Greener housing is costlier housing
There are many policy ideas for addressing rising housing costs, ranging from good ones like tax code changes that bring more homes onto the market, to bad ones like bans on investor purchases of houses. But often overlooked in this discussion are the effects of costly federal environmental measures targeting housing. The Trump administration has taken steps to counter this ill-advised greening of American homes, but there is more to be done.
Appliance regulations
Nearly everything that plugs in or fires up around the house has been hit with federal regulations, many of which have raised the prices of everyday appliances. Several more, such as new Biden-era rules for furnaces and water heaters, will increase costs further when they take effect over the next few years. The worst of these regulations is an Environmental Protection Agency (EPA) rule requiring all new residential central air conditioners manufactured after January 1, 2025 to meet tough new climate change-related standards. As a result, prices jumped by $1,500 or more last summer under the new regulatory regime. The Trump administration has proposed changes to this rule that would allow more compliance flexibility and could help moderate the cost increases.
Beyond air conditioners, the administration is reconsidering several other appliance regulations, but too many remain on the books.
Building codes
Activists have lobbied to add environmental provisions to building codes, and the Biden administration often obliged them despite adverse effects on housing affordability. This includes a 2024 rule requiring new homes that qualify for Department of Housing and Urban Development (HUD)-backed mortgages to comply with certain international energy code requirements. Projections show that this will increase average home construction costs by $6,548 to $9,301, and possibly more. According to the National Association of Home Builders, each $1,000 increase in the price of a home disqualifies an estimated 115,593 buyers, meaning this measure alone could prevent up to a million prospective homeowners from purchasing a home.
The Trump HUD has postponed the effective date for these requirements. It should use the time to get rid of them completely while also keeping a tight lid on any other such green building code measures.
Environmental Permits
Even modest housing projects can become ensnared in federal environmental laws that impose costly and lengthy permitting delays and, in some cases, block construction entirely. This includes Clean Water Act provisions that purport to protect wetlands. Legally speaking, the federal government only has jurisdiction over the “Waters of the United States” (WOTUS), but over time the EPA and the US Army Corps of Engineers have greatly expanded the definition of WOTUS to encompass vast areas, including land well suited for housing. A 2023 Supreme Court decision restored a good deal of common sense to this definition, but the Biden administration largely ignored it.
A proposed Trump EPA rule endeavors to incorporate the Supreme Court decision and place reasonable limits on the scope of federal jurisdiction, but much depends on the scope of the final rule. Additionally, a bill recently passed the House that includes important provisions streamlining the permitting process for home builders under the Clean Water Act.
Overall, we have seen a wave of federal environmental measures that both constrain the supply of new housing and raise the cost of the homes that do get built. Whether eco-friendlier housing policies really benefit the planet is a matter of debate, but there is no question about their contribution to rising home prices. Reconsidering this agenda should remain a key component in efforts to make American homes more affordable.