[REN #855] Real Estate: Smooth Sailing for CA Solar Mandate

Real Estate: Smooth Sailing for CA Solar Mandate, Real Estate News for Investors Podcast Episode #855

There’s been a lot of worry about the cost of California’s new solar power requirement for new homes. But the January 1st start date has now come and gone, and it appears the mandate has had little impact on home buyer demand. There has been a small decline in affordability for some people, but according to real estate experts, the mandate appears to be a “non-event.”

The new solar mandate is part of a long-term plan to reduce California’s carbon footprint. It requires rooftop solar panels for all new homes and is the first such requirement in the nation. With home prices as high as they are in California, some people thought the additional cost would scare home buyers away. But, Wayne Yamano, of John Burns Real Estate Consulting, doesn’t think it has had much of an impact on demand. He says, “Consumers see the benefits in comparison to owning a less energy-efficient resale home and appear to be willing to pay the difference.” (1)

Added Cost of Solar Power

Yamano says, it costs an average $9,000 to $10,000 for a system that complies with the rules. That adds about $40 to the typical mortgage payment. If the home buyer decides to lease the system, Yamano says, lease terms will vary but he believes the lease payments would be about the same. Compare that to the $80 average savings a homeowner will get on their energy bill, and they come out ahead by about $40.

Low-income homebuyers might experience the biggest impact, especially if they are just barely qualifying for a home loan. But, even that hasn’t had much of an impact so far. Consultants for the Burns consulting company say that Bakersfield buyers are the most price-sensitive, and the solar mandate has reduced demand by less than 1%.

We’re only a month-and-a-half into the mandate, but many builders also began ramping up for the requirement last year. Yamano says that many wanted to be prepared for the code change so they started complying with the new rules before they took effect. He says, some of the smaller construction companies were pulling permits in late December so they could build under the old rules, and postpone compliance. But by and large, compliance has been a breeze. Having solar panels on a home is often seen as a desirable feature because energy-efficient homes have a better resale value.

Unresolved Controversy

One unresolved controversy of this mandate is connected to the Community Solar option. Under this option, off-site solar arrays can be used to deliver solar power to apartment buildings that don’t have enough space on the roof or homes that don’t get enough sun. They can also be used to provide green energy for renters and low-income residents. (2)

The Sacramento Utility District, which is also known as SMUD, negotiated with state regulators to include its SolarShare program as part of the Community Solar option. The SMUD program would allow the use of off-site solar farms to supply energy for new single-family developments, based on the idea that it falls under the definition of “community.” But critics say that isn’t what the Community Solar option should be used for. State regulators postponed a decision, and SMUD has resubmitted a revised proposal. The California Energy Commission plans to review the new proposal at an upcoming meeting. (3)

Links:

(1) Solar Mandate “Non-Event”

(2) Rooftop Solar Panels: LA Times

(3) CA Solar Market

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