Talk with Bracken Hendricks, a senior fellow at the Center for American Progress and a founding member of the Home Star Coalition, a group endorsed by more than 1,000 organizations, associations, individuals, and companies of all sizes, and you will be infected by the “Good News.” “The City of Chicago set a goal for retrofit of 40% of its buildings,” Hendricks says. “If you applied that goal to all U.S. homes and offices over the next decade, that would be 50 million buildings. [In one decade], retrofit 5 million buildings a year at $10,000 a job, that’s half-a-trillion dollars in the retrofit and construction industry. That creates 625,000 sustained jobs throughout the decade. [It’s also] a 20% to 30% savings in energy costs. Anyone in the remodeling industry now potentially has a line on a huge new market. This is a huge opportunity.”
What Hendricks is referring to is the home performance industry in general and, specifically, the Home Star Energy Retrofit Act now making its way through Congress. Passed by the House in early May (the Senate version, as of this writing, is with the finance committee), Home Star supposedly will create an estimated 168,000 jobs as well as bump consumer spending, lower homeowners’ energy bills, and improve the environment. With the construction industry facing 25% unemployment — closer to 40% in Nevada, Arizona, Michigan, and Florida — Home Star looks like a magic bullet. But the act, which is being served to the public as a jobs bill, leaves many remodelers scratching their heads.
They fear that Home Star is aimed at creating a new industry and that remodelers, who have been doing retrofit work of some sort for years, will be shut out. “This is a jobs bill for people who are not remodelers,” says David Merrick, owner of Merrick Design and Build, in Kensington, Md. “They are not thinking of us at all.”
At issue are the possible barriers to success for remodelers: return on their investment for education and certification; the costs associated with offering rebates; and the possibility of having to create a new business model. “There’s a significant burden of entry here for many of our members,” says Mary Busey Harris, president of the National Association of the Remodeling Industry (NARI). “I think [they] are looking at this as so much bureaucracy and [a high cost] to play that it’s not going to be worth it.”
Yet Harris and leaders in the National Association of Home Builders Remodelers do acknowledge that this bill can have positive outcomes on both business and the environment. How can remodelers best take advantage of what may prove to be a game changer for the future of the building industry?
What Is Home Star?
Introduced in the House this past spring by several sponsors including Representatives Edward Markey (D-Mass.), Peter Welch (D-Vt.), Vern Ehlers (R-Mich.), and Dennis Cardoza (D-Calif.), Home Star (sometimes referred to as “cash for caulkers,” due to its similarities to last summer’s “cash for clunkers” program for automobile dealers) authorizes up to $6 billion worth of tax rebates for homeowners for installation of energy-efficient products.
The retrofit work is divided into two programs: Silver Star, which will offer rebates to consumers for purchase and installation of various energy-efficient measures, and Gold Star, which bases its rebates on whole-home energy savings.
Those who know and study the remodeling industry agree that the Silver Star level is the place where existing remodelers will be readily able to use their skills and participate. “We can all play at the silver level,” says Dan Taddei, director of education and certification at NARI. “There’s less money, [per job] but an opportunity for our people to work.”
In the Silver Star program, a consumer would hire a “qualified contractor” to install attic insulation, for example. A “qualified contractor” is defined as one who has a state license, or a state’s equivalent; has general liability insurance coverage of at least $1 million; provides warranties for at least one year after completion of work; and agrees to pass on the rebate to the homeowner. That qualified contractor would connect with a “rebate aggregator” then proceed with the project. The rebate aggregator will most likely be a big-box store, utility company, or other large entity that will be the financial liaison between the retrofitter and the federal government. The remodeler would provide the rebate directly to the homeowner and would receive payment from the rebate aggregator within 30 days.
Keep in mind that this is not a tax credit but a direct rebate to homeowners for up to $3,000 for materials and installation of specific energy-saving technologies, including insulation, air and duct sealing, windows and doors, and water heaters.
At least 20% of a “qualified” contractor’s retrofits will be randomly subject to field verification by an “independent quality assurance provider.” Only 10% of your retrofits will be subject to verification if you are a “qualified contractor” using a “certified workforce,” i.e., “all employees performing installation work” have been certified based on standards set by the Building Performance Institute (BPI), North American Technician Excellence (NATEX), Laborers’ International Union of North America (LIUNA), or another approved entity. The Senate version also includes NAHB’s Home Builders Institute in connection with Ferris State University.
While the Gold Star track has similar parameters, it specifies that those performing the work be accredited by BPI or another approved agency. And it includes a before-and-after comparison of energy consumption. Quality assurance providers, certified by the International Code Council; BPI; the Residential Energy Services Network (RESNET); a state; a state-approved residential energy efficiency retrofit program; or any other approved entity, will verify the work using approved home simulation software programs. Consumers will not have to save energy bills to show improved performance.
Rebates for Gold Star begin at $3,000 for a 20% reduction in whole-home energy consumption with an additional $1,000 rebate for each additional 5% reduction up to $8,000 or 50% of the retrofit cost (product plus installation), whichever is lower.
Fifteen percent of the work done by an accredited contractor is subject to verification. If that same contractor uses a “certified workforce,” just 10% of the work is subject to verification.
Like last summer’s cash for clunkers, the Silver Star program will be in place for one year or until the money runs out. Cash for clunkers was so popular it could only be sustained for two months. Yet, according to the Council of Economic Advisors, that short span not only spurred high summer 2009 car sales, it increased the subsequent yearly rate of sales.
Home Star’s Gold Star track will continue for two years subject to availability of funds. Proponents of the bill — numerable and on both sides of the political aisle — hope that by raising consumer awareness and spurring retrofit work, Home Star will engage the public to go further and change the way we build.