King Solomon, reputed to be the wisest man who ever lived, had the difficult job of deciding which of two women was the rightful mother of a baby they both claimed to be their own. Amidst their cries of claims and counterclaims, Solomon did something unique, unexpected, and very, very wise. He acted based on what he knew without question to be true, a mother’s love and human nature.

With regards to his Jobs Plan, President Obama would do well to take a cue from King Solomon. He should base his Jobs Plan on what he knows without question to be true: it is private sector investment that creates sustainable jobs, yet it goes against human nature to invest during an economic downturn unless it makes good financial sense to do so.

Unfortunately, this does not appear to be the approach that Obama is taking. Among the major job creation ideas to be announced, the President is expected to call for:

“an expanded program that gives people cash incentives to fix up their homes with energy-saving materials… Obama is leaning toward new incentives for small businesses that hire new workers and new spending on roads, bridges and other public works.” (From the Associated Press.)

Providing cash incentives or tax credits for energy-saving materials and equipment for homes will not put America back to work.

Why not? Because both the amount of private investment generated and the financial savings for homeowners will be far too small. Even if one million homeowners (very optimistic) took advantage of a 50% federal cash incentive or tax credit at a home-weatherization cost of $4,500, it would cost the government $2.25 billion dollars and generate only $2.25 billion in private spending. This would create or save only 29,997 direct construction jobs and 39,297 indirect jobs. Over the past 6 months, we have been losing 63,000 construction jobs each month. Since the recession began, we have lost over 1.6 million direct construction jobs.

The financial savings to the homeowner is so small that it is simply not worth the hassle. A $4,500 weatherization cost with $2,500 out-of-pocket expenses and a 20% energy savings would save a homeowner just $35 [1] a month. If the homeowner borrowed the $2,500 at 6.5% interest over 10 years (from a revolving loan fund), the homeowner’s savings is only $9 a month.

Funding infrastructure projects with more stimulus dollars will not put America back to work either.

Why not? Because infrastructure projects depend on tax revenue and the generator of tax revenue is the private sector, which has been devastated. Funding infrastructure projects with stimulus funds simply substitutes federal dollars for tax revenue dollars. This approach is a losing battle, creating temporary jobs that can only be made into permanent jobs by continual federal funding. While some infrastructure spending and financial help to state and local governments is warranted, it will not put America back to work. Each $1 billion dollars of federal infrastructure spending creates only 7,667 one-time construction jobs and 9,000 indirect jobs.

If these approaches are not the answer, what is? Based on what we know to be true, the only real answer is a plan that generates large private investment by making such an investment a good financial decision by those investing.

Fortunately, where to target such investment is known. The real engine behind American jobs is private building sector construction. This sector is an amazing jobs machine, employing millions of Americans, spurring economic activity in almost every other U.S. sector, and generating large amounts of private investment and spending, as well as the tax revenue needed for infrastructure projects and other public services.

The bad news is the construction industry is reeling and taking down the entire U.S. industrial base with it, everything from steel, metals, wood and concrete to gypsum-board, glass, wiring, lighting, paint, fabrics, retail, wholesale, shipping and warehousing. Of the 1.6 million construction jobs lost to date, about 1 million of these have been residential construction jobs. To date, less than 15,000 jobs have been created in housing construction by the stimulus.

The good news is that production homebuilders are sitting on billions of dollars in cash reserves and are ready to build, and about 77% of homeowners in the U.S. have positive equity and many are ready to renovate. The only piece missing is demand.

The most effective way to create demand is to lower mortgage interest rates for homeowners who renovate their homes or buy new homes that meet specific and deep energy reduction targets. Not only does this make good financial sense to homeowners (the ‘investors’) who will save substantially on both monthly mortgage payments and energy bills, it also makes good financial sense to the federal government, which will multiply each federal dollar invested with $9 to $10 of private spending.

Under such a plan, a homeowner would be able to refinance a home at a lower mortgage interest rate in return for making energy efficiency upgrades, immediately putting people back to work. Homebuyers would also be able to purchase new highly efficient homes at lower rates. The more energy efficient the upgrade or new home, the lower the interest rate available. For renovations, upgrade costs would be added into the new lower-rate mortgage, so that a homeowner pays little up front, has a lower monthly mortgage payment, cheaper energy bill, more expendable income and a more valuable property.

Take, for example, a family currently paying 5.5 percent on a $240,000 loan with $30,000 in equity. Under this plan, in order to obtain a new 3.5% interest rate mortgage, the family would be required to spend $28,700 to renovate their home to be 50% more efficient, immediately creating jobs. After adding the $28,700 to their current mortgage balance and obtaining a new 30-year loan at 3.5% interest, this family would save $415 per month in combined mortgage payment and energy bill savings.

A homebuyer purchasing a new $240,000 home built to a 50% efficiency standard would also be eligible for a 3.5%, 30-year mortgage. The homeowner would save $338 per month in combined mortgage payment and energy bill savings.

Because the program would be structured so that each federal dollar invested in lowering mortgage rates would generate $9 to $10 dollars in private spending, a federal investment of just $30 billion dollars would generate $280 billion in private spending, creating 4.5 million new jobs, generating $20 billion in state and local taxes, and returning to the federal government $60 billion in tax revenue – double its investment. The investment would also jump-start an energy efficiency renovation market worth potentially $1 trillion.

King Solomon acted based on what he knew to be true and was able to return the baby to its mother. If President Obama wants a thriving economy with low unemployment, he must also base his decisions on what he knows to be true. If not, his mistake could result in years of high unemployment.

[1] U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy. 2008 Building Energy Data Book, Table 2.3.9 Average Annual Energy Expenditures per Household, by Year. [March 2009]. Using 2010 data.

Architecture 2030’s in-depth analysis (Fact Sheet) of the House Climate Bill sheds new light on the considerable advantages and efficacy of updating the national building energy code to meet the 2030 Challenge. Following is a commentary by Edward Mazria:

Buried deep within the 1,428-page Waxman-Markey climate bill (H.R. 2454: American Clean Energy and Security Act of 2009) passed by the House and now on the Senate floor, is Section 201, pages 320-348. It is this section that makes H.R. 2454 worth passing.

No matter what else is compromised or changed in the climate bill working its way through the Senate, Section 201 must not be changed or weakened. Why? Because all other energy and emissions reduction approaches pale in comparison to what Section 201 will accomplish. Without it, we simply cannot meet the greenhouse gas (GHG) emissions reduction targets called for in the bill. We won’t even come close.

Section 201 covers building energy codes – that’s right, building energy codes – that will transform the entire built environment in the U.S. by 2050. That’s because Section 201 affects all new building and major renovations and by 2050, more than three-quarters of the built environment in the U.S. will be either new or renovated.

Section 201 requires updating national building energy codes to meet the following energy reduction targets:

• in 2010, 30% below the baseline energy code (IECC 2006 and ASHRAE 90.1-2004),
• in 2014-2015, 50% below the baseline energy code, and
• every three years after, out to 2029-2030, an additional 5% reduction.

The targets outlined in Section 201 are simply more effective than any other energy and emissions reduction approach. The following graphs compare Section 201 with the call by some in Congress for a massive U.S. effort to build 100 new nuclear power plants in an attempt to move the country toward energy independence and significant GHG emissions reductions (click either image to enlarge):

The proof is in the data. There’s simply no comparison. Whereas the 100 nuclear power plants only act as a replacement energy source, the updated building energy codes of Section 201 actually reduce energy consumption, eliminating the need for more plants. The codes also achieve more than six times the emissions reductions as 100 nuclear power plants. The codes accomplish all of this at a fraction of the cost. Here are the facts:

• Since June 2006, over 60,000 new homes have been designed, built, and certified to meet a minimum 50% energy reduction below the baseline energy code for heating and cooling.
• Studies by the Department of Energy’s National Renewable Energy Laboratory (NREL) illustrate that meeting a 30% residential energy consumption reduction target below code will save households in every region of the U.S. between $403 and $612 per year after the cost of efficiency measures is factored in.
• At current energy prices and mortgage interest rates, NREL estimates that the average cost-neutral point for home efficiency upgrades is a 45% energy reduction below code.

The targets in Section 201 are set at a reasonable and beneficial pace for change that will achieve the reductions necessary within the timeline called for by the scientific community. Implementing these targets will reduce building sector energy consumption by:

• 18.35 Quadrillion Btus from projected 2030 levels (the equivalent of approximately two hundred and forty 1000 MW power plants), saving consumers an estimated $218 billion in annual energy bills (2007 dollars),
• 18.7% below 2005 levels by 2030, and
• 40.4% below 2005 levels by 2050.

Implementing the targets in Sec. 201 would also reduce building sector CO₂ emissions by:

• 20.3% below 2005 levels by 2030 and
• 48.8% below 2005 levels by 2050, leaving only 34% of President Obama’s 83% Building Sector reduction target to be accomplished with other clean energy sources.

It is clear that the building energy code targets set in Section 201 are not only essential for achieving the energy consumption and GHG emissions reductions needed, but that they also are the most cost effective approach for doing so.

What about China and India? The U.S., through our multi-national architecture and engineering design firms, heavily influences the global built environment. As our firms move the U.S. built environment into the 21st century they will, in both practice and influence, move China’s and India’s as well. This is, in fact, beginning to happen (see a list of multi-state and national firms that have adopted the 2030 Challenge in Appendix B of the Architecture 2030 Fact Sheet).
 

To read Architecture 2030’s complete analysis of H.R. 2454, Section 201 with sources and citations, download the Architecture 2030 Fact Sheet, here.

What if there was a way for states, cities, and counties to leverage each $1 of federal stimulus money spent to generate $14 of private spending, create 14 times the number of jobs, reimburse the federal government $3, and get $1 back to boot? Well, there is a way, the ‘14x Stimulus’ plan.

The plan, which is being proposed by Architecture 2030 and its partners ICLEI – Local Governments for Sustainability, RESNET, and Veterans Green Jobs is a state/local version of Architecture 2030’s One-Year, 4.5-Million-Jobs Investment Plan. The effectiveness of the national plan in creating jobs and private spending has prompted these groups to propose a public/private partnership to strategically focus stimulus dollars that will enable a full-scale building industry revival while simultaneously addressing energy and greenhouse gas emissions reductions.

Self-Sustaining Market-Based Jobs vs. “Handouts”

On June 11, the U.S. House Financial Services Committee invited Edward Mazria to give testimony before the Subcommittee on Housing and Community on building efficiency and job creation measures in the Green Act of 2009 (H.R. 2336).

Download Mazria’s Written Testimony (.pdf)