Homebuilders Tell Congress ESG Policies Harm Affordable Housing Production in the U.S.

The National Association of Home Builders (NAHB) recently addressed Congress, highlighting concerns about the impact of environmental, social, and governance (ESG) policies on the housing industry’s ability to produce quality, affordable homes. NAHB Chairman Alicia Huey testified that the growing number of ESG policies at various government levels is directly affecting housing production and affordability.

Huey emphasized that ESG policies have already led to issues such as home insurance companies withdrawing from certain areas and increasing rates in others. Additionally, bank lenders are urged to minimize risks associated with their portfolios, potentially leading to reduced lending in certain locations or higher borrowing rates. The ongoing supply chain challenges in the residential construction sector are also being exacerbated by ESG disclosure requirements, further hindering the availability of essential building supplies and transportation.

Given the current housing affordability crisis, Huey stressed that this is not the right time to introduce or support additional regulations that add uncertainty, delays, and costs to the home building process.

Some specific regulatory and codes issues were highlighted as exacerbating the housing affordability crisis:

1. Transformer standards: Soaring costs and shortages of electrical distribution transformers are causing delays in housing projects across the nation. The Department of Energy (DOE) proposal to increase energy efficiency standards for transformers could worsen the existing backlog, which hampers development.
2. Building energy codes: The Inflation Reduction Act’s inclusion of grants for updated energy codes has resulted in more costly and restrictive codes, such as the 2021 International Energy Conservation Code (IECC). Implementing these codes can significantly increase the price of new homes, making homeownership less attainable for many families.
3. Electrification and gas stoves: ESG policies that aim to ban the use of natural gas and propane in new construction and existing homes are concerning. The additional costs associated with building an all-electric house compared to one with natural gas equipment and appliances can be significant, limiting consumer choices.
4. Waters of the U.S.: Despite the Supreme Court striking down parts of the Biden administration’s waters of the U.S. rule, federal agencies need to issue interim guidance to avoid pausing land acquisition, permit processing, and home building until a new rule is implemented.
5. Intersection of the National Flood Insurance Program and Endangered Species Act: FEMA’s suspension of processing floodplain map change requests in parts of California due to environmental concerns negatively impacts housing affordability, as new properties will be required to obtain flood insurance under the National Flood Insurance Program.
6. Property and Casualty Insurance: Increasing perceived risks and pressures related to ESG have led many private insurance companies to deny the sale of new policies or raise rates, affecting existing and potential homeowners’ ability to secure affordable insurance.

NAHB’s testimony urges Congress to consider these challenges and their implications on housing affordability, emphasizing the need to strike a balance between ESG goals and ensuring accessible, quality, and affordable housing for all.