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Tank style water heaters (both gas and electric) are not built to be directly exposed to the elements, and require shelter if outdoors. In the DFW Metro, they are often installed in the garage. This is especially common in cities like McKinney and Frisco with new construction homes or those recently built over the last 30 years.
Because the garage typically isn’t climate controlled, any exposed plumbing to the water heater should be insulated to protect it from freezing. As long as the unit is running and supplied with gas/electricity, the water heater produces enough heat to protect itself from freezing.
Tankless water heaters are sometimes built so that they can be installed outdoors. In newer subdivisions like those in the Prosper/Frisco/McKinney area, you will often find tankless water heaters located in exterior metal cabinets that are recessed into the brick or stucco siding. As with tank style water heaters, the plumbing pipes for the tankless need to be insulated, and the tankless unit itself has built-in freeze protection as long as electricity is supplied to the house.
Whether you have a tank style water heater or a tankless, the garage is often the most ideal location for homes in the north Dallas metroplex area. Whenever failure occurs and the unit starts to leak, damage to the home is often minimal.
According to the Mechanical code a water heater may not obtain combustion air from a living space. If the water heater was not venting properly or was burning rich you could have carbon monoxide problems. A properly functioning water heater however almost doesn’t even need a vent (but I would never try it) since it burns so clean. Kind of like a gas stove. While it is not right I don’t know that I would freak out about it. Garages are okay as long as they have sufficient cubic footage, other rooms may be okay as well as long as not designed living space. This rule changed relatively recently(last 25 years or so) so many homes do not comply with the new code. As with all building codes, they are just recommendations for localities to follow. They are under no obligation to follow some or all of them but they will have their official policy documented. My locality took 99% of the book and changed a couple of codes to local liking. Los Angeles scrapped the National code all together and made their own although most codes parallel the national code. In most cases you will go by either city or county policy depending on where you live.
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