Solar panels will be a required feature on new houses in California, after the state’s Building Standards Commission gave final approval to a housing rule that’s the first of its kind in the United States. Set to take effect in 2020, the new standard includes an exemption for houses that are often shaded from the sun. It also includes incentives for people to add a high-capacity battery to their home’s electrical system, to store the sun’s energy.
The state predicts that mandatory solar panel installations and other new improvements will add nearly $10,000 in the upfront cost of a home — a cost that officials say will balance out over time, due to lower electricity bills.
Starting in 2020, California homebuyers will have the option of either paying for solar panels outright, leasing them, or entering a power purchase agreement with developers. Another option is for communities to pool resources instead of installing solar on individual homes.
Affordability and lack of supply are two of the biggest issues in home building today. These challenges are even more pronounced in California, with only small portions of the population able to afford the median price of new homes, compared to the national average of approximately 50%:
With affordability already at issue, adding $10,000 to the purchase price of a home for solar panels will inevitably cause some headaches for builders. For example, some consumers will see that, all else equal, the price spread between new and existing homes is higher and opt for the cheaper option. Others may decide to spend less on options and upgrades to offset the $10,000.
Costs vs. Savings
The focus, however, should really be on the monthly payment. It’s calculated that the change in the mortgage payment is just under $40.00 per month when considering median home prices and current mortgage rates. The $40.00 difference is the same whether one is buying a $200,000 home or $1.5 million, making lower-cost areas are more vulnerable. Here’s the cost breakout by select regions:
• California average: 2.0% increase in the monthly payment
• Central Valley: 3.0%+
• Coastal Southern California: Roughly 1.0%
• Bay Area markets: <1.0% difference
The 2020 mandate looks costly on the surface, especially for consumers who don’t place a high value on the technology, but adding solar panels is estimated to be a net gain for households. Furthermore, unlike some regulatory fees that raise home prices without an obvious benefit, consumers can enjoy the utility of the solar panels. California has 40% more sunny days than the national average, which supports the early push to embrace solar power. While the new mandate will not get close to making green energy pervasive (the new home market comprises only 5% of overall housing transactions in California), the effort could lead other states to follow, especially if consumers realize the benefits as promised.
For Further Reading
Resources for further research into California’s Solar Mandate include:
• “What California’s Solar Mandate Means for New Homes”: https://www.homes.com/blog/2019/03/what-californias-solar-mandate-means-for-new-home-construction/
• “Count Down to 2020”: https://solarbuildermag.com/news/countdown-to-2020-californias-grid-is-broken-and-solar-is-the-solution/