In 2018, the California Energy Commission unanimously voted for the mandatory implementation of solar panels on virtually every newly built home in California.
This regulation has ensured that California will be the first state in the country to fully harness the sun’s power by 2020.
And although many have praised the landmark decision, some fear it will put a bigger financial strain on homeowners statewide, according to CNBC.
From CNBC: “According to California’s Energy Commission (CEC), that mandate will add between $8,000 and $10,000 to the cost of a new home.
CEC estimates suggest that the solar addition will increase the average monthly mortgage payment by $40, but new homeowners will save an average of $80 a month on their heating, cooling and lighting bills.
Still, the requirement does add a costly additional expense to already pricey new homes in one of the richest real estate markets in the country.”
Impact on Real Estate Market
According to the article, Realtor.com Chief Economist Danielle Hale believes the requirement could potentially undermine California’s real estate market.
“It’s a very different perspective depending on if you’re looking for affordable homes, or pricier homes,” Hale told CNBC in an interview. “It’s already difficult for builders to build, and I think this is just going to exacerbate that problem.”
In early February, the California Association of REALTORS® reported in itsTraditional Housing Affordability Indexthat the percentage of homebuyers who could afford to purchase a median-priced, existing single-family home came in at 28% in the fourth quarter of 2018.
“Lower seasonal home prices allowed more Californians to afford a home purchase in the fourth quarter of 2018 compared to the previous quarter, but higher interest rates pushed affordability lower compared to the previous year,” CAR writes.
As affordability continues to be a cause of concern, data indicates that more and more Californians are relocating to cheaper markets.
“Rising mortgage rates are exacerbating affordability issues that have been driving people out of expensive coastal metros for the past few years,” RedfinChief Economist Daryl Fairweather said. “With rates no longer near historic lows, buyers are increasingly cost-conscious, seeking more affordable homes in low-tax states in the South and middle of the country.”
Will California’s solar mandate push out more residents? Only time will tell, but if affordability continues to be the main catalyst for relocation, all signs point to yes.