Credit: Jason Schneider
Credit: Jason Schneider

On Monday, May 3, Congressman Patrick Murphy, of Pennsylvania's 9th District, appeared at the showroom of Windowizards, a Philadelphia-area home improvement company, to sing the praises of H.R. 5019, the Home Star Energy Retrofit Act of 2010.

Murphy is a co-sponsor of the Home Star bill, and with his vote among the 246 ayes, the legislation soon passed the House. It now awaits action in the Senate. If the Senate approves the bill ? and people such as Larry Zarker, CEO of the Building Products Institute (BPI), think it will ? then home improvement contractors may soon have a business opportunity comparable to the American Recovery and Reinvestment Act (ARRA) legislation passed in February 2009, which provided up to $1,500 in tax credits for installing qualified home improvement products. Many home improvement company owners feel that the stimulus legislation made the significant top- and bottom-line difference for window sales in 2009. Home Star may, or may not, do something similar. Windowizards president David Goodman, for one, who introduced Murphy, thinks that the legislation could be "a great shot in the arm" for both his company and the home improvement industry.

Industry Boost

Home Star could be that shot in the arm. On the other hand, it could also change the way homeowners think about home improvement as it relates to heating and cooling the places where they live, not to mention comfort and air quality. Frank Mumford, owner of Sir Home Improvement, in Kalamazoo, Mich., believes that thinking is already changing.

Sir Home Improvement tells prospects that changing out windows will result in, at most, a 10% reduction in energy load. Heresy, in the window replacement business, but Mumford's is one of the few home improvement companies anywhere to offer homeowners a complete package of green services rather than the single solution of one product. His procedure includes home assessment, retrofits, and test-out. "The homeowner gets it," Mumford says. "They want green. But you've got to show them how a green home is green in their pocket."

If and when it passes, this is what Home Star could do. First, it could provide $6 billion in federal funding as incentives for homeowners to make their homes energy efficient. Projects covered include weatherization, mechanical systems (i.e., HVAC), windows, insulation, and various energy-saving appliances. The program in its current form allows homeowners to claim rebates on a percentage of what they pay for qualified improvements. The Department of Energy estimates that Home Star funding and incentives will prompt audits and retrofits in some 1.2 million American homes, resulting in a savings of $9.2 billion to home­owners over a 10-year period.

The other thing Home Star will do is create jobs. "The message of Home Star in the job arena is very strong," says Zarker, whose Building Performance Institute, a national standards and credentialing organization for residential energy-efficiency retrofit work, has played a central role in lobbying for Home Star. "That resonates with both parties." The construction sector of the economy remains bleak, with 25% or greater unemployment. The aim of Home Star is to put some of the unemployed back to work, and BPI estimates that the legislation will result in 168,000 jobs at manufacturing, distribution, and construction levels.

Same but Different

Home Star could in fact mean more business in the next year for home improvement companies. But so far few have followed Mumford down the path of whole-house solutions, that is, energy-saving retrofits specified by testing, and tested again once installed to determine the effect on energy load.

Instead, many home improvement company owners are in wait-and-see mode. Their feeling is that the beneficial effect of the legislation has been diluted by restrictions. Home Star qualifies projects differently than last year's stimulus legislation did and it offers a different amount and type of incentive. It also splits reimbursed work in two tiers: Gold Star and Silver Star. The difference is big:

The $1.8 billion earmarked for Gold Star projects, available over a two-year period, is for "whole house" retrofits. It offers bigger reimbursements that require testing, installation, and verification by certified technicians and/or certified companies. To claim a $3,000 Gold Star rebate, test-out results would need to show a minimum 20% reduction in energy load for the home. A $1,000 rebate is offered for every additional 5% improvement in energy efficiency past 20%, with the dollar amount capped at 50% of project costs up to $8,000. That's an incentive substantial enough to move people. The catch for home improvement companies is that most lack company certification or certified technicians.

That will leave companies such as Windowizards tapping into the $3.6 billion set aside for Silver Star projects. Silver Star is a one-year program that provides between $1,000 and $1,500 for each qualified improvement or $250 for each appliance. Included are air sealing; insulation of walls, ceilings, or crawlspaces; and replacement of existing windows and doors, furnaces, air conditioners, heat pumps, water heaters, and appliances with high-efficiency models "installed by an appropriately licensed and insured contractor."

The amount claimed cannot exceed $3,000 or 50% of total project costs. So if your company simply installs qualified windows, the homeowner can claim a $1,000 rebate. Which, as Bruce Christensen, vice president and general manager of GE Money's home improvement division points out, is taxable income.

"There are a lot of restrictions," Christensen says, comparing Home Star to ARRA. "It's going to be a challenge to the consumer."