Transition Team Weighing Blockbuster Housing and Stimulus Proposal

The automobile industry was revolutionized with the invention of the hybrid engine that could capture and store energy that would otherwise go up in smoke. Now, there's a counterpart invention for the housing market that extracts the energy wasted by buildings, and uses it to power economic recovery.

It takes the form of a plan that promises to save consumers $142.33 billion to $200.88 billion in energy costs and mortgage payments over a five-year period, significantly reducing the risk of mortgage failure while increasing disposable income and creating millions of new jobs.

The plan of action is now in the hands of the Obama transition team and could rewrite the book on how the stimulus package gets put together. It's called the 2030 Challenge Stimulus Plan and it was authored by Ed Mazria and his team at Architecture 2030.

He's just back from Washington where he presented the Plan to Congressional staff and industry groups, going to 20 meetings a day, explaining how it works. "My feet were killing me," he said, "going around to all those buildings all day long." The payoff was that listeners across the board were enthusiastic. It also got sent to the Obama transition team, where the Plan is now being reviewed.

Architecture 2030 has figured out a way to direct federal stimulus into the beleaguered building sector so that it succeeds in doing these things:

• Reduces the cost of mortgages
• Reduces energy consumption and energy bills
• Creates millions of jobs and stimulates economic recovery coast to coast
• Returns the stimulus money back to government coffers.

It sounds to good to be true. You can't get something for nothing. Where's the hitch, I wondered.

The answer is, there is no hitch. There actually is a huge something. It's a very big untapped asset that Mazria has figured out a way to harness: the energy wasted by almost every single building in the nation. Capture the dollar value of that energy and you've created a powerful engine of economic recovery situated at the heart of America's sweet spot: its homes and buildings.

Here's how the plan works. (A pdf of the plan is here.)

The federal government creates what's called "a mortgage buy-down program." If you are a homeowner, you can bring your mortgage rate down 2 or 3 or 4 points -- with Uncle Sam picking up the difference -- if you improve the energy efficiency of your home. It's an offer you can't refuse, because it means you can save hundreds of dollars on a typical monthly mortgage, plus hundreds more in reduced energy bills -- in perpetuity.

Those savings immediately go in to family coffers and can get spent, stimulating the economy. At the same time, all the demand for energy efficiency upgrades creates millions of jobs. The government recoups its investment in the mortgage buy-down from the income tax collected from the newly employed. And greenhouse gas emissions go down dramatically.

He walked me through a hypothetical example that highlighted the huge incentives the plan could unleash. Say you're a homeowner with a $272,000 mortgage at 5.55%, paying about $1550 a month. You decide you want your mortgage rate to drop to 3%. In order to qualify for the reduction, you have to improve the energy efficiency of your home 75% below code, and it's going to cost you a pretty penny: about $40,000.

Existing tax credits would take care of about $10,000 of that cost. The rest would get tacked on to your existing mortgage, bringing it up to $302,000. But, at 3%, you'd be paying only about $1280 -- saving almost $300 a month on the mortgage alone, plus another $150 in reduced energy costs. The value of your home rises, you have more disposable income, you've given work to someone to do the upgrades for you -- and s/he's now paying federal taxes, and you've reduced your carbon footprint.

Here's how Mazria described it in his plan summary, which includes a mechanism for leveraging value of lost energy from commercial buildings in a slightly different fashion:

Because investing in energy efficiency in buildings is the most effective way to create jobs and revive the economy, Architecture 2030 recommends an investment of $171.72 billion ($85.86 billion each year for two years) in a plan that integrates a housing mortgage buy-down and an accelerated-depreciation program for commercial buildings with energy efficiency in buildings, specifically with the widely adopted energy reduction plan called the 2030 Challenge.

This investment will create 3.75 million direct jobs in the Building Sector, as well as 4.34 million indirect and induced jobs and over 350,000 jobs from consumer spending. Of special note, tying the mortgage buy-down and accelerated depreciation to achieving specific energy reductions immediately creates the opportunity for a $1.6 trillion renovation market that does not currently exist.

The immediacy and magnitude of this opportunity can turn the tide for the construction industry, as well as the nation. The plan, called the 2030 Challenge Stimulus Plan (‘Plan’), would save consumers $142.33 billion to $200.88 billion in energy costs and mortgage payments over a five-year period, significantly reducing the risk of mortgage failure while increasing disposable income.

Because the 2030 Challenge calls for buildings to be renovated or designed to reduce their fossil-fuel, GHG-emitting energy consumption, the Plan will also reduce CO2 emissions by 481.13 MMT and energy consumption by 6.17 QBtu over the same five-year period.

Mazria explained further advantages. It touches every homeowner coast-to-coast, and it touches every industry. Sure, rebuilding our roads and bridges is important, but those projects are highly localized. They require big investments, create few jobs, don't significantly lower emissions (except for mass transit and congestion alleviation projects), and mostly benefit just a handful of big industries: asphalt, concrete, steel and paint.

But the building sector, now practically dormant with a million people out of work already, can be uplifted almost immediately by the Plan. Every community and every industry would be touched. Mazria enumerates: glass, rubber and fabric, windows, wood, nails, you name it, and you don't have to pick winners and losers. The homeowners can decide if they want to retrofit insulation inside their walls or go with insulating curtains instead.

Okay. But what about verification, and trained and skilled workers and.....

"I'll answer you, I'll answer you. Everybody in Washington asked the same questions, and the answers are critical to the plan."

Mazria has budgeted $2 billion in the Plan for a training program for building inspectors -- to get enough of them in place. It takes about five days to train an inspector in energy efficiency. State energy offices would handle the training, Mazria says, and by the way, that also creates jobs. You also need energy auditors who will assess homes and make plans. Many utilities are already doing this, and there will be incentives for expansion. Professional architects and engineers can an also be quickly trained to perform audits, run simulations and insure construction compliance. Many already can.

"Everything is off-the-shelf, it's not that difficult," Mazria said. "More efficient boilers, furnaces and hot water heaters, efficient windows and doors, shading devices, more efficient appliances, tightening up duct-work. Any plumber can install solar thermal panels if he has a drawing from the manufacturer, same with photovoltaics. Sure, there's some training involved through the community colleges, state and city energy departments and trade associations, but it's not an insurmountable problem. It’s really just another opportunity for jobs and business growth."

Mazria has been working tirelessly for years on transforming the building sector. The last time I saw him a few weeks ago, he seemed tired, and that was before his Washington whirlwind tour.

"Yes, I need to take care of myself better. I still play ball when I can."

He's 68 and admits he's slowed down since 1962 -- the year he got drafted by the Knicks. He went to training camp and got offered a "cut contract", which he didn't take, and eventually became an architect instead. Good thing.

He might have just earned a slot on Obama's team.

Hat tip: GetEnergySmartNow

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