Markets in the Spotlight, continued: ALASKA: FAIRBANKS MAYORAL ELECTION
legislation requiring all new residential construction to be ZNE by 2020. Other state and local politicians have proposed similar measures that would require certain sectors of the housing market to begin incorporating energy-efficient systems. For example, in Milwaukee, Wisconsin, newly proposed legislation would require small residential construction to include solar-powered energy systems. The California measure has also led manufacturers of products for home products, such as lighting systems, to create more “classes” of energy-efficient and -compliant offerings that may be more expensive to purchase even if the upfront costs are made up over time. This affects costs of materials nationally even if those products are not mandatory in all construction. Critics of this type of legislation and policy say that ZNE mandates like those in California inhibit the growth of the affordable housing inventory. They also warn this type of initiative, if improperly implemented, can displace large portions of the population that cannot afford costlier upfront housing costs. > Continued on :: PG 96
FACTOR #2: Tariffs & Trade Policy
What are tariffs? Tariffs are taxes on imported goods. They serve as a means for governments to create revenue and affect domestic and international trade. For example, raising tariffs on imported goods may lead consumers to buy similar domestic goods instead. However, the relationship between tariffs and support of domestic products has become more complicated as the manufacturing process for many products has become more complicated. Today, many items are produced in part overseas and in part at home, which makes the effects of tariffs on the domestic economy more difficult to predict. The Issue today: Under the sitting presidential administration, tariffs play a significant role in trade policy. The Trump administration has enacted a number of tariffs on a wide variety of imports, partially in an attempt to strengthen domestic producers’ position in those industries and partially as part of a larger drive to reposition the United States on other related trade issues. Tariffs currently affect real estate investors most directly when it comes to the cost of materials for rehabs, renovations, and new construction. According to the Associated General Contractors of America (AGCA), existing and proposed tariffs on lumber imports, steel imports, aluminum imports, and flooring products and components involved in the production of luxury vinyl plank and tile have affected the cost of materials already. The AGCA warned in a public statement that contractors will likely continue to offset price increases in materials by raising the cost of their services or opting not to fund purchases of improved
Candidates are making renewable energy a key point in debate.
What is zero net-energy construction? Zero net energy (ZNE) is defined by the U.S. Office of Energy Efficiency and Renewable Energy as construction enabling a building, when complete, to “produce enough renewable energy to meet its own annual energy consumption requirements.” Zero-energy buildings (ZEBs) use cost- effective measures combined with on-site renewable energy sources, such as solar panels, to achieve the goal of zero net energy consumption.
What to Watch: Tariffs are not on the ballot, but politicians on both sides of the issue are. By placing pro-tariff individuals in office, many analysts and political pundits argue voters implicitly endorse the practice and vice versa. If supporters of tariffs tend to lose their political offices in November, analysts predict the current aggressive trade policy might be toned down. This could affect the cost of materials used in housing nationwide and, furthermore, it will also impact local and regional markets that may have benefited from domestic producers’ optimism about the effects of the tariffs. Those domestic producers may slow expansion or hiring if they do not believe the protection provided by tariffs will last. equipment and additional personnel. Both reactions will contribute to the ongoing construction labor shortage in the United States at this time. On the other hand, domestic producers of these goods say that if the tariffs remain in place or are enacted in the coming months, their production costs and, by extension, the pricing on their materials, could fall in response.
Why is this a midterm issue? Earlier this year, California made headlines for passing
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FACTOR #3: Zero Net-Energy New Home Construction
Markets in the Spotlight:
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NEVADA: QUESTION 6 Question 6 legislation would increase mandated minimums for obtaining electricity from renewable energy sources, thereby affecting utilities costs.
ARIZONA: PROPOSITION 127 A ballot initiative that will require Arizona utilities to generate half of their energy through renewable energy sources such as solar and wind by 2030.
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