HUD's Latest Energy Standards: A Builder's Guide

The U.S. Department of Housing and Urban Development (HUD) and the USDA have recently unveiled updated minimum energy standards for new single and multifamily homes. These changes, set to take effect in November 2025, represent a significant shift in the housing industry's approach to energy efficiency.

The new standards adopt the 2021 International Energy Conservation Code (IECC) for single-family homes and ASHRAE 90.1-2019 for mid and high-rise buildings. This is a significant expansion from the previous 2009 IECC standards, resulting in approximately a 34% increase in energy efficiency requirements. This update will affect all homes financed through FHA loans, which comprise about 14% of home loans nationally. However, for many production builders, this percentage can be significantly higher, potentially reaching 40-50% of their homes.

Challenges and Opportunities

HUD's new energy efficiency standards mandate that builders must upgrade all homes to meet the updated minimum requirements if there's any possibility of the property being financed through the FHA loan program. This sweeping policy ensures FHA financing eligibility but is expected to drive up construction expenses. The potential rise in construction costs may impact home prices, affecting housing affordability in the market.

Builders have several ways to comply with the new standards. They can meet the 2021 IECC requirements directly, adopt ENERGY STAR 3.2 or DOE Zero Energy Ready Home certifications, or potentially use the 2024 IECC (pending official determination). These options provide flexibility and may offer additional benefits, such as tax credits and marketing advantages.

Strategic Approaches

To navigate these changes effectively, builders should consider several strategic approaches. Redesigning and re-engineering plans to incorporate energy-efficient features is crucial. This might include exploring value engineering opportunities, evaluating high-performance mechanical systems, strategically selecting windows and insulation, and putting ducts into conditioned space. These design considerations can help offset increased costs while improving overall home performance.

Energy Modeling Partners

Working with expert energy modelers will be crucial in finding cost-effective pathways to compliance. These professionals can help builders maximize tax credits and incentives while ensuring that homes meet or exceed the new standards. They can provide valuable insights into how different design choices and features impact overall energy performance. The energy model is key to determining the most efficient approach to achieving high-performance construction.

Market Differentiation

The updated standards also present opportunities for builders to differentiate themselves in the market. By embracing high-performance home construction, builders can potentially offset increased costs through tax credits and utility incentives while delivering more energy-efficient homes to consumers. This approach not only helps meet regulatory requirements but can also be a strong selling point for environmentally conscious homebuyers.

Industry Impact

New HUD standards may have different impacts on various segments of the industry. Smaller builders and custom home builders may have more flexibility in adapting to these standards, as they can work more closely with individual clients who may be willing to invest in energy efficiency. On the other hand, production builders will need to find solutions that work across their entire portfolio of homes.

Driving Innovation

The transition to these new standards may also drive innovation in the construction industry. In response to higher energy efficiency requirements, builders are likely to explore and adopt new technologies and construction methods. This shift could spur advancements in many areas, including insulation materials, HVAC systems, and building envelope design.

Education Matters

As the industry adapts to these new standards, ongoing education and collaboration with energy experts will be key to success. Builders should start preparing now to ensure they're ready for the November 2025 implementation date. This might involve updating design libraries, retraining staff, and developing new relationships with suppliers and subcontractors who can help meet these higher standards.

Embracing Change

New HUD changes reflect broader trends in sustainable and energy-efficient housing, even as they pose industry challenges Builders who adapt quickly to the new standards and anticipate future changes may gain a competitive edge in the evolving housing market. For example, by constructing homes that exceed current code requirements, builders can stay ahead of regulatory trends, ensuring compliance while creating a buffer against future changes. This proactive approach offers long-term cost savings by reducing the need for frequent updates and enhances market adaptability.

Strategic Partnerships

New HUD energy standards challenge the industry to balance compliance, performance, and cost-effectiveness. Collaborating with experts at Henry, A Carlisle Company, and Arcxis provides crucial support in meeting these challenges, helping to improve project efficiency and quality standards while ensuring regulatory compliance.

Henry offers innovative building envelope systems designed to meet stringent efficiency standards, including high-performance barriers, advanced insulation, and HVAC duct sealing technologies. ARCXIS complements this with comprehensive inspection and engineering solutions, scalable from 100 to 4,000 homes.

For more detailed guidance and assistance with your air sealing strategy, contact one of our experts today.