California is the first state to make solar power mandatory on any new houses built in 2020 and beyond. Beginning next year, all newly constructed homes will have to be built with solar panels.

Solar Mandate to Increase Homeownership Costs

There are numerous ways to look at this new law, so let’s highlight some of the positive and the negatives that will affect new homeowners. On one hand, this solar mandate will increase the average cost of building a new home by $8,000 to $10,000. This is according to data studied by California’s Energy Commission (CEC). When priced out over the course of a standard 30-year fixed rate mortgage, the estimated mortgage payment increase will be around $40 more per month.

Obviously, California already has some of the most expensive home prices in the country. This is especially true here in San Diego County as values continue to rise. The increase in new home construction is helping slow the rate of appreciation some. Adding to the cost of building a new home, however, will continue to keep home prices increasing and presenting affordability issues for some would-be homeowners. The solar mandate will also impact developers by presenting an added expense during new home construction.

The Positives of Energy Savings

On the positive side, homeowners with solar panels typically save an average of $80 a month on their utility bills for heating, cooling and lighting. This easily offsets the additional expense of constructing a new home with solar panels over time. In addition, this type of energy-efficient feature may make the homeowner eligible for tax credits or rebates from the government or Southern California Edison. Last but not least, the solar power will generally make a house more desirable when selling, which can potentially increase its resale value down the line.

Who the Solar Mandate Affects Most

Where California’s solar mandate will probably have the most effect is on builders and on people in the lower- and middle-income ranges looking for affordable housing. This is already a struggle with the current home price boom. “It’s a very different perspective depending on if you’re looking for affordable homes, or pricier homes,” says Danielle Hale, chief economist at Realtor.com. “It’s already difficult for builders to build, and I think this is just going to exacerbate that problem. I think it’s going to take a couple of years before people see how the ramifications play out and what it really does for building in California, before they decide if it’s a good idea to follow suit.”

Roughly 3.3 percent of homes in San Diego qualify as “green” homes with solar panels and other energy-saving features. That number will keep going up, especially as this new construction mandate takes effect in 2020.

This solar panel law will simply be one more factor that potential homeowners will need to consider when deciding between building a home, buying an older home or buying a new home or condo built in 2020 and later. Most studies show that the long-term energy savings pay for the addition of solar panels—and then some—over the long run and it’s also a matter of reducing one’s carbon footprint a little more.

How it affects the overall real estate resale and new home construction markets in an already expensive place like San Diego County will remain to be seen.

What Are Your Thoughts?

What do you think about this new solar mandate? I’d love to hear from you. Email me at beau@tspmortgage.com. Or, if you have mortgage questions, my team and I will be happy to help. We can guide you throughout the home buying, home building or refinancing process, so you can make the right decisions for your future. Transparent Mortgage can also help with HELOC loans and cash-out refinances if you want to pull some of your equity to make solar or other upgrades to your current home. Contact us today at (619) 701-3906.

Beau Hodson

Beau Hodson

About the Author Since 2003, Beau has been a mortgage professional and is a leading mortgage broker and lender in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage, he is truly committed to serving the needs of his clients and raising industry standards for integrity and transparency.