President Trump famously pledged to halve Americans’ energy costs in his first year in office. And yet, he and some congressional Republicans have called for repealing energy initiatives in the 2022 Inflation Reduction Act (IRA).
But what if those two priorities conflict, particularly for Texans?
Texans especially want more resilient and affordable homes, not less, with rising electricity costs and storms decimating communities. Last year alone, millions in Houston suffered damage or outages from the derecho and hurricane. And the state’s home insurance rates are skyrocketing, jumping more than 50% in the last 5 years.
And so, more than most states, Texas stands to suffer if Congress and the White House undermine tax incentives that encourage the very kind of high-efficiency, durable homes the state needs and wants.
First, consider the homebuilder tax credit, which was first created in 2005 with bipartisan support and George W. Bush’s signature. Originally, homebuilders could get a $2,000 tax credit for building a home that was 50% more energy efficient than the model energy code.
Now, after the 2022 updates, builders can receive a $2,500 credit for building to the ENERGY STAR homes standard, or a $5,000 credit for building to a much more rigorous zero-energy-ready standard.
And homebuilders appear to love it. Before 2022, fewer than 142,000 ENERGY STAR homes were built in the U.S. Two years later, there were nearly 350,000 ENERGY STAR houses in 2024, or one-quarter of all new houses built in the U.S.
The boom is biggest in Texas, where the number of ENERGY STAR homes has tripled in just two years – from 32,304 units in 2022 to 101,308 in 2024.
This is a testament to the innovation and adaptability of the homebuilding industry, and it shows that smart, targeted tax policy can drive economic activity.
But mostly, it’s a boon for homeowners. ENERGY STAR homes on average use 20% less energy than standard homes, and the people who buy them will save an average of $400 a year on energy bills. That amounts to thousands of dollars in savings over the life of a home.
Second, look at the tax credit for homeowners investing in efficiency measures in their existing homes. As with the homebuilder credit, the IRA didn’t create this incentive; it simply modernized and updated it to reflect today’s technologies and construction prices.
And as a result, nearly 2.3 million Americans received an average credit of $900 in 2023 – including 148,520 in Texas – for projects like installing new insulation or high-efficiency heating and cooling equipment.
These efficiency improvements don’t just lower energy bills. They result in more durable and resilient homes. ENERGY STAR houses, for example, stand up better to natural disasters, and in those times when they lose power, they remain habitable for longer, meaning people can stay safely at home for longer until power is restored.
This is a huge issue for Houstonians. Last year’s derecho and hurricane left millions without power for days and resulted in dozens of deaths.
Of course, there is also a climate element to the incentives. The housing sector accounts for about 20% of U.S. greenhouse gas emissions, and by reducing their energy consumption we are simultaneously cutting pollution.
It’s the climate piece that has drawn criticism from some Republicans, who will soon determine the fate of the incentives along with other tax incentives created or updated in the IRA.
It would be a real shame if the credits were taken away. As we all know, we have a housing shortage in this country, in communities urban and rural, red and blue. Interest rates are high, and construction costs remain stubbornly inflated in the wake of the pandemic.
Eliminating these incentives would only add to those headwinds. It would not only hurt Texas homebuyers but the builders, electricians, insulation installers and HVAC contractors who would see a pullback in the market.
The truth is, the gains we’re seeing in ENERGY STAR homes being built in Texas is what progress looks like, and we should keep it going.
Ben Evans is the federal legislative director of the U.S. Green Building Council.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
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