Federal Cap and Trade Bill

What does it mean for real estate?

 Tom Larson  |    January 13, 2010

To address issues related to energy efficiency and climate change, Congress is currently working on legislation referred to as The American Clean Energy and Security Act (H.R. 2454), which was introduced by Reps. Waxman (D-CA) and Markey (DMA). The legislation is more commonly known as the “Cap and Trade” bill because of one of the bill’s more controversial provisions that places a cap on the usage of certain energy sources and allows trading of energy credits.

The bill was approved by the House of Representatives on June 26, 2009, and is currently being debated in the Senate. The Senate Energy Committee has already developed an alternative to the proposal  passed by the House, which establishes less stringentenergy reduction goals and maintains more state and local control. It is not clear if and when the Senate will take up the bill, but, if it does, the bill will likely look much different than the version passed by the House. This means that a House-Senate conference will be necessary to resolve the differences.

While the bill will have the greatest direct impact upon utilities and manufacturing companies, the “Cap and Trade” bill could also have a significant impact on the real estate industry and property owners. The National Association of REALTORS® has been working closely with members of Congress to amend the bill to minimize the negative impacts on our industry. They have been successful in removing several real estate-related provisions from the bill, such as federal energy audit requirements for homeowners and various point-of-sale triggers, but other controversial provisions remain in the legislation.

Some of the highlights in the House version of the bill include:

  • Exempts existing homes, multi-family homes and commercial buildings from any federal guidelines such as the existing federal Energy Star labeling program.
  • Authorizes state governments to pass a law to label homes according to their energy efficiency, but specifically prohibits labeling during a sales transaction.
  • Prohibits the Environmental Protection Agency from regulating carbon emissions for residential and commercial buildings under the Clean Air Act.
  • Provides property owners with matching grants and diagnostic tools to make energy-saving property improvements.
  • Creates green building financial incentives for HUD housing, including loans, block grants and underwriting for energy improvements.

The House version of the bill also includes some provisions that could be detrimental to the real estate industry. For example, the bill creates a national building code standard that would make buildings more energy efficient, but would also add significant costs to those buildings. States would have one year to bring their building codes into compliance with the new national standards before the federal government would enforce the codes for them.

In addition to the new building code requirements,the original version of the House bill included a mandatory federal energy audit and labeling requirement at the time of sale. In other words, the bill would have required every home and building to be inspected for its energy efficiency and labeled accordingly prior to closing. The National Association of REALTORS® successfully lobbied to have this provision removed from the bill that passed the House and will continue to try to keep it out of any future versions of the bill.

Due to the financial impact on the pocket books of American families, public support for the “Cap and Trade” bill appears to be lacking. According to government estimates, the average U.S. family would pay an additional $80 to $173 per year if the “Cap and Trade” bill was adopted. Based upon an AP-Stanford University poll, more than half of the respondents said they would not support a cap and trade program to reduce global warming gases if it increased their monthly energy bills by $10, or $120 annually. If monthly electric bills rose by $25 because of cap and trade, 75 percent of those surveyed said they would oppose it.

Given the lack of public support, it appears unlikely that Congress will pass the Cap and Trade legislation in 2010, especially since this is an election year. However, the Wisconsin REALTORS® Association staff, in conjunction with the NAR, will continue to monitor the progress of the legislation and provide periodic updates as necessary.

For additional information, please contact Tom Larson (tlarson@wra.org) at 608-240-8254.

Tom Larson is Director of Regulatory and Legislative Affairs for the WRA.

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