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Code Comparison and Cost Analysis (for builders)

With the 2018 IECC being released and new codes being adopted, the requirements builders have to satisfy are changing. Tennessee, in particular, is seeing a lot of changes in the building codes that counties and municipalities are adopting.


The biggest change in code requirements comes with the change from 2009 to any more recent codes. The 2012, 2015 and 2018 IECC are pretty similar. They all have the same updated requirements for insulation, while the 2018 code also requires a lower U-factor for fenestration.


All three are also much more strict regarding air leakage, cutting the acceptable home air leakage from 7 ACH50 to 3, and the max allowable duct leakage from 12 CFM/100 ft2 to only 4.


These changes, though pretty straightforward, can seem daunting to builders. We’ve also heard a lot of concerns about how this will affect the costs to the builder & the buyer, as well as the overall margins.


Let’s explore these changes, and see how builders can best navigate the new requirements and still keep their costs down, have great margins & sell the home at a fair and reasonable price.


What costs will increase?


Framing is the single greatest cost in the construction process, coming in at roughly 15% of the total construction costs according to a National Association of Home Builders (NAHB) report. And given the new insulation requirements, that cost will likely go up, depending on how you choose to approach it.

  • R-20 insulation - this will require 2x6 lumber for framing

  • Stick with 2x4s for framing and insulate using R-13 cavity insulation and a R-5 continuous sheathing

While at first glance you might think that sticking with 2x4s will lead to a lower cost to frame and insulate, in fact switching to 2x6 framing lumber will actually save money.


How is this possible?


By switching to 2x6s for framing, you’ll be able to go from 16 inches on center to 24 inches on center, taking a significant chunk out of the number of boards you’ll have to buy.


Using a cost analysis from BCAP, it actually looks like making the jump to R-20 instead of R-13+5 will save you, the builder, about $1,000 per house or about $600 after you factor in the window jamb extensions 2x6 framing will require.


Apart from the framing and insulation, depending on which code you jump to, other incremental costs include sealing and insulating attic hatches and knee wall access doors (estimated at $100), insulating hot water lines (estimated at $100), and upgrading lights and windows.


Estimated cost increase to build to the new IECC


Much like the costs for each builder are different, the projected increased costs are different depending on which source you go to. It also depends on what code your moving to and from.


Projection of costs to move from 2006 to 2012 IECC range from about $2,000 to about $8,000.


However, if you’re already on the 2012 IECC, the incremental costs to go to 2015 or 2018 codes are significantly smaller. The move from 2012 to 2015 ranges from saving builders about $500 to costing about $2,000 more. All the research and analysis I’ve seen, including that done for the NAHB shows that going from 2015 to 2018 will save builders money.


How can builders thrive under the new IECC?


The other major change in the 2015 and 2018 IECC is the addition of the Energy Rating Index (ERI) as a code compliance path. The ERI frees builders from following the very strict, very specific requirements of the prescriptive path, and gives them the freedom to design and build homes with much less scrutiny as long as they are able to score well enough on the ERI.


What is the ERI?


The ERI is generally synonymous with the HERS Index (Home Energy Rating System). Homes are scored for their performance, with lower scores being better.


How do you calculate the ERI?


You’ll give your design plans to a HERS rater, and they will build a computerized energy model of the home. This model can offer real time feedback on projected score, projected costs and projected energy savings of swapping out different features of the home.


For example, what would happen if you went with a tankless water heater? The rater will change that and give an updated score and cost right there.


Once the model is complete, you begin building as normal.


A few times throughout the build process, the HERS rater will come out and inspect the house. Basically he/she will be verifying that you are using the materials originally planned, and checking the quality of your subs work.


When the home is finished, they’ll do the blower door and duct blaster tests, as well as some final verifications and you will have your ERI.


You need an ERI of 54 under the 2015 IECC. In the 2018 IECC, that number actually eases up to 62 (remember, lower score is more efficient).


You read that right, the 2018 IECC is actually easier to comply with than the 2015.


Why use ERI instead of the prescriptive method?


The first reason is just freedom, and the ability to do things your way rather than by following a much more stringent code checklist.


The second reason is that by using the ERI compliance method, the home will have a HERS rating. The HERS rating is nationally recognized by the Appraisal Institute as increasing the value of homes.


Why?


Because it gives buyers a “miles-per-gallon” rating for the home. They’ll be able to compare two completely different homes and get a better idea of the total cost of ownership. Not only will they save money on their utility bills by having a home with a better HERS rating, but there is a lot of research that shows that energy efficient homes are also more durable and resilient (reducing maintenance costs) and healthier (reducing medical costs). For builders, there is generally reduced liability and fewer call-backs with homes that have good HERS scores.


When you get a HERS rating, you’ll be opening up a way to differentiate your homes from the competition. You can also get marketing and sales assistance. Finally, and this one is great, your homes may become eligible for high performance home mortgages, which can reduce the amount of time it takes to get them sold and occupied.


Reason number three why it makes sense for the ERI: it’s another QA/QC. What we’ve seen doing HERS ratings for builders is that the larger the development, the more valuable having a HERS rating can be. Simply put, the HERS rater will be in all the homes, looking at the details, and can alert your superintendent or project manager if things aren’t looking like they’re up to your usual quality standards.


It will give you real time feedback on the performance of your subcontractors. It will help you ensure you’re building a high quality product. And it will reduce the number of callbacks you get to fix issues, because a lot of these problems will be caught beforehand.


Final thoughts


While it may sound intimidating or costly to update the IRC and IECCs, the actual increased costs are minimal. Done properly, they can potentially get caught and prevented. And for homebuyers, the increased cost hardly affects their mortgage payments.


Even still, the National Association of Home Builders did a survey and found that most homebuyers would willingly add $9,000 to the cost of their new home in order to reduce their utility bills by $1,000 per year. Those kind of savings are easily attainable, and easy to prove, when you get a HERS rating.


Because different counties and municipalities are adopting different codes, and making unique amendments to them, keeping track of the requirements can get tricky. If you have any questions about the building codes anywhere in Middle Tennessee, or you want to understand how to deliver a great product while keeping costs down and profits up, reach out to us.


We pride ourselves on helping builders through this, so you can focus on building great homes and building a great business.




References:

https://www.nahbclassic.org/generic.aspx?genericContentID=248306

BCAP. http://bcapcodes.org/code-status/state/tennessee/

NAHBRC. 2012 IECC Cost Effectiveness Analysis.

Home Innovation Research Labs. Estimated Costs of the 2015 IRC Code Changes.

Home Innovation Reserach Labs. Estimated Costs of the 2018 IRC Code Changes.


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