In 2018, the State of California enacted legislation that required new residential buildings up to three stories in height to have solar panels and/or batteries installed. The California Energy Commission was unanimous in its vote, making California the first state to have such a mandate.
The law states further that solar power must be able to power all of the home’s electrical devices. If the batteries are installed, then the solar system must only be able to power 75% of the building’s electrical needs.
James Rector, the director of solar lending at Sunwest Bank, recently said, “New construction policy and consumer demand are pushing for solar to be integrated into new projects – particularly for all multifamily housing.”
The regulation that took effect in 2020 for residential folks became effective on January 1, 2023, for businesses.
One of the concerns prior to this effective date was that prices in an already expensive market would increase further because of the added cost of the solar panels and batteries. The law, however, makes solar improvements exempt from property taxes. Additionally, the long-term savings that come from having the solar systems may offset that of the cost of installation.
For investors and real estate developers, the shift towards solar could actually be good for the bottom line. Not only does a decrease in energy expenses mean more money in the bank for businesses and tenants, but an increasing consumer demand for sustainability means that many potential tenants and home buyers want to partner with others who are supporting the environment.
Builders will need to start planning for these installations before submitting their proposals to their local jurisdictions for approval. Analysts are keeping a close eye on the real estate market to see any possible effects that arise because of the implementation of the new law.