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 – “EISA”) via a “negotiated rulemaking” process, held its fifth in-person meeting in Washington, D.C. on October 1-2, 2014.
The results of the latest Working Group meeting should be alarming for both industry members and consumers as the group moves toward standards recommendations (testing and enforcement issues, and related costs, have not even been considered yet) that would radically change the nature and cost of manufactured housing. All this is being done, moreover, under a statute – EISA – that has been promoted as offering “benefits” for consumers, but is actually tailored to advance the agenda of energy special interests, while current manufactured home owners, according to U.S. Census Bureau data, pay median monthly energy operating costs that are less than, or equal to, other types of homes already built to the International Energy Conservation Code (IECC).
Even more baffling, though, is why part of the industry is assisting DOE in the implementation of this fundamentally flawed statute, developed and enacted without HUD Code industry input, until MHARR, near the end of the legislative process, was able to include a savings provision requiring consultation with HUD and the Manufactured Housing Consensus Committee (MHCC). Such assistance not only lends a potential veneer of legitimacy to an indefensible statute and DOE rulemaking process, but effectively removes any burden from DOE to develop its own factual and accurate consumer cost figures, as would normally be its burden – and its burden alone — in a federal rulemaking. Indeed, such assistance has provided cover for DOE to resist calls by MHARR during the negotiated rulemaking process for the agency to commission actual homes from small, medium-sized and larger manufacturers, built to the 2015 IECC, to accurately determine and assessall the cost implications of compliance with that code. Moreover, while some of these industry members maintain that rules developed with such cooperation and assistance will be “better” than would otherwise be the case, such cooperation does not change the fact that the 2007 EISA law is completely inappropriate for manufactured housing and should go back to Congress for fundamental reform.
MEETING SUMMARY
At the outset of the meeting, it was announced that the term of the Working Group has been extended by its “parent” committee – the DOE Appliance Standards and Rulemaking Federal Advisory Committee (ASRAC) – to November 1, 2014. This extension of thirty days would bring the full term of the Working Group to three months (August-October) – as contrasted with the seven years that DOE has had the issue of manufactured housing energy conservation standards before it – and, together with other information, raises serious issues regarding the legitimacy of the entire DOE process to date.
In its initial report on the DOE negotiated rulemaking process, MHARR noted information disclosed at the August 5, 2014 Working Group meeting which confirmed (as long suspected by MHARR) that DOE’s first attempt to develop manufactured housing energy standards via a “conventional” rulemaking process had been fatally contaminated by the “impermissible” disclosure of a draft proposed rule to DOE-selected parties in interest. This resulted in the rejection of the draft rule by the Office of Management and Budget (OMB) and a directive to DOE to re-start the entire rulemaking process from scratch. Based on this history, MHARR, in its analysis of the August 5-6, 2014 Working Group meeting, stated:
“While it appears – at least on its face — that DOE is going “back to drawing board” on this rule, as sought byMHARR … maximum vigilance will be necessary during the negotiated rulemaking process to … ensure that the current process is, in fact, a fresh start, from scratch, rather than a mere fig-leaf to paper over the prior “improper” action and results that were rejected by OMB.”
However, based: (1) on the minimal time allotted to the negotiated rulemaking Working Group by ASRAC to complete its standards recommendations (as contrasted with the years-long DOE “conventional rulemaking” process); (2) the arbitrary division of standards and enforcement by ASRAC — with the charter of the current Working Group limited to standards only (thus ensuring that regulatory compliance costs are excluded from analyses of consumer purchase price impacts); and (3) the participation of multiple recipients of the “impermissibly” disclosed (i.e., selectively leaked) DOE draft rule in the Working Group, the current process gives the appearance of being little more than a fig leaf designed to provide DOE a veneer of legitimacy and a “fresh-start” while ending-up at essentially the same place as the prior, illegitimate, OMB-rejected process.
As for substance, the meeting focused on completing the identification and analysis of “mandatory” 2015 IECC provisions, evaluation of the 2015 IECC thermal zones as compared with the existing HUD Code thermal zones, and consideration of information regarding IECC consumer purchase price impacts (developed from undisclosed sources by the Systems Building Research Alliance – “SBRA” — which itself has a direct interest in other energy conservation programs) and life-cycle cost information (developed by a DOE contractor using a DOE-designed computer-based energy usage modeling program).
COST ANALYSIS OF 2015 IECC REQUIREMENTS
The SBRA-developed information regarding consumer purchase price impacts shows 2015 IECC-driven price increases (based on a cash purchase, including material costs, labor costs, attributable overhead and retailer margin) ranging from a minimum of $802.29 for a single-section home in current HUD thermal zone 2, to $3,967.35 for a double-section home in current HUD thermal zone 3, with cost recovery times for some measures, such as R-38 insulation, ranging from 12-88 years in certain IECC thermal zones (see, full cost increase chart, attached). And MHARR maintains that even these amounts are understated in that:
(1) They do not include testing and regulatory compliance costs (as detailed in MHARR’s report and analysis of the fourth DOE Working Group meeting dated September 24, 2014) because the Working Group’s charter is arbitrarily limited to consideration of standards and not enforcement issues; and
(2) They do not reflect supply costs across the full spectrum of the industry, especially for smaller manufacturersthat do not receive high-volume discounts for materials and components comparable to larger manufacturers.
Indeed, a more realistic assessment of compliance costs (from the perspective of smaller manufacturers) shows that 2015 IECC compliance would require significant design and structural changes in manufactured homes, especially in current HUD thermal zone 3, with correspondingly significant price increases.
Thus, according to information provided to MHARR, in current HUD thermal zone 3, the retail-level price increase to transition from the most basic, affordable, single-section current HUD Code home, to a level approximating 2015 IECC thermal zones 4 and 5, would be approximately $5,270.00 (as contrasted with an SBRA-estimated range of $924.30 to $1,494.39).
For a comparable HUD Code base double-section unit, the cost increase would be $5,460.00 (as contrasted with an SBRA-estimated range of $972.32 to $1,912.89).
MHARR, thus voted against the acceptance or use of the understated SBRA cost assumptions at the September 22-23, 2014 meeting of the Working Group (as explained in its Memorandum of September 24, 2014) and voted “no” on further proposals at the October 1-2, 2014 meeting that were based on those assumptions. This includes a proposed table of energy efficiency “Uo” values that would exceed current HUD Code requirements by 28-42% and that even under the lower SBRA cost assumptions, would: (1) lead to the exclusion of hundreds of thousands (and potentially millions) of Americans from the market for the industry’s most affordable homes based on the most recent study and analysis by the National Association of Home Builders (NAHB); while (2) at the same time, driving manufacturers and consumers of the industry’s “higher-end” homes into the modular market, currently operating under less stringent state and local energy codes.
PROPOSED THERMAL ZONES
The Working Group also considered proposals to reduce the eight basic 2015 IECC thermal zones into a smaller number of zones to more closely correspond to the existing three-zone HUD system. One proposal would establish four zones based on the Uo values considered by the Working Group, while another would establish three zones. All such proposals, though, unlike the existing HUD zones, would split certain states into more than one zone, with Texas, the largest HUD Code shipment state, divided into as many as three separate zones. No vote, however, was taken on the thermal zones and demarcation issues, pending further input from the industry regarding the number of zones and whether demarcation should be by states or county (like the current HUD wind zone map).
HUD COMMENTS
On a positive note, HUD’s liaison to the Working Group emphasized that the Department’s consideration and analysis of any proposed standard or recommendation from DOE (including Manufactured Housing Consensus Committee – “MHCC” — review and recommendations) will be based on the balance between consumer purchase costs and consumer benefits as required by the Manufactured Housing Construction and Safety Standards Act of 1974 as amended by the Manufactured Housing Improvement Act of 2000.
As with HUD’s previous confirmation that it would involve the MHCC in the consideration and analysis of any DOE proposed standard, this is an encouraging step that is essential to ensure full compliance with the federal law specifically governing the manufactured housing. 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 federal law governing the HUD program. It is essential, moreover, that this consideration be both substantive and complete.
CONCLUSION
Based on all the above, DOE’s implementation of EISA in its current form should be unacceptable to the industry and the mostly moderate and lower-income American families that rely on manufactured housing as the nation’s most affordable source of home ownership. Instead of a headlong rush toward extremely costly standards that would devastate the already diminished availability of affordable manufactured housing, the manufactured housing portion of the Energy Independence and Security Act of 2007 should go back to Congress — with full input from the industry, consumers and HUD — for reforms that are needed to respect and maintain the role of HUD Code manufactured homes as affordable housing accessible to all Americans.
FUTURE MEETING SCHEDULE
The Working Group will meet next on October 23-24, 2014 in Denver, Colorado for what will likely be final action on a recommendation to DOE (via ASRAC). No additional meetings have been scheduled. 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. More importantly, this critical issue will be on the agenda ofMHARR’s upcoming Board of Directors meeting for discussion and consideration.
