LANSING, MI – Building industry groups are suing the state of Michigan to block new requirements making new homes significantly more energy efficient, saving homeowners thousands on utility bills in the long run, before the standards take effect later this summer.
Homebuilders say the upfront costs of new building codes are too much.
“Michigan faces a housing crunch. Too few homes are available. And too few homes are affordable, especially for first-time homebuyers entering the market,” they argue in two separate lawsuits filed against the Michigan Department of Licensing and Regulatory Affairs, or LARA, and its Director Marlon Brown on June 20 and June 23.
The legal attacks have the potential to further delay efforts to modernize Michigan’s residential codes, now a decade out of date. The new update, already mired in years of delays, is currently set to take effect Aug. 29.
Read more: Michigan will finally update old home building codes. See you in court, builders say
The codes govern aspects of design and construction of new and heavily renovated homes. They ensure safety and set bare minimum standards for materials like insulation, windows and heating and cooling equipment that can make a big difference in a home’s power and gas bills.
Proponents of the new codes, including a coalition of environmental groups, hail them as a behind-the-scenes way to slash carbon emissions from buildings in the fight against climate change, while reducing energy costs for homeowners.
“These lawsuits are another roadblock on the way,” said Carlee Knott, energy and climate policy manager with the Michigan Environmental Council.
Homebuilders raised objections from the moment the state proposed replacing current codes based on a set of international standards released in 2015 with new ones based on a 2021 update, some of the most energy efficient issued in years. They threatened legal action.
The groups have now followed through. The Home Builders Association of Michigan and the Michigan Manufactured Housing Association, trade groups representing the residential construction and modular and mobile home industries, sued LARA in the Michigan Court of Claims seeking to have the new codes struck down in two separate cases, one targeting overall residential codes and another focused on a set of energy-related provisions.
Citing the pending litigation, leaders of the industry groups declined to comment, as did a spokesperson for the state agency, whose Bureau of Construction Codes oversees code updates. Similar codes for commercial buildings already took effect this year.
The cases are assigned to Judge James Robert Redford.
Requirements in the new codes would increase the cost of a 2,000-square-foot home by $16,000, according to an expert analysis commissioned by the builders and included with their lawsuit.
Their complaints accuse state officials of overstepping their authority in updating residential energy codes and failing to follow procedural steps in Michigan law.
They request the court issue a preliminary injunction pausing implementation of the codes while the legal cases play out, then ultimately declare them invalid.
Part of the groups’ argument rests on a provision of Michigan law that requires new code updates to be “cost-effective,” considering costs and benefits over a seven-year time period. They argue the law requires “simple payback” of new costs introduced by the updated codes within that timeframe, meaning the financial benefits of the energy savings exceed the costs within the first seven years.
A federal study of updating Michigan’s residential energy codes found that would actually take 10 to 12 years. Studies commissioned by homebuilders found much longer payback periods stretching over decades.
But supporters of the code update contend the industry groups are hyperfocused on upfront costs because that’s what matters most for their bottom line, while they ignore longer-term and ongoing benefits for homeowners.
“It’s just the business model of homebuilding and selling houses,” Knott said. “I think they’re incentivized to sell houses for as cheaply as they can. … They’re not the ones that are going to be paying the bills every month.”
The new codes can also be evaluated via a “life-cycle” analysis that looks at savings over the long-term, assuming the initial investment is financed through a 30-year mortgage. That better reflects how most people finance a home and the fixed costs of homeownership, Knott said.
“It ends up saving people money in the long run, just by having those more energy efficient appliances and better insulation, because it lowers their utility bills month-to-month. Those savings add up quickly and pay for themselves over the lifetime of that mortgage.”
Under the new codes, homeowners could would see a positive cashflow in the first two to six years, with energy cost savings greater than the increased mortgage payment, per the federal study. The codes would save $396 a year on annual utility bills, it found.
Whether this satisfies the requirements of Michigan law, or whether the builders’ argument will hold up is a question for the courts, Knott said. “It is open to interpretation.”
The industry groups also contend the state failed to consider how homebuyers might be priced out of the market because of added construction costs. For every $1,000 increase, nearly 5,300 Michigan families are priced out, a market study cited in the lawsuits found.
“Although the Governor has recognized the need for more and diverse homebuilding in Michigan, the State of Michigan through LARA has chosen to adopt two new Codes that frustrate that objective,” the lawsuits read.
The cost increases will result in “incalculable loss of business and customer goodwill” for their members, the groups argue. Since builders need to buy new codebooks, learn the new requirements, change designs and order new materials ahead of the August implementation date, they are already being harmed, the lawsuits allege.
As of Thursday, June 26, state officials had not filed a response to the claims in court. Knott said the Environmental Council is now exploring legal options to aid in defending the new codes.
In the past, legal battles initiated by homebuilders over code updates have delayed their implementation for years. That possibility is a concern because it prevents Michigan from working on the next update, Knott said.
“That kind of just freezes Michigan in having decade-old codes for even longer, and I think it creates a lot of uncertainty too for builders.”
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