IMPLEMENTATION OF BC’S ENERGY STEP CODE – A MORE COLLABORATIVE AND INCENTIVE BASED APPROACH (2021)
Background
The STEP code is the envy of some Canadian municipalities, especially those without green building plans, and lower land costs. In BC, with its higher land costs, and high cost of housing, (Vancouver has been ranked the second most expensive housing market in the world after Hong Kong[1] for two years running) residents and builders are pushing back against building unaffordable supply.
We have over strengthened our building code making it unrealistic for housing affordability. Homes that were built 30 years ago are still in good shape and now we are building new homes that are Cadillacs vs Chevies; and to make them energy efficient is tough to get payback. Costs are so high to produce these homes that it takes years to get some of that money back through savings on utilities.[2]
Housing affordability issues – including not only the STEP code, but also high demand, pandemic panic buying, low interest rates, limited supply and regulatory red tape – lead to increased issues with labour, business expansion, pandemic recovery and even mental health. Government needs to relinquish “green implementation” and give control back to professionals who have shown willingness to take on the risks of investing the money to produce more supply. Below is a snapshot of new construction costs in Kelowna, the largest centre outside the lower Mainland/island[3] where housing costs continue to climb.
Has government created the housing affordability crisis? Yes, according to input from many builders and builders' associations across the province, from Prince George to Victoria, from Kelowna to the Lower Mainland. The incremental effect of all levels of government ‘taking their cut’, DCCs, and now the STEP code, is crushing for homebuyers. According to the Executive Director of the Victoria Residential Builders Association, Casey Edge, “The government has created the housing affordability problem. They’re in control. In terms of the STEP Code and government policy, what we’re saying is the government tells us what to build, how much we can build, where we can build through rezoning policies, how to build in terms of the building code, and how much money we have to give to the government in order to build through property transfer taxes, GST and so on. So how is the lack of affordable housing the responsibility of industry?”
What price is ‘net zero’ if you have to live in a rented apartment your entire adult life? Does that address climate change? Government can offer incentives to make existing homes more energy efficient, thus producing less greenhouse gas emissions vs. what will be achieved by the STEP code.
His words are echoed by professional associations such as the Urban Development Institute and the Northern BC Canadian Home Builders Association and numerous consultants.[4]
The STEP code costs an extra $40,000 per door which is not affordable and will never be recovered through energy consumption savings. Again, the STEP Code is diminishing affordability at a time when we can ill afford another dollar on top of the cost of new housing.
Municipal and provincial fees continue to rise, further impacting housing affordability. Additionally, in the spring of 2021 rising lumber costs are now impacting costs for builders and potential buyers.[5]
The BC Energy Step Code is a compliance path in the BC Building Code that local governments may use, if they wish, to incentivize or require a level of energy efficiency in new construction that goes above and beyond the requirements of the BC Building Code. As of November 2020, 72 BC municipalities had endorsed an implementation plan and begun revising bylaws.
The Government of BC implemented the Energy STEP code in 2017 and set up the Energy Step Code Council[6], an advisory body, supporting local governments and industry as they implement the STEP code. The STEP code sets performance requirements for new construction and groups them into “steps.” All authorities having jurisdiction over the BC Building Code—including local governments—can choose to require or incentivize builders to meet one or more steps of the BC Energy Step Code as an alternative to the code’s prescriptive requirements. Most municipalities are passing bylaws to require the steps are implemented according to the government timelines.
The Code covers all new construction not just residential construction. The purpose is to improve energy efficiency[7] of new homes, leading to a 2032 “net zero compliance”.
THE CHAMBER RECOMMENDS
That the Provincial Government:
- Work with professional builders' associations and local governments to refine the implementation plan for the BC Energy Step Code to create a more robust and practical framework for new home construction and building retrofits that balances the cost of regulations vs. the benefit of keeping housing affordable for average working families.
- Offer increased incentives to make existing homes more energy efficient in line with the objectives of BC Energy Step Code.
[1] Bloomberg News, February 2021
[2] Justin O’Connor, Sotheby’s International Realty Canada, Kelowna: interview December 3, 2020,
[3] https://www.mortgagesandbox.com/okanagan-real-estate-forecast
[4] A 2016 Public Sector Climate Action Leadership Symposium in Vancouver (November 22, 2016) defined net zero energy ready as “a Facility generating on-site all the energy required to power its functioning through the course of the year. Any project can be Net Zero provided you have enough $$$ or modest expectations for comfort, environmental quality, amenities, etc.” https://www2.gov.bc.ca/assets/gov/environment/climatechange/cng/symposium/2016/23_building_the_future_net_zero_and_net_ready_-_brittany_coughlin.pdf
[5] Lumber costs have increased significantly adding thousands of dollars to building a new home. The price of a 2×4 has now tripled as of March 2021, while OSB is on its way to quadrupling since 2019. In addition, the pandemic has disrupted supply chains for other materials creating shortages and high prices, also impacting the availability of skilled trades. Plus, the US now (again) wants to re-negotiate the Softwood Lumber Agreement. Government fees and taxes are part of these rising housing costs. For example, municipal building permit fees are often calculated from the “value of construction.” “Value of construction,” in addition to materials like lumber, include labour, liability insurance, builder’s profit and other factors with no relationship to the cost of delivering municipal inspection services. This municipal fee is really a tax like the Property Transfer Tax (PTT) based on market value. The BC government receives up to $2 billion annually from the PTT for doing simple land transfers. Their PTT revenue increases along with the PST revenue from higher prices on materials. Municipal fees should not be taxes, revealing the gap between high building permit fees and the cost of building inspections. This drives up housing prices as multiple levels of government generate significant revenue from the construction of a single new home. Municipal fees should be connected to the cost of providing a service and charged under the principle of reciprocity – a fair market fee for reciprocal service. VRBA Feb 3, 2021 https://www.vrba.ca/category/blog/
[6] BC Energy Step Code to work. It serves as a “bridge” between governments, industry, and utilities, to identify and resolve implementation issues, provide support and resources, and ensure local governments use the regulation prudently. https://energystepcode.ca/about/
[7] Includes:
Greenhouse Gas Reductions – High-efficiency homes require less energy to heat, resulting in reduced carbon emissions even if homes heat with fossil fuels. Homes heated with a heat pump will have the lowest carbon emissions.
Better Affordability – Reduced energy consumption results in lower energy costs.
Increased Comfort – Increased insulation and airtightness within a home means that it is better equipped to maintain a more even temperature throughout, for a more comfortable home.
Better Health – Energy efficient homes do a better job of refreshing the indoor air by filtering out unwanted mould, moisture, pollen and other allergens.
Improved Durability – A high-efficiency