Propmodo Daily

By Nicholas Pipitone · Apr. 2, 2024

Greetings!

The International Code Council (ICC) is facing criticism for changes to its 2024 energy code. Key provisions promoting electrification for emission reduction were moved to appendices, prompting accusations of caving to industry pressure and breaking ICC rules. Critics warn this could lead to withdrawals from the association or even an alternative code. Today, we'll examine why this change, while potentially benefiting the real estate industry temporarily, could hinder decarbonization and increase long-term costs.

Residential hospitality operator Sentral is challenging the traditional apartment model by offering flexible living options. They provide both standard leases and furnished, short-term rentals, appealing to remote workers and those desiring more adaptability in their living situations. Sentral's unique approach, which includes allowing some tenants to sublet on Airbnb, signals a shift within the multifamily industry towards solutions that align with evolving tenant preferences.

This week, Propmodo Technology delves into the realm of capital project management thanks to our sponsor, Nuveen Green Capital. We'll explore how advancements in technology are transforming the management of commercial construction expenses, the role of green loans in funding clean energy initiatives and energy-efficient improvements in buildings, and the growing acceptance of C-PACE, a financing option once seen as niche.

Now, let's dig in!

International Code Council's Credibility Questioned After Energy Code Dispute

The International Code Council is the world’s leading source of building model codes. The ICC’s International Energy Conservation Code is used in 48 U.S. states and essentially sets the tone for building energy efficiency worldwide. A recent dispute over an ICC vote to finalize the 2024 International Energy Code has garnered some headlines but has happened primarily behind the scenes.

In March, the ICC voted to move specific provisions of the 2024 energy code that would cut greenhouse gas emissions from commercial and residential buildings from the main body to the appendices. The 2024 code covers commercial and residential building energy design and construction, providing minimum energy efficiency requirements that are safe, technologically feasible, and cost-effective.

The provisions moved from the main code to the appendices cover heat pump products, electric vehicle charging infrastructure, energy storage systems, demand response, and property readiness for solar installations. Although moving these provisions to the appendices may not seem like a huge deal, the ICC faces plenty of criticism. The American Council for an Energy-Efficient Economy says the code council bowed to industry group pressure and gave no explanation for removing the provisions.

Critics are even more upset about how the International Code Council handled the situation. All code adoptions have an appeal process, but critics claim that the ICC violated its own appeals protocols. The code received appeals from industry groups, including trade organizations representing gas utilities, HVAC equipment manufacturers, and apartment building developers. ICC provided no opportunity for committee member review after stripping provisions for the code that would’ve pushed for building electrification.

Moving these provisions to the appendix doesn’t entirely remove them from the 2024 energy code but makes it less likely that jurisdictions will adopt them. Critics are upset because the code development process depends on volunteers, who spent countless hours working on the code only to have the critical provisions stripped. “All of this adds up to a serious credibility issue for ICC and the need to rethink the process for building energy code development,” wrote Amy Boyce for the Institute of Market Transformation, a non-profit organization focused on high-performance buildings.

Some organizations question whether they will continue voluntary participation in the 2027 energy code process. They even say an alternative to the International Energy Conservation Code may soon be necessary. That could have a considerable impact. State and local governments could begin adopting their own energy codes or turn to a different code organization.

Some compromise is always necessary in the development of building codes. And the industry groups that got their way by removing the more stringent provisions are certainly not the bad guys. The electrification provisions removed from the 2024 energy base code would have added additional costs and burdens on real estate developers.

What’s interesting about the ICC energy code dispute is that it comes at a time when other climate change policies have also been weakened. The Securities and Exchange Commission’s finalized climate disclosure rules were notably watered down and omitted Scope 3 emissions. The White House and the U.S. Department of Energy unveiled a national net-zero building definition that also omitted embodied carbon emissions.

A lighter regulatory burden for the real estate industry is mostly good news, especially with the market in such turmoil. The costs associated with decarbonizing commercial properties will be massive, and the rules being passed are still tough to comply with. However, stricter decarbonization regulations will eventually be implemented. Removing more burdensome provisions now may delay the inevitable and increase future costs. Industry groups may see these recent compliance battles as a win, but they’ll either have to pay now or later. And the bill that’s coming due is likely to keep getting bigger.

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