Easier Insurance and Lending for Straw Bale Homes
The inclusion of straw bale construction in the 2015 International Residential Code (IRC) (access the 2021 IRC Appendix AS - Straw Bale here) has made it easier to get insurance and lending for straw bale homes. It may not be as easy as getting insurance and lending on conventional homes yet, but we are making major headway.
In recent conversations with insurance agents, it was made clear to me that because the technique is now included in the code books, it is often considered "automatically acceptable" to insurance agencies. Of course, this is not the case for every insurance company out there, but it is true for some.
Perhaps even more exciting is the potential for this approach to be used with other companies moving forward. For example, if an insurance agency tells you that they cannot insure a straw bale home, it is much easier to challenge them on their reasoning.
After all, if the construction technique is code approved, and you are building to meet that code, it will be hard for them to state what grounds they have to deny insuring the home. Geico, AAA, and Unigaurd are examples of companies who have stated they will insure code-approved straw bale homes. Give your local agents a call and see if they have the same approach.
Construction lending continues to be a challenge. Having just watched The Big Short, I may be biased in my assessment of the banking industry as a bit corrupt and focusing more on making money than on providing access to money for those who need it. Okay, now that I have that out of the way...let's see what options are available to you to find funding for your straw bale build.
My first suggestion is to start with smaller, local banks and credit unions. They tend to appreciate keeping money in the community so your project may be right up their alley. If you don't get a yes for your "straw bale home" with the first few lenders you approach, consider changing your language moving forward. As I mentioned in my last blog post, a new name for straw bale construction may be needed and that may be true in lending as well.
Consider inquiring about building a "post and beam home with cellulose insulation." Or perhaps a "reinforced cellulose block" home, or some other name. As you can see, the potential for immediate red flags is much lower this way.
Just make sure the lender doesn't have any exclusions or restrictions that would create issues for you once you start construction. You'll also need to make sure your construction drawings reflect the same wording you use in your approach.
You may also want to push the "Green" aspect of your job and speak to the excellent carbon sequestration, healthy construction materials, energy efficiency, and overall environmentally responsible practices that make up your home.
There is no doubt that green construction is important to a lot of communities and banks are getting on board as well. As an example, California's Title 24 goes into effect on January 1, 2017 and requires all new residential construction be zero net energy homes by 2020. Straw bale construction is a great piece for assembling that puzzle. Get the banks excited about being a part of the future and not stuck in the past.
As with the insurance agencies, it is important to inform the lenders that the techniques you are using to build your home are code approved. If they push back against you, try to get them to explain why they cannot fund a code approved building. They won't have much ground to stand on; however, that doesn't mean they will agree to fund your project. It might mean that they will start to see the thin veil they are using to hide from funding your project start to slip away. Some banks to contact include Wells Fargo, US Bank, Citizens Bank, and PNC Bank.
For those of you who have been successful in acquiring insurance and/or funding, I hope you will share your bank and insurance contacts in the comments below. Let us know what worked, what didn't and what advise you would offer to others.
-Andrew Morrison