The U.S. Department of Energy (DOE) Working Group tasked with developing new manufactured home energy efficiency standards (as mandated by the Energy Independence and Security Act of 2007) via a “negotiated rulemaking” process, held its fourth in-person meeting in Washington, D.C. on September 22-23, 2014.
SUMMARY
The fourth meeting of the DOE Working Group focused primarily on presentations regarding – and consideration of — more detailed (yet still incomplete) 2015 International Energy Conservation Code (IECC) consumer purchase price and “life-cycle” cost impact data, and the further identification of potentially applicable 2015 IECC mandatory provisions for inclusion, exclusion, or revision as part of the Working Group process. The Working Group members and DOE also received information from HUD regarding the “consultation” process between HUD and DOE mandated by the Energy Independence and Security Act of 2007 (EISA).
While the Working Group currently has meetings scheduled for October 1-2, 2014 and October 23-24, 2014, DOE officials indicated that the “negotiated rulemaking” process and Working Group deliberations could be halted after the October 1-2 meeting if it appeared that progress toward a consensus (defined by the Working Group ground rules as 2/3 member approval) on a standards recommendation was unlikely.
COST PRESENTATION AND ANALYSIS
Under EISA, DOE is charged with establishing energy conservation standards for manufactured housing “based on the most recent version of the International Energy Conservation Code, except in cases in which the Secretary finds that the code is not cost effect or a more stringent standard would be more cost effective, based on the impact of the code on the purchase price of manufactured housing and on the total life-cycle construction and operating costs.” (Emphasis added).
Interpreting this section of EISA in relation to the activities of the Working Group, DOE’s Office of General Counsel (OGC) has stated that it is the responsibility of the Working Group to effectively define and quantify “affordability.”
Consistent with this OGC opinion, and because: (a) manufactured housing is specifically recognized by federal law as “affordable housing;” and (b) there is no “life-cycle” and, therefore, no life-cycle energy cost savings for lower and moderate-income homebuyers priced out of the manufactured housing market by costly energy-related measures (including their impact on the initial home down-payment), MHARR has consistently maintained during the Working Group process that the purchase price impact of energy measures on potential homebuyers must be the paramount consideration for both the Working Group and DOE, and that information concerning such costs must be fully-developed and properly considered.
A significant portion of the fourth Working Group meeting thus addressed:
(1) a presentation of “manufacturer” construction cost data (factored to a retail price level) based on the 2015 IECC, gathered through a “survey” of “8-10” unidentified HUD Code manufacturers conducted by Working Group member Emanuel Levy, Executive Director of the Systems Building Research Alliance (SBRA); and
(2) a comparison of that information with projected life-cycle cost savings based on an analytical model developed by a DOE contractor.
In advance of the meeting, MHARR had expressed concerns with the scope, nature and potential use of the SBRA “survey” in its September 3, 2014 memorandum titled “Questionable Request for HUD Code Manufacturers’ Proprietary Information” — and those concerns were validated by the survey information presented at the meeting, forcing MHARR to cast its first “no” vote against acceptance of the survey data and its incorporation into the life-cycle cost model that will become the basis for further Working Group decisions.
MHARR’s “no” vote was based on four specific grounds detailed by MHARR’s representative for the Working Group record:
· Manufacturer “costs,” to the extent presented in the SBRA “survey” are not representative of production costs for all manufacturers due to varying supply costs for larger, smaller and medium-sized manufacturers. Those survey numbers, moreover, cannot be tested, verified, or disputed by other industry members (or other interested parties) because the source(s) of the survey information have not — and will not — be publicly disclosed. As a result, the survey results are illusory, given that supply volume impacts (discounts) were not quantified or even identified. MHARR stressed at several points that DOE, having had this matter before it for seven years, should have — and still can — assess real production costs based on the 2015 IECC by commissioning the construction of at least three identical homes from small, medium and large manufacturers. DOE, however, has given no indication that it will do so.
· The consumer purchase price impact numbers, to the extent presented, are necessarily incomplete, as they do not address costs relating to testing, enforcement, or regulatory compliance (including potential Subpart I enforcement of any final standard). MHARR stressed that while the Working Group’s “parent” committee has arbitrarily limited the Working Group’s authority to consideration of “standards” only – and not enforcement measures, issues or costs – the consumer cost impact of any standard necessarily includes a regulatory compliance component (which disproportionately impacts smaller businesses as confirmed by U.S. Small Business Administration studies) that is not included in any of the survey data or purchase price / life-cycle cost model.
· There is no indication of weighting in the life-cycle cost model that would make consumer purchase price impacts the paramount factor for any final rule or otherwise account for the market impact of the exclusion of significant numbers of lower and moderate-income consumers, as demonstrated by the recent National Association of Home Builders (NAHB) study showing the extreme price sensitivity of the manufactured housing market.
· MHARR stressed that the burden is not on the industry in this proceeding to prove consumer cost impacts. Rather, the burden is on DOE, as the federal agency responsible for implementation of this law, to arrive at a standard that properly quantifies and considers those cost impacts in compliance with the EISA statute.
While MHARR’s “no” vote does not stop discussion of these issues, it places the strongest possible indication in the record that the cost analysis as it currently stands is insufficient and unacceptable. This record, moreover, will be extremely important in the event that there is a challenge to any final DOE standards.
MHARR also emphasized that the very premise of EISA, as it relates to manufactured housing, is flawed from a consumer perspective, as exhaustive data from the latest (2011) American Housing Survey by the U.S. Census Bureau shows that the median monthly operating cost for a manufactured home, using the three most common heating (and/or cooling) sources (i.e., electricity, piped gas and fuel oil) is already equal to or less than that of a site-built home constructed within the four years prior to the 2011 survey date (and thus in accordance with IECC codes).
CONTINUED ANALYSIS OF RELEVANT 2015 IECC SECTIONS
The Working Group continued its review of “mandatory” 2015 IECC sections that are potentially relevant to manufactured housing, identifying those that should be considered for inclusion in any recommendation to DOE based on further cost-benefit analysis. A full, proper and complete cost-benefit analysis will be critical, insofar as many of the potentially applicable sections establish requirements that exceed current HUD Code standards and involve specific prescriptive mandates.
HUD COMMENTS
HUD’s liaison to the Working Group offered comments on a number of technical issues, but more importantly noted that there had been contact between HUD and DOE regarding the “consultation” required by the EISA statute, and emphasized further that HUD intends to bring any recommendation that emerges from the DOE process to the Manufactured Housing Consensus Committee (MHCC) for its consideration.
This confirmation is a positive step for HUD that is essential to ensure full compliance with both EISA and the federal law governing the manufactured housing program, its standards and its enforcement system. MHARR has maintained from the outset (2007) that any DOE proposed rule – regardless of how it is developed – must be brought to HUD for its input at a timely and meaningful stage, and that any such consultation must include the MHCC, in accordance with the requirements of the Manufactured Housing Improvement Act of 2000. It is essential, moreover, that this consideration be both substantive and complete based on the specific federal laws governing the regulation of manufactured housing, and not simply a cursory “rubber stamp” of any DOE proposal.
The industry and consumers will thus need to be prepared to address any such proposal fully and properly at the MHCC, and the Committee itself will have the responsibility to fully uphold Title VI in conjunction with any proposal from DOE that could undermine the affordability and availability of manufactured housing that Title VI was designed to uphold.
FUTURE MEETING SCHEDULE
The Working Group will meet next on October 1-2, 2014. A meeting is scheduled for October 23-24, 2014, but now appears to be tentative based on DOE comments noted above. No new meetings were scheduled. Various subgroups will continue to convene, as needed, on their own schedule.
MHARR will continue to fully participate in all working group meetings and will provide status reports on these important deliberations as they take place, going forward.
