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Cap-and-Trade Will Depress Home Prices
Cap-and-Trade Will Depress Home Prices
September 23, 2009
Originally published in Politico
Cap and trade is back in the news. By the end of this month, Senate Environment and Public Works Committee Chairwoman Barbara Boxer (D-Calif.) is expected to unveil new legislation along the lines of the Waxman-Markey bill, which passed the House on June 26.
That bill contains 397 new regulations. One of them would affect almost everyone who buys or sells a home. If Waxman-Markey becomes law, homes for sale that qualify as “federally related transactions” — which is almost all of them — would be required to undergo an environmental inspection.
Many politicians are upset about depressed housing prices. And true, environmental inspections are one way to raise them. But this is not the way to do it. Sen. Boxer should see to it that the Senate version of cap and trade leaves the environmental inspection provision out.
Inspections are not free. Nor is fixing the inevitable violations. Compliance with new energy-efficiency standards would make homes, especially older ones, more expensive. Selling one’s home would become even harder than it already is in this down market if Waxman-Markey-style cap and trade becomes law.
And that is just one of the unintended consequences.
Suppose you have a window that isn’t quite airtight or your appliances are a little too old. Maybe they’re not Energy Star certified. You’d have to replace them before you would be allowed to sell your home.
The result could be the end of fixer-upper homes; surely, this is not what Congress has in mind. Some families prefer to buy a home in less-than-stellar condition on the cheap and make repairs and upgrades themselves.
For people who don’t have a lot of money, or who enjoy working with their hands, or who want to customize their home, this can be a very fulfilling path to homeownership. Waxman-Markey would take that away.
If the sellers are required to make all these improvements pre-sale, buyers lose the opportunity to, say, choose what kind of appliances they can have, what kind of insulation to put in the attic or what kind of doors or windows they would like.
Some people prefer a front-loading washing machine; others prefer a top-loading one. You’d be stuck with whatever the previous owner decided — unless you were rich enough to pay twice for new washers and dryers.
Another unintended consequence would be lower homeownership rates — and not just because of what inspections add to the cost of homes in money. They also add enormous costs in time and energy. Complying with inspections and mandates is a hassle.
If buying and selling homes becomes more difficult, some people will decide not to bother. Which brings up a pretty big loophole: If you don’t sell your home, then you don’t have to run the inspection gantlet. If you’re going to move, why not just rent out your old home instead of selling it?
Waxman-Markey’s home inspection requirement directly contradicts decades of federal policy designed to raise homeownership. Again, this is almost certainly not what Waxman-Markey’s 219 supporters had in mind when they voted for the bill. But it’s pretty easy to see that this is what will happen. As Sen. Boxer crafts the Senate version, she should keep that in mind.
To sum up: Inspecting homes for sale for their environmental friendliness would raise home prices. Buying or selling a home would become an even more onerous process than it already is. And there’s an easy way to dodge the bullet: Rent instead of own. If enough people did that, the inspection requirement would fail to achieve its goal of making homes more energy efficient.
And this is just one small piece of what cap and trade has to offer. Many of the other 396 new regulations and 1,100 mandates in the House version have their own unintended effects. No doubt the Senate version will have others. Social-engineering schemes never work quite like they’re supposed to. Better for Congress to stay out of our homes.