Aug. 7 (Bloomberg) -- Legislation requiring new U.S. homes to be more energy-efficient threatens to smother a rebound in the housing market, homebuilders say.

Under a measure approved by the House and being considered by the Senate, new homes would be required to have more insulation, more-efficient doors and windows, and heating and cooling systems that consume less energy. The changes would cost $4,000 to $10,000 a home, and price more than 1 million people out of the market, Bill Killmer, a vice president of the National Association of Home Builders, estimated.

President Barack Obama’s goals of reviving the economy and saving energy clash in the new standards, according to appliance-maker General Electric Co. and the homebuilders association, whose members include Pulte Homes Inc. and KB Home.

Congress would raise builders’ costs “at the absolute bottom of the worst housing market since World War II,” Joe Robson, a Tulsa, Oklahoma, homebuilder, said in an interview.

Housing starts climbed 3.6 percent in June from May to an annual rate of 582,000, a seven-month high, the Commerce Department said on July 17. Starts remained 74 percent below their 36-year high of 2.27 million in January 2006.

GE’s Concerns

Buildings are a target of the climate-change measure because they produce 40 percent of U.S. greenhouse gases and use more than 70 percent of all electricity, according to the Washington-based Alliance to Save Energy, which supports the new standards. The alliance represents makers of energy-reducing products such as 3M Co. and Dow Chemical Co.

The climate bill passed by the House in June would require states to adopt building codes that increase the energy efficiency of new homes by 30 percent one year after passage and 50 percent by 2014. Builders would have to disclose how efficient their homes are. Renovations of existing homes would have to meet the codes when building permits are required for the work.

The Senate plans to draft its version of the legislation next month.

GE, the biggest supplier of appliances for new homes, is worried that higher costs caused by the codes will curtail new - home sales, preventing installation of more-efficient appliances, said Earl Jones, a senior counsel for government and industry relations at the Fairfield, Connecticut-based company.

“Our concern is that those standards not actually impede the development of new housing stock,” Jones said. “There are issues about costs of those new standards.”

Different Market

The company is planning to sell a $1,500 hybrid-electric water heater that is three times more costly than basic brands and could be as much as 85 percent more efficient, he said.

The homebuilders association, based in Washington, has lobbied lawmakers in both congressional chambers, asking that the 30 percent reduction not take effect for two to three years. The association’s Killmer says its data show that for every $1,000 increase in the price of a home, 250,000 people become unable to get a mortgage to buy the property.

Homebuilders’ concerns are warranted in the current market but their worst fears may not come to pass, said Megan McGrath, an analyst for Barclay’s Capital in New York.

“If we are talking about a 2011 or 2012 requirement, I think the market is in a completely different place by then, and someone may be willing to pay a couple thousand more upfront,” McGrath said. “Right now that’s a tough sell to make.”

Spokespeople for builders Pulte Homes, KB Home and Centex Corp. didn’t return calls seeking comment for this story.

Consumer Savings

Energy use reductions in new homes will save consumers $500 a year, said Representative Henry Waxman, the California Democrat who sponsored the House measure, in a July 8 note to lawmakers. “That’s money in the pockets of your constituents instead of the energy companies,” he said.

After lobbying by the National Association of Realtors, the legislation was drafted to exclude existing homes from the energy disclosures that would apply to new-home sales.

“In a good market, any sort of mandates for sale of a home could have negative implications,” said Mary Trupo, public issues director for the realtors group in Washington. “In the volatile housing market that we are in, those implications would be magnified.”

Targeting only new homes is misguided, said Killmer of the homebuilders association.

“It makes no sense to have labeling requirements for new homes and not for less-efficient existing homes,” he said. “It’s like imposing labeling requirements on more-efficient hybrid cars and allowing sport utility vehicles to avoid such mandates.”

The energy efficiency of all homes should be made public, said Lowell Ungar, director of policy at the Alliance to Save Energy.

“If you go buy a dishwasher, there is a yellow label that tells you how much energy that dishwasher is going to use,” he said “If you want to buy a house, good luck getting that information.”

To contact the reporter on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net

Last Updated: August 7, 2009 00:00 EDT