Utility bills are a pain. Not only do they add up, they never seem to get any cheaper whether or not we turn off every light before leaving the house. So what if we told you that the price of these monthly costs could soon go down? For Californians buying a newly constructed home next year, this is certainly true. Beginning in 2020, California will be the first state in the nation to require newly built homes to install solar panels. This will save homebuyers money and the energy to install them personally, but the purchase price will increase.
Below we will discuss where this new requirement came from, the options available to homeowners, and what effect it could have on the real estate market.
How Did This Requirement Come About?
A unanimous vote by the California Energy Commission requires new California homes to be solar-paneled starting January 1, 2020. The vote, finalized in December 2018, applies to single-family and multi-family homes with three stories or less.
“Solar was always considered a luxury item in the past. Now it’s going to be a necessity,” said Dan Spiegel, president and co-founder of DMS Contractors.
According to the L.A. Times, this was part of the state’s decade-long goal to reach net-zero energy in residential homes by 2020.
What Are the Solar Buying Options?
1. Home buyers can purchase panels
Although the most expensive option, this could provide long-term benefits. The CEC estimates homebuyers could save up to $35 a month as well as 50%-70% energy depending on the size of the system.
2. Home buyers can lease the panels from a third party
The company will own the panel and its energy, giving homeowners a 20% discount on the electricity bill. Leases can go on for 20 years at a time.
3. Home buyers can pay for community-shared solar options
This is the most affordable option for home buyers and developers, but would require more planning. Developers would have to buy a piece of land from off-site solar farms which would send energy through transmission lines. This could lower the cost per home from $8,400 to $1,200.
How Much Will It Cost?
Seen as an environmentally friendly choice to some, this could cause a financial strain on the home buying process for others. The CEC estimates that this new requirement could save homebuyers an average of $19,000 over 30 years, however, the upfront cost of the home can reach over $8,000. Monthly mortgage costs will also be hiked up nearly $40 per month as developers add on this price for supplying the panels.
What Effect Could This Have On The Real Estate Market?
This new requirement could potentially undermine a segment of the California real estate market. Depending on the prospective homebuyers in 2020, the additional upfront cost of homes could cause further financial constriction in California.
According to a study from the National Assn. of Home Builders, “every $1,000 increase to the cost of a home makes 52,903 households unable to afford a house. At that rate, a jump of $8,400 would keep about 444,385 households from buying a home.”
With many individuals already relocating to more affordable markets, it’s questionable if the new solar panel requirement will amplify this more. There’s an unclear balance between the additional cost to buy a new home with solar and the monthly savings on utilities. We are curious and excited to see how this unfolds.
One thing can be sure: every step that we take as a society towards renewable energy sources is a step in the right direction.
To read the full L.A. Times article, click here.
To learn more about Malibu Real Estate, contact our team!
The Mark & Grether Group at 310.230.5771 or email us at russellandtony@compass.com.
