could wish to purchase such products and services for their own energy saving needs to utilize whatever benefit they may find, and also offer those products and services to the next owner of the property if the current owner decided to sell for whatever reason.

Of course I realize that these alternative energy products are going to have to actually deliver on the promises being made if the premise I'm in line with becomes reality. In other words a seller would have to prove that his/her home actually has a lower utility cost than perhaps his/her neighbor that is also selling but doesn't have the alternative energy products. Potential buyers will basically have to be able to see it, feel it, and realize it.

Now this bill doesn't actually have any wind turbine tower or solar panel information in it (at least from the documents that I scanned through), but the gist is the same. New construction homes, at least a percentage of them, will have to meet new requirements put in place by whatever government that puts them there.

Maybe it will be the squiggly looking light bulbs that have to be put into lighting fixtures, maybe it is (even) lower flow toilets, or something else along those lines that this bill is pushing... but no doubt that reducing energy needs in a home will be the rage (if it isn't already).

So this really means that new residential developments (if there ever is such a thing again) will likely market the heck out of the fact (if they choose to) they offer these energy efficient homes. These energy efficient homes will find a market for the new home buyer and strain the older less efficient home market... leading to a form of obsolescence.

The bill doesn't appear to even be as harsh as it certainly could be. The bill only calls for 50% of new construction projects to be up to whatever energy efficiency level they are talking about by 2020. But nevertheless, the clock is ticking (if the bill passes).

I guess that I don't live in one of these energy efficient homes at the moment (although I do have squiggly light bulbs in many places). I don't have a wind turbine or solar panels either. There will be opportunities to retrofit my home to be more efficient, and at the increased rate that utility rates are increasing, perhaps even someday soon those retrofits might even be cost effective.

But... my home will still likely be facing the clock of obsolescence.

Future developments that offer energy efficient homes will draw more demand than even a retrofitted home once that market really appears. Retiree's on fixed incomes will be drawn to such a home, folks that think they are saving the planet will be drawn to that kind of dwelling, penny pincher's like me will be drawn to a lower cost solution, and even just some folks that want to live near someone from the examples I just shared will likely be drawn as well. It will be a new market... a new product market. A new product is just really what the overall housing market could use to fuel demand.

Normally I'd rather simply let the free enterprise market deliver the new market, but it seems the government is bent on doing it at this time. I'd feel better about the kind of organic demand that free enterprise always delivers, and my only worry about the government interference in this case would be that these new 'efficiencies' aren't really efficient enough to make up for the actual cost/benefit difference that there clearly is at this point in time (I doubt I'm saving all that much money on my squiggly light bulbs yet... it is not noticeable at least).

I'm left wondering how much faster obsolescence clock ticks if this all happens and how quickly a new product market appears if these kinds of government mandated, along with truly beneficial cost saving energy efficient products, changes the overall housing market.

It is always smart to be in the present taking care of issues that need attention today... however we should always keep one eye down the road and be ready for future issues.

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