The Biden administration is exploring energy efficiency mandates that would apply to millions of new homes backed by Fannie Mae and Freddie Mac, in a move that critics fear could further exacerbate the housing affordability crisis. 

“We are undertaking an analysis right now to look at the building code issue,” the director of the Federal Housing Finance Agency, Sandra Thompson, told a Senate Committee in April, adding that the agency should “have some recommendations” coming out by the end of June. When reached by the Sun, a representative of the agency confirmed that it is working to “assess ways to support greater energy efficiency for loans financing newly constructed properties” purchased by Fannie Mae and Freddie Mac, and to “improve resiliency for the mortgage market.”

The move comes on the heels of the Department of Housing and Urban Development and the Department of Agriculture adopting minimum energy standards in April that would require newly built homes that are backed by Federal Housing Administration loans or USDA financing to meet the requirements of the 2021 International Energy Conservation Code. 

“Those requirements, in our estimation, are going to raise the cost of housing anywhere between $20,000 to $30,000,” the president of the National Association of Home Builders, Jim Tobin, tells the Sun. “If you take FHA, USDA, we also have the Department of Veterans Affairs, VA Home Program to follow suit as well, and then Fannie and Freddie join, 90 percent of the mortgage market in this country will have to comply with these mandates.”

That’s a “massive amount of homes that will be affected by this,” he adds. “I think what we’re going to find is that home costs are going to go up at a time when we cannot afford that. We’ve got to find a way to make homes less expensive, not more expensive.” 

The greener energy push comes as national home prices in March hit their “ninth all-time high over the past year,” according to S&P Global.

“It already costs a lot of money to build a new home no matter what size you’re building,” Mr. Tobin says. Adding a national “energy efficiency mandate” would make the crisis worse. “That’s what this is, I don’t want to make a mistake about it, this is an effort by the federal government to put in a national energy code,” he says, adding that typically energy is regulated at the local and state level. 

Supporters of the energy efficiency requirements contend the energy cost savings would make up for the upfront costs of meeting the new build requirements. 

“Analysis for HUD and USDA’s determination on building energy codes showed that the nearly $1,000 in annual energy savings for a typical homebuyer supported by FHA would exceed any increased downpayment and financing costs in just the 18th month of ownership,” a senior policy director at the American Council for an Energy-Efficient Economy, Mark Kresowik, tells the Sun. “Homebuyers are also likely to be more safe and comfortable during extreme weather, especially if the power goes out, due to the additional insulation and better air sealing in a home built to modern energy codes.” 

The federal agencies pushing the standards say they will save residents money, improve health, and reduce overall energy use and pollution. 

“These updates don’t just benefit the residents of these homes,” HUD’s principal deputy assistant secretary for community planning and development, Marion McFadden, said in a statement. “They benefit us all by reducing carbon emissions that lead to climate change. Emissions savings from these standards is equivalent to taking 46,000 cars off the road every year.”

Despite monthly savings, Mr. Tobin says the initial added costs could price homebuyers out of the market.

“If you’re going to raise the cost of the house by even $20,000, there are thousands, millions of people across the country that will no longer be able to afford that house,” he says, adding that some of the proposed energy standards would take a century to pay off. “There just isn’t enough monthly savings to overcome that initial point of $30,000 costs to the house, and it’s born completely upfront by the person who buys that first home.”

A better way to address climate change, Mr. Tobin says, is to retrofit older homes. “Forcing energy mandates on new homes, it’s a drop in the bucket when you consider all the older inefficient homes that are out there,” he says.