Residential new construction is arguably one of the most difficult industries of the modern era. An industry that relies on innovation, standards and well-defined codes utilizing materials sourced through a supply chain from across the globe and large numbers of humans to produce, whether using automation or manual labor. The end result is a unique product where humans retreat for safety, security and comfort.
Homebuilders faced many headwinds in 2025, including uncertainty over tariffs, interest rates, the ENERGY STAR program and a softening real estate market. These headwinds will continue when the 45L energy efficient new home tax credit expires on June 30, 2026. Builders have embraced the tax credit, with more than a quarter million homes being ENERGY STAR certified in 2025. Fortunately, regional programs exist through utilities and municipalities offering incentives for verified and quality assured, above-code building practices. RESNET® maintains a list of incentive programs offering incentives and rebates through utilities and municipalities on their website. Builders should review the list and search for other energy efficiency incentives in their markets.
In other positive news for energy efficiency legislation, the implementation guidance for the Veterans Home Energy Savings Act was released by the Veterans Administration in late 2025. This allows lenders to apply their underwriting expertise to adjust the residual income of the veteran in accordance with the energy efficiency of a subject property in accordance with the information provided on the RESNET HERS® Report, as well as any other method determined appropriate by the Secretary of Veterans Affairs. This legislation will provide veterans with an opportunity to own homes with an understanding of how much they can expect to pay for their energy bill while making the mortgage payment less of a financial burden.
Despite the upcoming end of federal energy efficiency tax credits, consumers have become more aware of the positive impact energy and water efficiency and the demand is starting to influence the decisions builders make with new home construction. New York, Rhode Island and Illinois will implement updated energy codes in 2026 that will increase energy efficiency requirements. These changes will require builders to provide homes that satisfy the needs of more energy-savvy consumers. Through technological advances and movement toward electrification, builders have access to more equipment designed to meet these energy efficiency goals. Tighter envelopes and duct work, more efficient HVAC systems, increased insulation levels and better performing windows, to name a few.
As stated by the National Association of Realtors, the trend toward water conservation through the WaterSense Program has increased almost 300% based on how often it appears in real estate listings. The WaterSense Program is based around WaterSense labeled fixtures that help households reduce their water consumption and relies on the HERSH20® Program which saw a 26% increase in submittals from 2024 to 2025. Following these guidelines is important to provide consumers with peace of mind that they are getting what they pay for and that the savings they are promised are real and verified through quality assurance.
With these code improvements and above code programs, there are countless advantages to the consumer beyond a reduced energy bill and added resiliency from natural disasters and increased comfort. Indoor air quality is a major improvement in the living environment due to reduction of outside air infiltration and properly filtered air intentionally being introduced to the home as fresh air for inhabitants. Tighter envelopes with targeted ventilation strategies are making their way through many above code programs and are influencing base codes in many jurisdictions. Initiatives are underway to improve the guidance and training that is available to take the guesswork out of the installation and testing of these types of systems with the hope that it will increase adoption while helping to reduce associated costs.
Builders have no easy task to meet the challenges of new codes and consumer demands, but as they have shown time and time again, they are willing and able to improve and adapt to what the market wants and the codes require. Costs will continue to rise on materials and equipment necessary to provide a healthy, safe, resilient and comfortable home for their customers, but with innovation, training and the tradespeople willing to push forward, they will continue to provide these safe havens for the masses.
Michael Matthews is the RESNET Programs Engagement Specialist. He may be reached at michael@resnet.us.
This column is in the Green Home Builder February issue, read the print version here.
