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California City Wants to Require Solar on Every New Home

A Republican mayor campaigns for a historic requirement for solar on new homes.

Herman K. Trabish: March 1, 2013

Rex Parris, the mayor of Lancaster, California, wants every new home in his city to host solar. And starting next January, that could be a reality.

Yesterday in Lancaster, homebuilder KB Home celebrated its 1,000th new home with solar panels from SunPower. Speaking at the event, Mayor Parris announced his city will institute a first-of-its-kind requirement that solar be installed on every new single-family home built in Lancaster after January 1, 2014.

The new law will be written into Lancaster’s “Residential Zones Update” on residential solar. Along with a range of green building provisions, it specifies that new single family homes meet minimum solar system requirements.

“The purpose of the solar energy system standards,” it reads, “is to encourage investment in solar energy on all parcels in the city, while providing guidelines for the installation of those systems that are consistent with the architectural and building standards of the City.” It is further intended “to provide standards and procedures for builders of new homes to install solar energy systems in an effort to achieve greater usage of alternative energy.”

Residential homes on lots from 7,000 square feet must have a solar system of 1.0 kilowatt to 1.5 kilowatts. Rural residential homes of up to 100,000 square feet must have a system of at least 1.5 kilowatts.

The standards spell out simple, common-sense rules for both roof-mounted and ground-mounted systems. They also deal with some interesting issues:

A builder’s model home must show the kind of solar system the builder will offer.

Builders of subdivisions will be able to aggregate the houses’ requirements. If ten houses in a subdivision each have a 1.0 kilowatt requirement, the builder can install a single 10-kilowatt system, two 5-kilowatt systems or four 2.5 kilowatt systems.

If a housing tract is built in phases, each phase must meet the requirement.

Multi-family developments can meet the requirement with a rooftop system or a system on a support or shade structure.

Finally, builders “may choose to meet the solar energy generation requirement off-site by providing evidence of purchasing solar energy credits from another solar-generating development located within the City.”

Mayor Parris, who frequently promises to make Lancaster “the solar energy capital of the world,” expressed confidence that he has the City Council votes for approval, despite resistance from the building industry.

“I understand the building industry is not happy with this,” Parris said. “We will just have to take the heat. I could not do that without a City Council — made up of people who want a political career — with the courage to take that heat.”

The building industry should understand “that we work with them, not for them,” he said. “They are not in a hurry to disrupt our partnership. Opposition would disrupt it.”

Even with resistance from some members of the building community, the market is shifting.

“There are a rapidly increasing number of solar homes being built,” said Matt Brost, SunPower’s national director for new home sales. “One of every five built in California this year will be solar powered.”

Along with partnering with KB Home, SunPower has worked with other major home builders like Lennar Homes, Richmond American Homes, and Standard Pacific Homes.

Mayor Parris, a Republican, noted that Lancaster is “one of the most conservative Republican districts in the country. But Republicans are smart,” he said. “When you show them a solution, they will take it.”

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If you have an IRA, you don’t need cash to invest in real estate.

Many of our investors are buying land in the path of development using their under performing IRA accounts. In most cases, clients will need to open a Self Directed IRA with a new custodian in order to invest in alternative options. Companies like Fidelity, Lincoln, T. Rowe Price, Morgan Stanley, etc. only offer the traditional stocks, bonds and mutual funds. They do not offer actual land investment opportunities unless they are in a mutual fund or Real Estate Investment Trust or REIT. Since you will own the actual dirt, you need a Self Directed IRA custodian who can hold the land as an asset in your account. The process is simple; identify the custodian you would like to use, open a new account and transfer funds in from your old custodian. There are no tax consequences or penalties if you follow the guidelines.

There are several benefits to buying land within your IRA. First, there is zero cash out of pocket. Second, you are likely not getting the investment returns you were used to getting in your IRA back in the early 2000’s and you are looking for alternative ways to invest. Third, you defer or eliminate taxes on the growth of your land investment depending on the type of IRA you have. Growth in a Roth IRA for example, will be tax free if you follow the IRS guidelines. You should consult with your tax advisor or Self Directed IRA associate to see if using your IRA account is the best option for you. Many of our clients own properties in both cash and in their IRAs so they have access to the profits at different times based on their age and specific needs.

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Can I take money from my 401(k) account to invest in land?

It depends. If you no longer work for the same company where you were contributing to your 401(k), in most cases; YES and right away! Transferring your 401(k) funds to a Self Directed IRA account is simple and easy. And you have two options to consider: 1. Don’t pay any tax now and open a Traditional IRA. You will pay taxes when you begin withdrawals normally after age 59 ½. Your second option is to pay tax now (on all or part of the funds you’re transferring), and open a Roth IRA. Your profits from land investing in a Roth account will not be taxed In the future! This is a great idea for people who can claim the transferred amount as income on their taxes and pay now versus pay later on the larger amount after years of growth.
Now, if you STILL work for your company where your 401(k) resides, there is a possibility that you can do an in-service, non-hardship withdrawal from your 401(k), 403(b) and 457 plans to a traditional or Roth IRA. This is a great option if you have a large amount of funds in your plan and limited investment choices for diversification.
Speak with your company representative to see if your plan has been customized to allow an in-service withdrawal to an IRA. If you don’t have the option and there is enough support from the employees, the plan can be amended to have this option added.

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