Construction Law: Challenging Regulations

New California Building Code Will Lower Emissions but Raise Prices

by Gabriel Pinilla, Cotney Attorneys & Consultants

 

 

 

 

 

 

 

 

 

(Editor’s Note: Gabriel Pinilla is the managing partner of Cotney Attorneys and Consultants’ Denver, Colorado, office. He is a seasoned, results-oriented business and construction law and litigation attorney. Pinilla’s practice encompasses state and federal court litigation from pre-trial through the appeals process, as well as serving clients with negotiation and transactional needs. For more information, go to www.cotneycl.com.)

 

For decades, the State of California has led the way in enacting laws to safeguard the environment. Some might argue that those regulations, while well-intentioned, can also prove to be challenging for those who must carry them out. Such is the case with the updated building code that California adopted in August. According to the new mandate, which goes into effect in 2023, nearly all new homes and commercial buildings in the state must be constructed with solar panels and batteries. In addition, wiring for new homes must allow for heat pumps powered by electricity, instead of heaters burning natural gas. According to energy experts, this new building code is among the most sweeping environmental updates ever issued by a government agency.

The new building regulations are ambitious and will likely be transformative for California. However, many construction and energy professionals are worried that the state may be making a mistake by focusing on new buildings instead of existing ones. The biggest concern is that California already has extremely high construction costs, and these new regulations will drive them even higher. While solar energy and cleaner heating equipment have been shown to pay for themselves over the years, via lower utility bills, adding the cost to new homes may be more than some families can manage.

Someone building a multi-million-dollar home may not flinch at adding $20,000 for solar panels and a battery, but the added cost could force a middle-class family trying to afford a $400,000 home to stretch their budget outside of their comfort zone. The current median price for a single-family home in California is more than $800,000, compared to $360,000 for the rest of the country. One reason costs are so high is because California is not building enough new homes, so making them more expensive will not help the problem. In addition, increased costs for building new office structures will result in even higher rents in California’s already pricey cities. To combat the added costs, companies will likely raise their prices, passing the expenses along to consumers.

The intent of this new building code is to eventually transition the state from relying on fossil fuels to using electricity generated by solar panels, hydroelectric dams, wind turbines, and other renewable sources. Making that change is difficult because so many existing residential and commercial buildings need to be updated. To sidestep that challenge, regulators opted for starting with new construction projects.

It is daunting to realize that there are currently 14 million homes in California, compared to only around 100,000 building permits requested each year for new homes. Upgrading those existing structures will cost billions of dollars, so some say imposing the regulations on new homes makes sense as they are the low-hanging fruit. However, new homes will already be more energy-efficient thanks to better insulation, improved appliances, and more advanced heating and cooling equipment than older homes have.

California regulators have acknowledged that it will increase constructions costs, but they point out that the energy efficiency will also make money over time. During this past year, the state has faced heatwaves, wildfires, and other extreme weather events that result in increased expenses for paying higher electricity bills, employing firefighters, and rebuilding damaged homes.

The changes adopted in August require that most new commercial buildings, as well as condominiums and apartment buildings higher than three stories, must include solar and batteries. However, large warehouses and factories are exempt. The new code also states that single-family homes must have wiring for electric heat pumps and water heaters instead of those that burn natural gas. California’s new regulations may alarm some contractors who worry that commercial and residential customers will not be able to handle the added costs. That concern may vary from neighborhood to neighborhood, however, and many consumers are enthusiastic about embracing solar.

Many builders support efforts to curtail climate change through construction methods, but support doing so through updated, energy-efficient systems for existing buildings. Otherwise, all the new homes, with more advanced systems and higher price tags, will be beyond most first-time buyers’ budgets. Despite those concerns and counter-arguments, the new California building code has been approved and will go into effect soon. Contractors are well advised to adapt to the regulations and ensure that their future contracts reflect those standards.