Expiry of Energy Codes Could Affect Industry
January 11, 2012

By Sahely Mukerji, smukerji@glass.com

Opinions differ among glass and glazing professionals regarding whether Congress should have extended tax incentives used by developers and remodelers that, in turn, influenced the glass industry.

The incentives in question: the New Energy Efficient Home Tax Credit (45L) and the Existing Home Retrofit Tax Credit (25C). The 45L was the only federal incentive available for efficiency in new home construction, and provided a $2,000 tax credit to builders and developers for the construction and sale of homes that achieved a 50 percent improvement in energy efficiency over the 2004 International Energy Conservation Code (IECC). The 25C provided consumers a tax credit of up to $500 for the purchase of qualifying energy-efficient products. Remodelers often leveraged 25C tax incentives when working with clients. Both tax credits expired on December 31, 2011.

"The December 31, 2011, expiration of the Energy-Efficient Home Credit (45L) will have very little, if any, impact on new home construction as the portfolio of existing unsold new homes continues to compete with the glut of severely devalued properties that blanket the U.S.," says Rich Walker, president and CEO of American Architectural Manufacturers Association of Schaumburg, Ill. "Banks continue to unload foreclosed homes at severely distressed prices. These prices then form the basis for local real estate 'comparable,' which serve to further reduce the opportunity for builders to recover the cost of construction built to exceed the energy-efficiency standards set within the IECC. The $2,000 credit offered to builders does not compensate for the tens of thousands of dollars lost in new construction value due to the current saturation of homes being sold at prices far below fair market.

"Until Congress acts uniformly to enact a well thought out initiative to jumpstart job growth and offer substantive homeowner energy-efficiency incentives, the ongoing U.S, housing crisis will continue to languish along a painful recovery path measured in years, not months," Walker adds.

Brian Pittman, director of marketing and communications at the Glass Association of North America in Topeka, Kan., has a different opinion. "These tax credits are a vital part of keeping the United States moving forward on energy-efficient products in homes and, ultimately, in commercial construction," he says. "Consumers use the incentive provided in 45L as a reason to purchase these products for their home, and they learn a valuable lesson when the true benefits kick in. President Obama and the U.S. Congress clearly need to keep this train moving, as it benefits our economy, the glass and glazing manufacturers, fabricators and installers who make and sell these products, the consumers who buy them and the environment in general. To remove this specific incentive, among others, can slow the adoption of energy-efficient, high-performance glazing among consumers, which could negatively affect one of the bright points of the glass and glazing industry right now."

Robert Dietz, an economist with the National Association of Home Builders of Washington, D.C., says that 45L is an important energy tax incentive. "The tax credit helps offset the cost of constructing an energy efficient home, which results in both lower utility bills for the residence over the life of the property, which can be 60 years or more, as well as the direct construction impact," he says. NAHB estimates that the construction of an average, single-family home creates three full-time jobs. "An extension of the 45L program is an important policy goal of NAHB for 2012," he says.

NAHB has also estimated the jobs and remodeling sector impacts associated with the 25C program. Click here to see its Eye on Housing Economics blog.

Ben Gann, director of legislative affairs & grassroots activities at the Window and Door Manufacturers Association (WDMA) in Washington, D.C., agrees with Pittman. "Expiration of the energy efficiency tax credits for both existing homes (25c) and new homes (45L) will decrease sales of all higher-energy-efficient products, including windows, doors and skylights," he says. "The 25C tax credit creates jobs and benefits homeowner by reducing energy use, and WDMA is leading an industry coalition seeking an extension of the energy efficiency tax credit for existing homes. As for 45L, incentives for construction of new homes should remain in place given the current state of the housing market."

Kim Flanary, sustaining, manufacturing and quality engineer at Milgard Windows & Doors in Tacoma, Wash., is of the same opinion. "The New Energy Efficient Home Tax Credit is good for the consumer, as well as the glass and glazing industry," he says. "The tax credits of the past few years have helped our industry through very difficult economic conditions. Consumers have been given an incentive to invest in home improvements that will improve the energy efficiency. This has driven sales within the industry that helped many companies through very difficult times."

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