1. SUMMARY
The second working group meeting focused primarily on the development of an analytical framework to evaluate the elements of a recommendation to DOE based on the requirements of the Energy Independence and Security Act of 2007, as well as the identification and acquisition of information relevant to that analysis. Significant amounts of data to flesh-out such a framework, while identified, have yet to be developed and/or obtained from third-party sources.
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 [now the 2015 edition], except in cases in which the Secretary finds that the code is not cost effective 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).
MHARR, during both meetings of the working group, has forcefully emphasized that the impact of any such standards on the purchase price of manufactured housing must be the first and primary consideration of any analysis, given: (1) the fact that there is no “life-cycle” and, therefore, no life-cycle energy savings, for consumers excluded from homeownership in the first place by regulation-driven purchase price increases; (2) the recognized and protected status of manufactured housing as “affordable” housing under federal law; and (3) the latest research (detailed in MHARR’s memorandum of August 21, 2014, “Consumer Exclusion Numbers Vindicate MHARR Objections to HUD/Contractor Regulatory Expansion”) showing the extreme sensitivity of the manufactured housing market to purchase price increases. This is especially the case – and amplified in its importance – by the recent significant increase in HUD’s certification label fee and impending regulatory compliance cost increases stemming from HUD’s final implementation of expanded in-plant regulation and expanded and more frequent Subpart I record reviews (see, MHARR’s August 14, 2014 memorandum, “Sobering Wake-Up Call for HUD Code Manufacturers on Expansion of Unnecessary and Costly Regulation,” following the HUD/Monitoring Contractor/IPIA conference call of August 12, 2014).
MHARR’s representative thus stressed that the work of the DOE group, at its core, is not a bland technical or engineering exercise, but rather an urgent matter of policy and people – i.e., not excluding millions of Americans, especially families at the lower end of the economic spectrum — from the only type of homeownership that they can afford on their own without costly government subsidies.
MHARR further asserted that an analytical and rule structure making purchase price impact the first and primary factor could be established by the working group because: (1) EISA itself lists the purchase price impact of any new standards as the first factor to be considered in evaluating the cost-justification of each element of the 2015 IECC, prior to “life cycle construction and operating costs;” (2) EISA contains no language stating that life-cycle costs should take precedence over purchase price impact; and (3) DOE’s Office of General Counsel (OGC) opined during the meeting that it would be up to the working group to define “affordability” for purposes of any recommended standards. MHARR will, therefore continue to press for proper analysis and consideration of purchase price impacts on the mainly lower and moderate-income consumers that HUD Code manufactured housing serves today.
2. PRESENTATIONS
In addition to an overview of the 2015 International Energy Conservation Code (IECC) and various compliance mechanisms allowed by the IECC (i.e., “performance path,” “prescriptive path” and “Energy Rating Index path”) that will be further evaluated, there were three significant presentations during the meeting. The first was a synopsis and explanation of a “life-cycle cost” analysis being developed by a DOE contractor. Under questioning by MHARR’s representative, it was disclosed that this analysis: (1) does not account for the direct costs of energy conservation measures to either manufacturers or consumers; (2) does not account for collateral manufacturer and purchaser costs associated with energy conservation measures (e.g., costs related to address the need for increased air exchange and moisture/condensation issues attributable to such measures); and (3) does not account for the “societal” (and industry) economic costs of the potential exclusion of large numbers of lower and moderate-income consumers from the only type of home ownership that they can afford. While a DOE representative indicated that such costs would be accounted for – and such costs were identified in discussion of one of the subsequent “strawman” presentations (see, below) — it remains to be seen specifically how and when that will be accomplished.
The second significant presentation was a “strawman” analytical model (i.e., a non-binding discussion paper) offered by the Systems Building Research Alliance (formerly the Manufactured Housing Research Alliance, an organization with a preponderance of Manufactured Housing Institute members and staff serving on its board of directors), which is represented on the working group. Most significantly the “strawman” as originally presented, while recognizing the relevance of purchase price impacts, was based on “guiding principles” that would have made purchase price impacts secondary to “life-cycle” cost impacts, stating:
“Decisions based on [life-cycle costing] should be tempered by the goal of having the standards not become a roadblock to qualifying families for a loan as a result of increased first [i.e., purchase] cost[s]. Provision should be made for adjusting the requirements if and when it is demonstrated that such standards will significantly reduce the roles (sic) of loan qualifying households.”
(Emphasis added).
MHARR objected to any language that would make purchase price cost impacts secondary to life-cycle cost impacts and also objected to this specific language on the ground that, among other things, it would effectively shift the burden to consumers (and those representing consumers) to essentially prove a negative, i.e., that the purchase price impact of energy conservation measures would not “significantly” reduce the number of households able to qualify for a manufactured home purchase loan.
As a result of these objections, the “guiding principles” language was withdrawn, subject to further discussion of “affordability” later in the process.
In all of these deliberations, MHARR has made it clear that manufacturers want to maintain the fundamental purchase price affordability of manufactured housing that is so critical to the mostly lower and moderate-income consumers that manufactured housing serves, rather than passing the increased cost of “one-size-fits-all” energy measures and related regulatory compliance costs to consumers and pursuing a higher-income market, as some members of the DOE working group actually urged. Indeed, one member referred to consumer “winners” and “losers” as a consequence of the work group process, while urging the industry to pursue a higher-end clientele. While rejecting outright the casual dismissal of the consumers that HUD Code housing currently serves, MHARR and other working group members pointed out that a mandatory “standard” is not required for the industry to provide any type of energy efficiency package that a consumer wants now, as enhanced energy efficiency packages are already available, on an optional basis, as a matter of consumer choice for any given buyer.
The third significant presentation was a different, purely technical “strawman,” offered near the end of the meeting by working group and Manufactured Housing Consensus Committee (MHCC) member (and persistent energy standards advocate) Michael Lubliner, based on the existing three HUD energy zones. This simplified, bare-bones discussion draft will be further analyzed for its cost and feasibility.
3. CONSULATATION WITH HUD
Insofar as EISA requires DOE “consultation” with HUD (which in turn may call upon the MHCC) regarding any standard, MHARR asked DOE about the status of any such consultation and DOE’s plans going forward. The DOE-OGC indicated that it had been in contact with HUD-OGC regarding the nature of such consultations when (and if) the work group submits a recommendation to the DOE Appliance Standards and Rulemaking Advisory Committee (ASRAC) and ASRAC decides to move forward. DOE further stated that it would keep the work group apprised of further contacts and discussions regarding such mandatory “consultation.” MHARR has maintained both within the working group, and ever since the passage of EISA – in communications with the highest-level officials at both agencies — that consultation with HUD must take place at a meaningful stage in the proceedings, not as an afterthought, and must include the MHCC. MHARR will continue to press DOE for full compliance with this requirement.
4. FUTURE MEETING SCHEDULE
The working group confirmed its previously-scheduled meetings for September 9-10, September 22-23 and October 1-2, 2014 (if needed). No new meetings were scheduled during the group’s second session. Various subgroups established at the first and second working group meetings will convene, as needed, on their own schedule.
MHARR will continue to fully participate in all working group meetings and will provide updates on these important deliberations as they take place, going forward.
