California homebuilders rushed in recent months to get building permits before new rules kick in Jan. 1 requiring all new homes to be solar-powered.
TRI Pointe Homes, for example, already has permits for 80% of the homes it plans to build in Southern California in 2020.
Glendora-based CrestWood Communities has permits for 42 homes it plans to build in the new year in Montclair.
And in Irvine — home to numerous new housing projects — building permit applications jumped 600% during the last three months of 2019 compared with the prior two years.
Most homebuilders — particularly large-scale production builders — have been gearing up for the state’s new solar mandate for years, industry officials say.
But many — particularly smaller builders — are rushing to get their 2020 homes grandfathered under the earlier building code in order to keep costs down, ongoing projects uniform or because they’re not ready for the energy upgrade.
Some industry officials have been advising members to pull as many building permits as possible by Dec. 31 to avoid installing solar on their homes.
“I don’t know how much prepared they are in the urban areas. My builders, they haven’t been given the time or the clarity of what compliance constitutes. It’s just a big furball at this point,” said Brian Todd, president and CEO of the Building Industry Association of Tulare and Kings Counties, north of Bakersfield. “My prediction is you’ll see a lot of building permits pulled in the last week or two weeks of December.”
It’s still too early to see if that’s the case. But data shows an uptick in building permits issued in October, even though permits were down for the year as a whole.
For example, permits for single-family homes jumped 10% to 5,239 units in October from the year before, the California Homebuilding Foundation’s CIRB Report shows. But permits were down 8% for the first 10 months of 2019.
Zillow reported a 7% gain in California building permits in October, with increases of 11% in Los Angeles and Orange counties and 38% in the Inland Empire.
Some of those gains may be due to lower mortgage rates. But interviews with builders and industry officials show at least some of that is due to the new solar mandate.
First in nation
State energy and building officials adopted the new building code in 2018, making California the first state in the nation to require solar power on homes getting a permit in 2020 or later.
The vote was the culmination of a decade-long push to make new homes net-zero by the next decade, meaning they would produce as much energy as they consumed over the course of a year.
The new energy code applies to all residences in buildings of three stories or less, including apartments.
The solar mandate followed several rounds of energy-code updates enacted gradually over the years to reduce power consumption and make solar more feasible.
Some builders began experimenting with solar homes as early as 2012, with more and more developers providing rooftop solar panels as an option for the past several years. They long-ago developed marketing with displays in model homes showing how much the more-efficient solar homes save them on their utility bills.
Most of those builders now are ready, industry officials say.
“I haven’t heard of or have spoken to any builders unprepared for the solar mandate,” said Wayne Yamano, a principal with John Burns Real Estate Consulting, a homebuilder advisory firm. “All of the builders who build in California that we spoke to have been gearing up for the solar mandate for quite some time and are ready, with many choosing to be in compliance early.”
Building Industry Association officials around the region echoed that view.
“It’s not even a discussion. Builders will just deal with it,” Borre Winckel, executive officer with the BIA of San Diego County, said in an email. “It doesn’t rate high on the scale of obstacles.”
“The large production builders are very prepared because we knew this law was eminent for over a year,” added Tom Grable, Southern California division president for TRI Pointe Homes and president of the BIA of Southern California.
“It’s very minor,” Grable said. “Solar is a very simple system. … The biggest issue is the cost of the system itself. That can run into $10,000 to $20,000.”
Increased costs
Nonetheless, even builders that are prepared have been pulling building permits early, mainly to avoid having to go back to a city’s plan-check desk to revise the remaining units in an ongoing project.
For example, TRI Pointe’s Southern California division began pulling 2020 permits in August to cut costs next year, said Project Management Vice President Rick Wood.
“It behooves us to get them grandfathered into the 2016 code to save on cost increases,” Wood said.
Other new upgrades effective in January require even more insulation or thicker walls and more efficient heating and cooling systems, Wood said. But solar is the most expensive requirement coming in 2020.
About 80% of the homes TRI Pointe will build in Southern California will be built under the old energy code, said Wood. By 2021, as many as 30% may be built using permits issued in 2019.
Homebuilders are benefitting from a new state law — enacted to help wildfire victims get their homes rebuilt — which extends the life of building permits from six months to a year and allows multiple six-month extensions.
Price also is another factor. In lower-cost, less-urban parts of the state, buyers are more sensitive to the added cost of solar, industry officials said.
For example, a $12,000 solar system adds 4% to the price of a typical new home in the Central Valley, but just 2% to the price of an L.A. County home and 1% to the price of an Orange County home.
“We’re very price sensitive in Kern County,” said David Dmohowski, executive officer for the Kern County Home Builders Association. “The new solar mandate will push the new unit price to around $300,000, and that’s a big concern to our builders. The homebuilders who deal with the starter market, they really struggle with the added cost.”
CrestWood Communities plans to include solar panels on a 17-home development in the San Bernardino town of Grand Terrace called Ladera, said Operations Vice President Terry Kent. But it pulled permits early for a 42-home project in Montclair.
“We’re trying to save affordability,” Kent said. “With all these new mandates, it adds to the cost of a house.”
Central California homebuilders also are far less prepared, said Brian Ennis, president Ennis Builders in Porterville, which averages about two dozen homes a year.
“There’s a lot of unknowns, and we’re trying to figure out,” Ennis said.
Builders of attached townhomes and low-rise apartments face different struggles because their buildings have less roof space.
Roof-top solar could displace air conditioning units, said Sunti Kumjim, vice president of development and forward planning for MBK Rental Living, which is building about 1,700 apartments in six or seven projects throughout California.
“There may not be enough roof area to accommodate multifamily projects,” Kumjim said. “You may have to move air conditioning units to ground level. … Just where to put them all becomes a site-planning issue.”
Ultimately, builders everywhere will have to figure all these issues out, builders said. Solar won’t be an option anymore.
“Solar is the future,” said CrestWood’s Kent, a past president of the Baldy View BIA chapter. “It’s just like the kitchen stove. … It’s going to be standard on all houses now.”
