Michigan Office of Administrative Hearings and Rules

Administrative Rules Division (ARD)

MOAHR-Rules@michigan.gov

REGULATORY IMPACT STATEMENT

and COST-BENEFIT ANALYSIS (RIS)

Agency Information:

Department name:

Licensing and Regulatory Affairs

Bureau name:

Bureau of Construction Codes

Name of person filling out RIS:

Tony Williamson

Phone number of person filling out RIS:

517-241-9303

E-mail of person filling out RIS:

WilliamsonT5@michigan.gov

Rule Set Information:

ARD assigned rule set number:

2021-48 LR

Title of proposed rule set:

Construction Code - Part 10. Michigan Uniform Energy Code

Comparison of Rule(s) to Federal/State/Association Standard

1. Compare the proposed rules to parallel federal rules or standards set by a state or national licensing agency or

accreditation association, if any exist.

There are no federal rules or standards set by a state or national licensing agency or accreditation association.

A. Are these rules required by state law or federal mandate?

Yes, these rules are required by state law in MCL 125.1504(6) and federal mandate in 42 U.S.C. Sec. 6833(a).

B. If these rules exceed a federal standard, please identify the federal standard or citation, describe why it is

necessary that the proposed rules exceed the federal standard or law, and specify the costs and benefits arising out

of the deviation.

These rules, as required by MCL 125.1504(6), do not exceed the federal standards indicated in 42 U.S.C. Sec. 6833

(a).?

2. Compare the proposed rules to standards in similarly situated states, based on geographic location, topography,

natural resources, commonalities, or economic similarities.

The proposed rules incorporate by reference the 2021 edition of the IECC, published by the International Code

Council (ICC), and ASHRAE standard 90.1-2019 with Michigan amendments, deletions, and additions. All

surrounding Great Lakes states (Ohio, Illinois, and Wisconsin) follow the International Energy Conservation Code.

Ohio and Illinois follow the 2018 IECC and Wisconsin follows the 2015 IECC. In addition, it is anticipated the

surrounding states will adopt the latest version of the IECC, protecting the health, safety, and welfare of the public,

while ensuring sustainable human welfare.

A. If the rules exceed standards in those states, please explain why and specify the costs and benefits arising out of

the deviation.

MCL 24.245(3)

RIS-Page 2

The IECC is a nationally recognized model code used through the United States as a minimum standard. The

Michigan rules do exceed the standards of other Great Lake States (Ohio, Illinois, and Wisconsin), because the

surrounding Great Lakes states have not yet updated their codes. (Ohio and Illinois follow the 2018 IECC, and

Wisconsin the 2015 IECC), but it is anticipated that the surrounding states will adopt the latest version of the IECC.

There are costs of deviation from other Great Lakes States because the State of Michigan is using the newest Energy

Code, which accounts for new technologies in energy use and conservation. Once the other Great Lakes States adopt

the newest Energy Code, or newer than what they currently use, those States will fall into line with what Michigan is

currently adopting. The State of Michigan will be at the forefront of the most up to date Energy Code. Regardless of

which Energy Code other States use, structure owners within the State of Michigan only use the Energy Code when

building a new structure or renovating an existing structure. The costs the structure owner will realize is predicated

upon the size of the structure. Therefore, the smaller the size of the new build, or renovated structure, the less it will

cost that owner.

3. Identify any laws, rules, and other legal requirements that may duplicate, overlap, or conflict with the proposed

rules.

There are no federal, state, or local laws, rules or other legal requirements that may duplicate, overlap, or conflict with

the proposed rules.

A. Explain how the rules have been coordinated, to the extent practicable, with other federal, state, and local laws

applicable to the same activity or subject matter. This section should include a discussion of the efforts undertaken

by the agency to avoid or minimize duplication.

There are no federal, state, or local laws, rules or other legal requirements that may duplicate with the proposed rules.

4. If MCL 24.232(8) applies and the proposed rules are more stringent than the applicable federally mandated

standard, provide a statement of specific facts that establish the clear and convincing need to adopt the more

stringent rules.

While 42 U.S.C. Sec. 6833(a) does not specifically mandate states to update standards, the code being adopted is a

successor to the CABO Model Energy Code, 1992, or successor (i.e. 2021 IECC), and establishes the energy

efficiency requirements for residential structures in the state. The proposed rules are not more stringent than the 2021

IECC.

5. If MCL 24.232(9) applies and the proposed rules are more stringent than the applicable federal standard,

provide either the Michigan statute that specifically authorizes the more stringent rules OR a statement of the

specific facts that establish the clear and convincing need to adopt the more stringent rules.

While 42 U.S.C. Sec. 6833(a) does not specifically mandate states to update standards, the code being adopted is a

successor to the CABO Model Energy Code, 1992, or successor (i.e. 2021 IECC), and establishes the energy

efficiency requirements for residential structures in the state. The proposed rules are not more stringent than the 2021

IECC.

Purpose and Objectives of the Rule(s)

6. Identify the behavior and frequency of behavior that the proposed rules are designed to alter.

The proposed rules adopt the 2021 IECC with technical provisions designed to alter the outdated residential energy

efficiency standards and provide a more energy efficient built environment. The frequency of behavior change due to

the proposed rules is only required when altering, renovating, or building a new residence. The requirements outlined

in this rule set establish a more economical and environmentally friendly home energy use standard.

A. Estimate the change in the frequency of the targeted behavior expected from the proposed rules.

The proposed rules adopting the 2021 edition of the IECC will continue to establish a more progressive energy

efficient Michigan Uniform Energy Code, allowing more flexibility while keeping current with technological

innovations. However, there are no changes in the frequency from the current ruleset to the proposed rules, as the

rules will continue to apply to alterations, renovations, or building of a new residence.

B. Describe the difference between current behavior/practice and desired behavior/practice.

To comply with the requirements of the Stille-DeRossett-Hale Single State Construction Code Act the proposed rules

adopt the updated IECC. These adjustments will improve energy efficiency in residential construction when required

to be applied to the alteration, renovation or building of a new residence.

C. What is the desired outcome?

MCL 24.245(3)

RIS-Page 3

The desired outcome is to bring the Michigan Energy Code rules in line with current IECC standards, to eliminate

unnecessary requirements in the code, improve clarity, and align all codes with the Michigan rules. The rules are

designed to provide consumer safety while allowing latitude for innovation and new technologies. Overall, this code is

intended to protect the health, safety, and welfare of the public from potential dangers associated with the installation

and operation of more energy efficient designs while ensuring sustainable human welfare.

7. Identify the harm resulting from the behavior that the proposed rules are designed to alter and the likelihood

that the harm will occur in the absence of the rule.

Without implementation of the proposed rules, the businesses would not be able to take advantage of new methods,

materials, or technologies leading to improved energy efficiency. The rules are designed to provide consumer safety

while allowing latitude for innovation and new technologies. Overall, this code is intended to protect the health, safety,

and welfare of the public from potential dangers associated with the installation and operation of more energy efficient

designs while ensuring sustainable human welfare.

A. What is the rationale for changing the rules instead of leaving them as currently written?

MCL 125.1504(6): The director shall add, amend, and rescind rules to simultaneously update all chapters of the

Michigan residential code not less frequently than once every 6 years or more frequently than once every 3 years as

the director determines is appropriate.

42 U.S.C. Sec. 6833(a): The state, not later than 2 years after the date of the publication of a determination by the

Secretary of Energy that revision of residential energy efficiency code standards would improve energy efficiency

(CABO Model Energy Code, 1992, or any successor), to certify that it has reviewed the provisions of its residential

building code regarding energy efficiency and made a determination as to whether it is appropriate for the state to

revise the residential building code provisions to meet or exceed the revised code for which the Secretary made such

determination.

8. Describe how the proposed rules protect the health, safety, and welfare of Michigan citizens while promoting a

regulatory environment in Michigan that is the least burdensome alternative for those required to comply.

Aligning the Michigan Energy Code with the 2021 IECC will protect the health, safety, and welfare of Michigan

citizens while promoting a regulatory environment that is the least burdensome alternative for those required to

comply. These rules ensure the ongoing assessment of safety in various energy efficient measures and training of staff

to keep current with the most updated information. The rules are designed to provide consumer safety while allowing

latitude for innovation and new technologies. Overall, this code is intended to protect the health, safety, and welfare of

the public from potential dangers associated with the installation and operation of more energy efficient designs while

ensuring sustainable human welfare.

9. Describe any rules in the affected rule set that are obsolete or unnecessary and can be rescinded.

The following rules are unnecessary because they are outdated and will be rescinded: R 408.31060c, R 408.31060e,

R 408.31061, R 408.31062, R 408.31063, R 408.31063a, R 408.301064, R 408.31065, R 408.31069, R 408.31070,

R408.31071, and R 408.31071a.

Fiscal Impact on the Agency

Fiscal impact is an increase or decrease in expenditures from the current level of expenditures, i.e. hiring additional staff,

higher contract costs, programming costs, changes in reimbursements rates, etc. over and above what is currently

expended for that function. It does not include more intangible costs for benefits, such as opportunity costs, the value of

time saved or lost, etc., unless those issues result in a measurable impact on expenditures.

10. Please provide the fiscal impact on the agency (an estimate of the cost of rule imposition or potential savings

for the agency promulgating the rule).

There is no additional fiscal impact to the agency beyond the current operational costs.

11. Describe whether or not an agency appropriation has been made or a funding source provided for any

expenditures associated with the proposed rules.

MCL 24.245(3)

RIS-Page 4

The proposed rules will not result in additional fiscal impact on the agency. Thus, there is no need for an additional

appropriation or funding source as a result of the changes in the rules.

12. Describe how the proposed rules are necessary and suitable to accomplish their purpose, in relationship to the

burden(s) the rules place on individuals. Burdens may include fiscal or administrative burdens, or duplicative

acts.

The application of the rules and adopted IECC is required to set the minimum standards for uniform energy code

compliance, fostering better solutions for the safety and care placed upon individuals and communities in compliance

with the Stille- DeRossett-Hale Single State Construction Code Act. Although there is no administrative burden on

the individual, each person must review expenses for the project and decide if costs match budget. There will be an

increase in upfront costs for materials for alterations, renovations, or building of a new residence.

A. Despite the identified burden(s), identify how the requirements in the rules are still needed and reasonable

compared to the burdens.

MCL 24.245(3)

RIS-Page 5

The amendments will clarify code requirements which will make compliance less burdensome. The individual will

realize a net savings in energy costs pursuant to these requirements. The analysis of cost-effective demands a

reduction in cost for homeowners to meet the required cost-effective energy efficiency, in accordance with MCL

125.1504(3)(f) and (g). To evaluate the cost-effectiveness of the changes introduced by the 2021 IECC over the

Michigan-amended 2015 IECC, Pacific Northwest National Laboratory (PNNL) estimated the incremental

construction cost associated with these changes. For this analysis, cost data sources consulted by PNNL include:

Building Component Cost Community (BC3) data repository

2020 RSmeans Residential Cost Data

2018 ENERGY STAR Cost & Savings Estimates23

Price data from nationally recognized home supply stores.

The incremental costs are calculated separately for each code change (Michigan amended 2015 IECC to the 2021

IECC) and then added together to obtain a total incremental cost by climate zone, building type, and foundation type.

Tables 5 and 6 show the climate zone-specific incremental construction costs when updating to the 2021 IECC based

on the single-family and multifamily prototypes used in this analysis. These costs have been adjusted using a

construction cost multiplier of 0.989 to reflect local Michigan construction costs based on location factors provided

by 2020 RS Means and converted to 2023 dollars. Incremental construction costs for individual measures included in

this analysis were compared to the incremental costs in the 2021 CONSOL Report – Impact of 2021 IECC on 2015

Michigan Residential Code. Measure level cost estimates between the two reports were found to be similar, with

PNNL costs being slightly higher on average.

Table 5. Total Single-Family Construction Cost Increase for the 2021 IECC Compared to the Michigan Amended

2015 IECC

Single-family Prototype House

Climate Zone Crawlspace Heated Basement Slab

5A

6A

$4,238

$3,738

$4,442

$3,480

$4,915

$4,415

7

$4,972

$4,189

$4,714

$4,339

$4,972

$4,861

Average

Table 6. Multifamily Construction Cost Increase for the 2021 IECC Compared to the Michigan Amended 2015 IECC

Multifamily Prototype Apartment/Condo

Climate Zone Crawlspace Heated Basement Slab

5A

6A

7

$1,933

$1,428

$2,249

$1,880

$1,743

$1,170

$1,990

$1,682

$2,033

$1,528

$2,249

$1,979

Average

Impact on Other State or Local Governmental Units

MCL 24.245(3)

RIS-Page 6

13. Estimate any increase or decrease in revenues to other state or local governmental units (i.e. cities, counties,

school districts) as a result of the rule. Estimate the cost increases or reductions for other state or local

governmental units (i.e. cities, counties, school districts) as a result of the rule. Include the cost of equipment,

supplies, labor, and increased administrative costs in both the initial imposition of the rule and any ongoing

monitoring.

Local jurisdictions with administrative enforcement of the code may incur some cost in training of inspection staff.

The agency has no way of knowing what the additional specific expenses will be, as each individual structure will be

unique to the needs of the governmental unit. However, when construction is up in general, there will be increased

revenue from permits, (re)inspections, and plan reviews. The construction market is subject to numerous outside

influences such as: material costs, labor costs, and interest rates. Overall, a person must review expenses for the

project and decide if costs match budget. There will be an increase in upfront costs for materials for alterations,

renovations, or building of a new structure.

14. Discuss any program, service, duty, or responsibility imposed upon any city, county, town, village, or school

district by the rules.

It is anticipated that a local government unit would incur added responsibility due to the proposed rules if a local unit

of government has decided to administer and enforce the code under the Stille-DeRossett-Hale Single State

Construction Code Act. They would be responsible for learning, understanding, and applying the new code

accurately. However, no additional program, service, duty, or responsibility will be imposed on any city, county,

town, village, or school district by the rule changes.

A. Describe any actions that governmental units must take to be in compliance with the rules. This section should

include items such as record keeping and reporting requirements or changing operational practices.

The proposed rules would require additional or new responsibilities on behalf of governmental units to be in

continued compliance with the rules. They would be responsible for learning, understanding, and applying the new

code accurately, which would require training of all applicable staff.

15. Describe whether or not an appropriation to state or local governmental units has been made or a funding

source provided for any additional expenditures associated with the proposed rules.

No additional appropriations for additional expenditures associated with the proposed rules have been made to state

or local governmental units. However, $1.2T in federal grant programs through the Bipartisan Infrastructure Law

and/or the Inflation Reduction Act are available to states, local governments, and other organizations contingent upon

the adoption of the 2021 IECC.

Rural Impact

16. In general, what impact will the rules have on rural areas?

The proposed rules affect the state of Michigan as a whole. There is no specific rural impact, rules are applicable to

both urban and rural new build structures alike. Where allowed under the Stille- DeRossett-Hale Single State

Construction Code Act, there continue to be limited agricultural exemptions under the applicable construction codes.

Therefore, there is no specific rule impact as these rules are applicable to urban and rural new building structures

alike.

A. Describe the types of public or private interests in rural areas that will be affected by the rules.

Pursuant to the Stille- DeRossett-Hale Single State Construction Code Act, there is an agricultural exemption to the

applicability of the construction codes from permits and inspections for those reasons; however, any structures not

falling under the agricultural exemption, would still need to follow the code. It is unlikely that the proposed rules will

have any impact on public or private interests in rural areas.

Environmental Impact

17. Do the proposed rules have any impact on the environment? If yes, please explain.

As cited in PNNL Cost-Effectiveness Analysis of the 2021 IECC for the State of Michigan, it is expected with the

adoption of the 2021 IECC during the first year alone, collectively, Michigan residents could expect to save over

$7,229,392 in energy costs and 44,850 metric tons in avoided CO2 emissions.

MCL 24.245(3)

RIS-Page 7

Small Business Impact Statement

18. Describe whether and how the agency considered exempting small businesses from the proposed rules.

Because the Stille-DeRossett-Hale Single State Construction Code Act does not allow for exemption of small

businesses from the Michigan Energy Code, the agency has no authority to exempt small businesses from the

proposed rules.

19. If small businesses are not exempt, describe (a) the manner in which the agency reduced the economic impact

of the proposed rules on small businesses, including a detailed recitation of the efforts of the agency to comply

with the mandate to reduce the disproportionate impact of the rules upon small businesses as described below (in

accordance with MCL 24.240(1)(a-d)), or (b) the reasons such a reduction was not lawful or feasible.

The agency was obligated to follow the Stille-DeRossett-Hale Single State Construction Code Act, which is

applicable to scenario “(b) the reason such a reduction was not lawful or feasible” as the act did not provide for such

an exemption within the act.

A. Identify and estimate the number of small businesses affected by the proposed rules and the probable effect on

small businesses.

According to the most current federal data available, Michigan has 765,487 small businesses. Business involved in

residential construction will see an increase in costs related to the standards in the rule set. It is likely these costs will

be passed along to the person contracting for the residential construction project. The analysis conducting by PNNL

demonstrates that although there will be an increase in upfront costs, the energy efficiency improvements result in a

positive net cash flow within 3 years.

B. Describe how the agency established differing compliance or reporting requirements or timetables for small

businesses under the rules after projecting the required reporting, record-keeping, and other administrative costs.

There is no additional reporting, record keeping, or other administrative costs associated with the implementation of

the proposed rules established by the agency for small business.

C. Describe how the agency consolidated or simplified the compliance and reporting requirements for small

businesses and identify the skills necessary to comply with the reporting requirements.

The agency did not consolidate or simplify the compliance requirements timetables for small businesses. A small

business that plans to construct a new building structure encounter additional reporting requirement.

D. Describe how the agency established performance standards to replace design or operation standards required

by the proposed rules.

R 408.31059 adopts by reference the 2021 IECC which is a nationally recognized model code. For that reason, the

agency need not establish performance standards as the design and operation standards are established through the

2021 IECC.

20. Identify any disproportionate impact the proposed rules may have on small businesses because of their size or

geographic location.

The impact of these proposed rules will be directly correlated to the size of the new build structure, or renovation, a

small business chooses to design. The larger the square footage of the new building structure or renovation, the

higher the material costs and other associate expenses will incur. The proposed changes to the rules have a

disproportionate impact on small businesses engaged in residential construction in the three different climate zones

defined in the IECC, with each climate zone having its own unique building requirements (installation) effect cost

because of their size or geographical location.

21. Identify the nature of any report and the estimated cost of its preparation by small businesses required to

comply with the proposed rules.

The agency has not received any reports regarding the estimated costs to small businesses. There are no increased

costs of preparing reports to small businesses, or requirements mandating completion of reports with the proposed

rules.

22. Analyze the costs of compliance for all small businesses affected by the proposed rules, including costs of

equipment, supplies, labor, and increased administrative costs.

MCL 24.245(3)

RIS-Page 8

The agency is unable to estimate compliance costs due to many variables which are at the discretion of a small

business. In particular, the size of the new build structure, or its renovation, will dictate the ultimate expenses to the

small business. Additionally, inflationary costs and specific material selections, will factor into the expenses for the

small business. It is likely that any increase in cost will be passed along from the small business engaged in the

residential construction project to the homeowner contracting for the project.

23. Identify the nature and estimated cost of any legal, consulting, or accounting services that small businesses

would incur in complying with the proposed rules.

There is no anticipated change to the nature and estimated cost of any legal, consulting, or accounting services that

small businesses would incur in complying with the proposed changes to the rules.

24. Estimate the ability of small businesses to absorb the costs without suffering economic harm and without

adversely affecting competition in the marketplace.

The agency is unable to estimate what if any, economic harm may result due to the many variables which are at the

discretion of a small business. In particular, the size of the new build structure, or its renovation, will dictate the

ultimate expenses to the small business. Additionally, inflationary costs and specific material selections, will factor

into the expenses for the small business.

25. Estimate the cost, if any, to the agency of administering or enforcing a rule that exempts or sets lesser

standards for compliance by small businesses.

There are no rules that exempt or set lesser standards for compliance by small businesses; thus, if the agency were to

administer or enforce a rule that exempted or set lesser standards for compliance by small businesses the agency may

occur some cost in training of inspection staff. The agency has no way of knowing what the additional specific

expenses will be, as each individual structure will be unique to the needs of the governmental unit.

26. Identify the impact on the public interest of exempting or setting lesser standards of compliance for small

businesses.

There is no public interest at play as it relates to exempting standards of compliance for small businesses. To

maintain the integrity, security, and fairness of businesses conducted in Michigan, all businesses must be held to the

same compliance and exempting small businesses or setting lesser standards of compliance is not an option for fair

and equal businesses practices. The code is applied uniformly across the state to ensure all jurisdictions are providing

for the health, safety, and welfare of the public.

27. Describe whether and how the agency has involved small businesses in the development of the proposed rules.

The agency involved small businesses through the Code/ Rule Change Proposal Form as well as at the in person

Public Advisory Meeting, the in person Public Hearing, along with having the ability to submit written comments to

the agency.

A. If small businesses were involved in the development of the rules, please identify the business(es).

MCL 24.245(3)

RIS-Page 9

The agency received proposed rules from the plumbing trade, electrical trade, mechanical contractors, building

inspectors, residential builders, energy rating companies, and small home and residential builders in addition to the

following small business, associations of small businesses, stakeholder organizations, and governmental entities

involved within the development rules:

The Home Builders Association of Michigan

Consumer’s Energy & DTE, municipalities (specifically the City of Grand Rapids)

Building officials (inspectors)

The American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE)

Pacific Northwest National Laboratory, architects and engineers, Masonry Institute and energy home raters.

American Chemistry Council

New Buildings Institute

Natural Resources Defense

The American Institute of Architects

Dream Development & Energy Technology, LCC

Grand Rapids 2030 District

VonMelle Construction

Metro Detroit Construction Consultants, LLC

Calabria Homes, INC

Michigan Environmental Council

Michigan Energy Innovation Business Council

Ecology Center

Midwest Energy Efficiency Alliance (MEEA)

The Michigan Conservative Energy Forum (MICEF)

Residential Energy Services Network (RESNET)

Cost-Benefit Analysis of Rules (independent of statutory impact)

28. Estimate the actual statewide compliance costs of the rule amendments on businesses or groups.

MCL 24.245(3)

RIS-Page 10

The agency was able to determine variables to estimate compliance costs utilizing the PNNL Cost-Effectiveness

Analysis of the 2021 IECC for the State of Michigan. In particular, the size of the new build structure, or its

renovation, will dictate the ultimate expenses to the business. Additionally, inflationary costs and specific material

selections, will factor into the expenses for the businesses. The impact of these proposed rules will be directly

correlated to the size of the new build structure, or renovation, a small business chooses to design. The larger the

square footage of the new building structure or renovation, the higher the material costs and other associate expenses

will incur. Any small business already established in a preexisting structure or moves into a preexisting structure will

derive no impact by these proposed rules. Probable causes effecting businesses will incur upfront, higher costs, but

these expenses will be offset by the long-term financial savings because of this rule set. Overall, the agency has no

way of knowing what the additional specific expenses will be, as each individual structure will be unique to the

needs. The following are impacts due to the proposed rules, but are not limited to the listed below:

The resulting analysis shows that a home designed to comply with the residential provisions of the 2021 IECC would

yield short-term and long-term consumer benefits compared to a home built to the Michigan-amended 2015 IECC.

When building to the 2021 IECC, Michigan households can expect to save 10.7% in energy costs, equating to $396

of annual utility bill savings.

When amortizing costs and benefits over a typical 30-year mortgage, homeowners will see a positive cash flow in the

first two to six years, depending on building type and climate zone.

Over the course of 30 years, a first-time homebuyer will net approximately $7,300, and an average-income

homebuyer around $9,250 in life-cycle cost savings.

During the first year alone, collectively, Michigan residents could expect to save over $7,229,392 in energy costs and

44,850 metric tons in avoided CO2 emissions.

Adopting the 2021 IECC in Michigan is expected to result in homes that are energy efficient, more affordable to own

and operate, and which are designed and constructed to modern standards for health, comfort, and resilience.

A first-time homebuyer will be cashflow positive in year three of owning the home.

Moving to the 2021 IECC is cost-effective for first-time homebuyers living in single-family and low-rise multifamily

units in Michigan.

Michigan is currently ranked third in mortgage foreclosures nationally. By updating to the 2021 IECC, Michigan

homeowners will see more stable energy bills month over month, reducing the financial strain that can lead to

foreclosure.

States adopting the latest model energy codes are provided favorable insurance underwriting as they rank higher on

the ISO’s Building Code Effectiveness Grading Schedule (BCEGS®).

Energy-efficient homes built to the latest energy-efficient codes are more durable, resilient, and help lower mortgage

default rates, nationally, on average, by 32 percent.

A. Identify the businesses or groups who will be directly affected by, bear the cost of, or directly benefit from the

proposed rules.

MCL 24.245(3)

RIS-Page 11

The businesses and groups who will be directly affected by the proposed rules are those entities who either build a

new structure or renovate an existing structure to work in or renovate an existing structure. Also, contractors will be

affected by these proposed rules because they will be hired to construct to the new energy requirements. The

businesses or groups who will directly benefit from the proposed rules will be the individuals producing the energy

products and commercial and residential contractors because they will be able to profit through the hired work to be

performed based upon the new energy code requirements. Additionally, structure owners will realize an energy costs

savings, long-term, as these standards are implemented through new build or renovations. The individuals who will

build a new structure or renovate an existing structure will bear the cost of the new standards.

B. What additional costs will be imposed on businesses and other groups as a result of these proposed rules (i.e.

new equipment, supplies, labor, accounting, or recordkeeping)? Please identify the types and number of businesses

and groups. Be sure to quantify how each entity will be affected.

The impact of these proposed rules will be directly correlated to the size of the new build structure, or renovation, a

small business chooses to design. The larger the square footage of the new building structure or renovation, the

higher the material costs and other associate expenses will incur. Probable causes effecting businesses will incur

upfront, higher costs, but these expenses will be offset by the long-term financial savings because of this rule set. In

particular, the size of the new build structure, or its renovation, will dictate the ultimate expenses to the business

deriving from inflationary costs and specific material selections factoring into the expenses for the business. There

are over 54,000 licensed residential builders and over 100,000 skilled trades licensees in the state who will be

impacted.

29. Estimate the actual statewide compliance costs of the proposed rules on individuals (regulated individuals or

the public). Include the costs of education, training, application fees, examination fees, license fees, new

equipment, supplies, labor, accounting, or recordkeeping.

Regulated individuals may incur training costs for energy code continuing education courses with fees ranging from

free to $400.00 from ASHRAE. If the regulated individual desires use of the code book, a fee of $52.00 will be

required for the energy code. The agency leaves it to the discretion of the regulated individual to choose how they

obtain their training. For homeowners, the size of the new build structure, or its renovation, will dictate the ultimate

expenses to the individual. The PNNL Cost-Effectiveness Analysis of the 2021 IECC for the State of Michigan

indicates cost of the material is based on the project size and scope, only if the cause for alterations, renovations or

building of a new residence is required. Additionally, inflationary costs and specific material selections, will factor

into the expenses for the individual.

A. How many and what category of individuals will be affected by the rules?

It is anticipated that approximately 54,000 licensed residential builders and 100,000 skilled trades licensees and other

regulated individuals (including architects and engineers) will be affected by these proposed rules, but only when

new build structures or renovations are contracted for. Homeowners engaged in new home construction or home

renovation projects will be impacted through the requirement for the projects to be completed in compliance with the

rules and the adopted code.

B. What qualitative and quantitative impact do the proposed changes in rules have on these individuals?

MCL 24.245(3)

RIS-Page 12

In particular, the size of the new build structure, or its renovation, will dictate the ultimate expenses to the individual.

Additionally, inflationary costs and specific material selections, will factor into the expenses for the individual. The

qualitative impact to the individual will result in a Life-Cycle Cost (LCC) savings in the long-term. As cited in PNNL

Cost-Effectiveness Analysis of the 2021 IECC for the State of Michigan. The following are impacts due to the

proposed rules, but are not limited to the listed below:

The resulting analysis shows that a home designed to comply with the residential provisions of the 2021 IECC would

yield short-term and long-term consumer benefits compared to a home built to the Michigan-amended 2015 IECC.

When building to the 2021 IECC, Michigan households can expect to save 10.7% in energy costs, equating to $396

of annual utility bill savings.

When amortizing costs and benefits over a typical 30-year mortgage, homeowners will see a positive cash flow in the

first two to six years, depending on building type and climate zone.

Over the course of 30 years, a first-time homebuyer will net approximately $7,300, and an average-income

homebuyer around $9,250 in life-cycle cost savings.

During the first year alone, collectively, Michigan residents could expect to save over $7,229,392 in energy costs and

44,850 metric tons in avoided CO2 emissions.

Adopting the 2021 IECC in Michigan is expected to result in homes that are energy efficient, more affordable to own

and operate, and which are designed and constructed to modern standards for health, comfort, and resilience.

A first-time homebuyer will be cashflow positive in year three of owning the home.

Moving to the 2021 IECC is cost-effective for first-time homebuyers living in single-family and low-rise multifamily

units in Michigan.

Michigan is currently ranked third in mortgage foreclosures nationally. By updating to the 2021 IECC, Michigan

homeowners will see more stable energy bills month over month, reducing the financial strain that can lead to

foreclosure.

States adopting the latest model energy codes are provided favorable insurance underwriting as they rank higher on

the ISO’s Building Code Effectiveness Grading Schedule (BCEGS®).

Energy-efficient homes built to the latest energy-efficient codes are more durable, resilient, and help lower mortgage

default rates, nationally, on average, by 32 percent.

30. Quantify any cost reductions to businesses, individuals, groups of individuals, or governmental units as a result

of the proposed rules.

MCL 24.245(3)

RIS-Page 13

If the aforementioned groups stay within their existing building, and never make changes, they will neither incur

costs nor realize savings based on this new set of rules. The cost reductions will depend upon if the individual,

business, group of individuals, or governmental units build a new structure or renovate an existing structure where

they are located. The following are results of cost reductions due the proposed rules, but are not limited to following

listed below:

The resulting analysis shows that a home designed to comply with the residential provisions of the 2021 IECC would

yield short-term and long-term consumer benefits compared to a home built to the Michigan-amended 2015 IECC.

When building to the 2021 IECC, Michigan households can expect to save 10.7% in energy costs, equating to $396

of annual utility bill savings.

When amortizing costs and benefits over a typical 30-year mortgage, homeowners will see a positive cash flow in the

first two to six years, depending on building type and climate zone.

Over the course of 30 years, a first-time homebuyer will net approximately $7,300, and an average-income

homebuyer around $9,250 in life-cycle cost savings.

During the first year alone, collectively, Michigan residents could expect to save over $7,229,392 in energy costs.

A first-time homebuyer will be cashflow positive in year three of owning the home.

Moving to the 2021 IECC is cost-effective for first-time homebuyers living in single-family and low-rise multifamily

units in Michigan.

States adopting the latest model energy codes are provided favorable insurance underwriting as they rank higher on

the ISO’s Building Code Effectiveness Grading Schedule (BCEGS).

Energy-efficient homes built to the latest energy-efficient codes are more durable, resilient, and help lower mortgage

default rates, nationally, on average, by 32 percent.

Michigan can ensure more energy efficient and resilient homes by adopting the latest building energy codes, which

lower utility bills, improve construction quality, create local jobs and support workforce training for Michiganders.

31. Estimate the primary and direct benefits and any secondary or indirect benefits of the proposed rules. Please

provide both quantitative and qualitative information, as well as your assumptions.

The agency relied on the following information as cited in the PNNL Cost-Effectiveness Analysis of the 2021 IECC

for the State of Michigan when determining the existence and extent of the impact of the proposed rules:

The primary and direct benefits of the proposed rules include things such as long-term costs savings, a reduction in

the carbon footprint and other energy savings to the owners of new build structures and renovations.

The secondary or indirect benefits of the proposed rules are the skilled trade professions who will benefit from the

contracted work that will result from an updated energy code.

32. Explain how the proposed rules will impact business growth and job creation (or elimination) in Michigan.

The proposed rules will benefit the skilled trades profession as well as the energy related industry due to the new

requirements which are established in this rule set. Michigan can ensure more energy efficient and resilient homes

and businesses by adopting the latest building energy codes, which lower utility bills, improve construction quality,

create local jobs and support workforce training for Michiganders.

33. Identify any individuals or businesses who will be disproportionately affected by the rules as a result of their

industrial sector, segment of the public, business size, or geographic location.

MCL 24.245(3)

RIS-Page 14

Overall, the proposed changes to the rules have a disproportionate impact on small businesses in the three different

climate zones, with each climate zone having its own unique building requirements affect cost because of their size

or geographical location. The code is applied uniformly across the state to ensure all jurisdictions are providing for

the health, safety, and welfare of the public.

34. Identify the sources the agency relied upon in compiling the regulatory impact statement, including the

methodology utilized in determining the existence and extent of the impact of the proposed rules and a cost-

benefit analysis of the proposed rules.

Data for this Regulatory Impact Statement came from the PNNL Cost-Effectiveness Analysis of the 2021 IECC for

the State of Michigan, information and data provided from public advisory meeting, stakeholders, the Construction

Code Commission, the State Plumbing Board, the Electrical Administrative Board, the Board of Mechanical Rules,

the Residential Builders Maintenance and Alteration Contractors Board, reviewed comments from the code/rule

proposal forms, and research on other Great Lake States (Ohio, Illinois, and Wisconsin).

Through the means identified above, the following stakeholders contributed to this regulatory impact statement:

The Home Builders Association of Michigan

Consumer’s Energy & DTE, municipalities (specifically the City of Grand Rapids)

Building officials (inspectors)

The American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE)

Pacific Northwest National Laboratory, architects and engineers, Masonry Institute and energy home raters.

A. How were estimates made, and what were your assumptions? Include internal and external sources, published

reports, information provided by associations or organizations, etc., that demonstrate a need for the proposed

rules.

As cited in PNNL Cost-Effectiveness Analysis of the 2021 IECC for the State of Michigan, it is expected with the

adoption of the 2021 IECC during the first year alone, collectively, Michigan residents could expect to save over

$7,229,392 in energy costs and 44,850 metric tons in avoided CO2 emissions.

Results due to the proposed rules include, but are not limited to, the following:

The resulting analysis shows that a home designed to comply with the residential provisions of the 2021 IECC would

yield short-term and long-term consumer benefits compared to a home built to the Michigan-amended 2015 IECC.

When building to the 2021 IECC, Michigan households can expect to save 10.7% in energy costs, equating to $396

of annual utility bill savings.

When amortizing costs and benefits over a typical 30-year mortgage, homeowners will see a positive cash flow in the

first two to six years, depending on building type and climate zone.

Over the course of 30 years, a first-time homebuyer will net approximately $7,300, and an average-income

homebuyer around $9,250 in life-cycle cost savings.

During the first year alone, collectively, Michigan residents could expect to save over $7,229,392 in energy costs.

A first-time homebuyer will be cashflow positive in year three of owning the home.

Moving to the 2021 IECC is cost-effective for first-time homebuyers living in single-family and low-rise multifamily

units in Michigan.

MCL 24.245(3)

RIS-Page 15

States adopting the latest model energy codes are provided favorable insurance underwriting as they rank higher on

the ISO’s Building Code Effectiveness Grading Schedule (BCEGS).

Energy-efficient homes built to the latest energy-efficient codes are more durable, resilient, and help lower mortgage

default rates, nationally, on average, by 32 percent.

Michigan can ensure more energy efficient and resilient homes, and businesses by adopting the latest building energy

codes, which lower utility bills, improve construction quality, create local jobs and support workforce training for

Michiganders.

The agency relied on the following information as cited in the PNNL Cost-Effectiveness Analysis of the 2021 IECC

for the State of Michigan When determining the existence and extent of the impact of the proposed rules:

Commission and Stakeholders

Pacific Northwest National Laboratory, Cost-Effectiveness Analysis of the 2021 IECC for the State of Michigan

(PNNL-SA-188473)

Life-Cycle Cost (LCC) cash flow analysis.

The U.S. Department of Energy (DOE) cost-effectiveness methodology

The U.S. Energy Information Administration (EIA).

National Association of Realtors (NAR) report.

National Association of Home Builders report “What Buyers Really Want.”

Building Component Cost Community (BC3) data repository

2020 RSMeans Residential Cost Data

2018 ENERGY STAR Cost & Savings Estimates

Price data from nationally recognized home supply stores

Alternative to Regulation

35. Identify any reasonable alternatives to the proposed rules that would achieve the same or similar goals.

No reasonable alternatives would achieve the same goals. The agency is required by statute to adopt the updated

IECC.

A. Please include any statutory amendments that may be necessary to achieve such alternatives.

Although the agency does not believe any statutory amendments are necessary to the Stille-DeRossett-Hale Single

State Construction Code Act, individuals who believe the energy code updates cause additional expenses to be

incurred, may wish to lobby the legislature to extend the energy code adoption to greater than every three to six

years.

MCL 24.245(3)

RIS-Page 16

36. Discuss the feasibility of establishing a regulatory program similar to that proposed in the rules that would

operate through private market-based mechanisms. Please include a discussion of private market-based systems

utilized by other states.

The agency is unaware of similar programs or private market-based systems in other states.

37. Discuss all significant alternatives the agency considered during rule development and why they were not

incorporated into the rules. This section should include ideas considered both during internal discussions and

discussions with stakeholders, affected parties, or advisory groups.

The most significant alternative, which was presented to the agency and not adopted, was the proposition to require

all new structures or renovations be exclusively electric in nature. This would mean no use of propane or natural gas.

This would result in extraordinarily expensive construction beyond the current normal practice. It also eliminates

possible cheaper modes to energy.

Additional Information

38. As required by MCL 24.245b(1)(c), please describe any instructions regarding the method of complying with

the rules, if applicable.

Upon promulgation of the Michigan rule’s, the agency will publish instructions on obtaining the updated code books.

MCL 24.245(3)