Political window is open for business

Window manufacturers’ political interests in 2013 will remain focused on two major issues, including establishing an effective and permanent incentive for the installation of energy-efficient windows, and reducing the impact of the Environmental Protection Agency’s lead paint rule on the remodeling market. Window sales are expected to increase modestly in 2013 as manufacturers address these issues and the housing market continues its slow but steady improvement seen in the latter half of 2012.

Executives from the two major window manufacturer associations who spoke to Residential Building Product News stopped short of predicting 2013 housing and window market performance, saying only that modest improvement is anticipated. This is, of course, assuming the country’s employment situation gets better, tax credits improve, and tax hikes are avoided or kept at a minimum, say executives of the Window & Door Manufacturers Association, Washington, D.C., and the American Architectural Manufacturers Association, Schaumburg, Ill.

Rich Walker, president and CEO, AAMA, expects final 2012 market numbers to reach middle single-digit improvement compared to 2011. “While remodeling has remained strong during the downturn, window sales in some cases have been negatively impacted by the lead rule. For example, in the Northeast, where many older homes contain lead paint, business has been reduced by up to 30 percent,” he says.

A large portion of window sales have been in the remodeling and replacement in recent years, which has been keeping the construction market afloat, adds Jeff Lowinski, vice president, technical services, WDMA. “People are staying in their homes and replacing windows, but, we’re starting to see a drop off in that market. People interested in replacing windows have already done so. Now, the question remains as to how many people are left that will remodel their home, or will they tend to live with what they have,” Lowinski says.

If home construction picks up, as it is expected to, a window shortage is not likely, Lowinski says, adding that the only supply problems might be in local markets. “For example, in areas affected by Hurricane Sandy, where whatever stock that existed has been destroyed and there’s big demand for replacement product, there could be supply issues. Overall, though, there’s still plenty of capacity in the market. Manufacturers that have survived are poised and ready for a recovery,” he says.

“What has happened is the brand equity manufacturers have taken all the fat out of their businesses, they’ve leaned their practices, and simplified product flow. It’s not a matter of having taken the value out of the product, they’ve taken the cost out of the mechanism for building windows. As capacity has gone down, so did the costs of that capacity,” he adds.

The most significant factor affecting window costs will be improving their energy efficiency, Lowinski says. The U.S. DOE and EPA, through the Energy Star program, appear intent on putting forth regulations that will drive requirements for windows to be more efficient, he adds. “Honestly, we’re at about the brink of what current technology can do regarding efficient windows. It will take a new invention to jump to another level of efficiency, or will require windows to interface with building operations so we don’t have a passive product but a dynamic product that can react to its environment.

“These products are in early stages of experimentation and commercialization,” he says. “They have limited production capacity, or, manufacturers can’t make these products in the sizes required for residential housing demand. Some technologies have problems regarding durability, suffering degradation over time. Manufacturers are still working on that, and they haven’t worked out all the bugs. As the technology matures the costs will drop down but never as low as the cost of clear glass.”

The 25C tax credit

Section 25C of the U.S. tax code was established in 2009, ran through 2010 and provided up to $1,500 tax credits for the installation of energy-efficient windows. It was extended through 2011 at $500 and expired at the end of the year. In late November 2012 as this was written, Congress had not addressed 25C nor the more than 200 other tax breaks on the table. Extending 25C in its current form will not do much good, AAMA’s Walker says, as evidence has proven that it’s not an incentive to persuade homeowners to buy windows. “The amounts that were in effect for 2010 for example, at $1,500, had many manufacturers seeing an uptick in business that year,” he says.

WDMA also is in favor of establishing an effective incentive for consumers to buy and install efficient windows. “The estimate from the EPA is one billion single-glaze windows are in the market,” Lowinski says. “Using tools like 25C to put money into the hands of people who need to replace those inefficient windows that are wasting energy is a good thing. It will lower fuel bills and increase the efficiency of the existing housing stock.”

The Senate finance committee in August 2012 passed an extension of 25C and several other soon-to-expire deductions. “The extension would extend the 2011 level, which is 10 percent of the cost up to $200 for windows and $500 for doors, through 2013,” explains Ben Gann, director, legislative affairs and grassroots activities, WDMA.

“On the House side, we have a standalone piece of legislation called HR-6398, or the Home Energy Savings Act, that’s structurally different than what the Senate proposed,” Gann continues. “This bill would extend the 2011 level through 2013 like the Senate’s. Labor costs would be included for all qualified products, and it makes the credit permanent. It has only been introduced in the House, and in this lame duck Congress it’s one of dozens of other credits that are about to expire.”

WDMA and AAMA would love to see a permanent tax credit established, which would allow remodeling contractors once again to promote the credit to consumers. “The 2009 and 2010 versions were successful because consumers knew there would be a credit thanks to remodelers advertising it so much. Because consumers knew in advance, they were able to decide to get a less-efficient product or spend more money on a better product and get a credit. The reason it was successful is because remodeling businesses were advertising the credit. It’s unclear how much of that will go on as 25C is proposed now, because most remodelers’ marketing decisions for 2013 have been made already, so there might not be money to advertise a credit in 2013.”

Lead paint battle

Another critical political issue affecting the window market is the 2008 Lead Renovation Repair and Painting law, which governs how to work in homes with lead paint, and who can perform the work. The good news, Walker says, is the U.S. EPA has delayed expanding the rule to the commercial sector. “AAMA has a substantial commercial window and door manufacturing segment that is relieved to hear that. The bad news is the lack of activity in court and through legislation to restore the opt-out option, because the lame duck Congress [had] to deal with more major issues like the fiscal cliff. We don’t anticipate anything significant happening to the lead in remodeling law for six months,” Walker says.

Legislation exists in both houses of Congress to, among other things, restore the opt-out provision, WDMA’s Gann says. Both bills are roughly the same, and would defund enforcement of the rule if the EPA can’t certify a lead paint test kit that meets the standard for false positives and negatives. “Right now none of the three kits on the market are producing acceptable results. Another part of the legislation addresses certified remodelers, allowing them to recertify by taking an online course and not having to take one in person,” Gann explains. “Also in those bills is a one-time exemption for paperwork violations, so if you make a mistake once you would not be fined.”

The House bill, Gann says, takes a cooperative approach by giving the EPA six months to come up with a process for identifying an acceptable test kit, then a year to identify a test kit. As far as a timeline, the bills are sitting still right now and are expected to be reintroduced at the start of the new Congress.

Issues other than the 25C tax credit and the LRRP rule are percolating, including questions about green building standards, Gann notes. “There’s a feeling that the federal government has favored [the Leadership in Energy and Environmental Design program] as the preferred green building standard, and we’re advocating the adoption of green codes that follow a consensus-based approach to development. We’re not saying, ‘Don’t use LEED,’ we’re saying at least recognize any standard that follows the consensus approach.”

> Additional window products on pg 12