Washington, DC—Low-income residents of manufactured homes would have significantly reduced housing costs if the Biden administration strengthened proposed energy efficiency standards for the homes, according to a report today by the American Council for an Energy-Efficient Economy (ACEEE). The pending plan from the Department of Energy (DOE)—which does little to increase nearly 30-year-old insulation requirements for many manufactured homes—failed to consider how stronger standards would benefit many lower-income residents and overestimated the costs of energy-efficient construction, according to the report.
These homes (sometimes called mobile homes) are a critical type of affordable housing—more than half of residents have incomes under two times the federal poverty level—but they often use large amounts of energy because of limited insulation and outdated windows and heating equipment. Energy costs are nearly twice as high per square foot in these homes compared to site-built homes, and a quarter of their residents spend more than 10% of their income on energy costs, ACEEE has found.
DOE proposed long-overdue efficiency standards for the homes in August 2021, but its “primary” option would leave models with a manufacturer’s suggested retail price under $63,000 with requirements that are little stronger than the 1994 rules in place today, while residents of more expensive homes would benefit from significantly stronger standards. An “alternative” option would require the stronger standards for all manufactured homes but still not require technology like efficient, electrified water heating.
ACEEE’s report shows that DOE’s analysis accompanying its proposal only fully considers the benefits for the original owners, not all residents. Using revised assumptions—primarily based on government data—ACEEE finds that DOE’s stronger “alternative” option would generate $900 more in total net savings for the average single-wide home than the primary proposal would. And it finds that an even stronger standard, requiring one of several options such as an efficient heat pump water heater (which DOE has not considered), could increase the life-cycle savings by approximately $2,000 beyond those of DOE’s alternative (to $5,544).
“If DOE goes with its primary proposal, many of the lowest-income residents of manufactured homes will pay the price with high energy bills for decades to come. There’s nothing equitable about leaving the lowest-income residents with less insulated homes and exorbitant energy costs. The department suggested the weaker plan would help with affordability, but we found the opposite,” says Aimee Bell-Pasht, senior research associate for federal policy at ACEEE and lead author of the report. “Even DOE acknowledges that the stronger alternative would save residents more money in the long run, but when we updated the department’s assumptions, we found it ought to be setting a stronger standard still.”
Figure: Net housing cost savings for a single-section home at different standard levels compared to a HUD Code home by HUD climate zone over 30 years. Climate Zone 1 is in the South, Zone 2 in the middle, and Zone 3 in the North. The estimates are based on DOE’s analysis but have updated financing and cost assumptions.
To measure the impacts on housing affordability—a concern DOE cited in justifying its primary proposal—ACEEE calculated the number of manufactured home residents who would still face high energy burdens (energy bills exceeding 6% of income) or high housing burdens (total housing costs exceeding 30% of income) under each standard. The report finds that the alternative proposal—strengthened with an efficient heat pump water heater requirement—would decrease housing burdens, slightly lowering the share of residents with high housing burdens from 31.8% to 30.9%. The stronger standard would also relieve nearly 1,000,000 households from high energy burdens, roughly 440,000 more than under DOE’s primary proposal.
The ACEEE report faults DOE’s assumptions in several areas:
· Missing impact calculations for low-income residents. DOE’s life-cycle cost analyses focus solely on owners (ignoring the one-quarter of residents who rent) and, in its 10-year analyses, focus only on a home’s first owner. This is a small subset of residents and typically not the lowest-income ones; ACEEE found that only 3% of low-income manufactured home residents own homes less than 10 years old. DOE’s approach fails to account for the benefits that stronger standards would create for all residents, including renters and second and third owners.
· Faulty assumptions on home loans. DOE assumes that all cheaper manufactured homes are purchased using chattel loans, a form of personal property loans that typically have higher interest rates than mortgages. This assumption raises the department’s projected cost of more efficient homes. Yet 2019 Census Department data show that 56% of manufactured home residents own their homes but do not have a loan; only 19% do (the remainder are renters). And according to a 2021 Consumer Financial Protection Bureau study, only about half of residents who have a loan have a chattel loan, and the median income of owners with mortgages and chattel loans is almost the same, despite DOE’s assumption that chattel loans are used primarily by lower-income residents.
· Questionable costs on efficient windows. When assessing the price of efficiency measures, DOE largely relied on prices that the manufactured home industry voluntarily reported in 2015, adjusted for inflation. Using these figures, the department assumed that more-efficient windows would cost multiple times what other government analyses have found, tilting the math against requiring them.
In each case, by using more-reliable assumptions, the report finds that the alternative standard or a stronger one would reduce overall costs even more than DOE has found and would better improve housing affordability for low-income residents than the primary option.
State or municipal building energy codes cover most new home construction, but the federal government regulates manufactured homes, which are made in facilities that may ship to multiple states. The Department of Housing and Urban Development sets a building code for the homes, but it has not updated the energy provisions since 1994.
Recognizing the need to reduce energy waste in these homes, Congress—in a bipartisan energy bill in 2007—directed DOE to develop and finalize a separate energy standard for manufactured homes by 2011. The Sierra Club sued DOE over its failure to publish a rule by the legal deadline; the department agreed in a settlement to publish a final rule by May 15, 2022.
In November 2021, attorneys general of 11 states and the City of New York supported the alternative proposal in comments to DOE and warned the department that finalizing a standard along the lines of its primary proposal would be in “violation” of the 2007 law.