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Climate-Minded Housing Energy Efficiency Rule Finalized (1)

May 18, 2022, 6:42 PMUpdated: May 18, 2022, 7:26 PM

The Energy Department finalized on Wednesday a new energy conservation standard for manufactured homes, a sweeping rule that drew criticism from efficiency advocates who wanted a stronger update and from industry who argued it would worsen the country’s affordable housing crisis.

The standard comes as the department faces pressure from advocates to use efficiency standards as a tool to fight climate change and save consumers money. The rule will reduce carbon and methane emissions equivalent to the annual emissions of 11.7 million homes over 30 years, the department said.

The department’s energy conservation team is also confronting a Trump-era backlog of efficiency standards, asking Congress for a nearly 39% increase in funding for fiscal year 2023 to address an increased workload.

The final rule on manufactured homes puts the office at the center of a debate with echoes across broader climate policy: how to improve energy standards without hiking costs for industry and upfront costs for consumers.

Manufactured homes, which are built in factories rather than on housing sites, account for about 9% of annual U.S. single-family home starts. They include mobile homes built after 1976.

Raise Prices?

Manufacturers warned the department’s rule will raise housing prices just two days after the White House announced an affordable housing plan that includes incentives for people to purchase manufactured homes.

“Manufactured housing is by far the most affordable home-ownership option in America—and the industry is currently building quality affordable homes that are already energy efficient and resilient,” said Lesli Gooch, chief executive officer of the Manufactured Housing Institute, an Arlington, Va.-based trade association.

“Instead, the significant cost increases to actual manufactured home-buyers far exceed the speculative energy savings the rule claims will take place,” Gooch said.

Efficiency advocates, meanwhile, objected to the department’s “tiered” model, which allows small, single-section homes to escape more stringent standards that larger homes built with multiple sections have to follow.

Standards for single-section homes are barely stronger than efficiency standards last updated in 1994, allowing for thin insulation or single-pane windows, said Steven Nadel, executive director of the American Council for an Energy-Efficient Economy.

“This rule gives manufacturers the green light to keep building models with the same problems,” Nadel said. “It’s going to leave many of the lowest-income households paying painfully high utility bills for even more years to come. Going forward, the administration certainly shouldn’t make a habit of letting manufacturers make more-wasteful homes and products for lower-income people.”

Savings Outweigh Costs?

About 6.8 million manufactured homes are used as residences, with more than 105,00 new manufactured homes shipped in 2021.

Manufactured homes are built to a code administered by the Department of Housing and Urban Development, and Congress in 2007 required the Energy Department to update the energy standards in the HUD code. The department’s efforts stalled for more than a decade as officials negotiated a standard with industry and advocates.

The DOE’s final rule states consumers save hundreds of dollars on their annual utility bills and slash carbon emissions by 80 million metric tons, which is equivalent to the energy use of over 10 million homes in one year. Once implemented, the new efficiency standards, which include updates to insulation and sealing requirements, will help bring the country closer to reaching President Joe Biden’s goal of net-zero emissions by 2050.

The DOE estimated the new standards would cause the national average sale price to increase 1.2% for single-section homes and 3.9% for multiple-section homes. That increase in price will be more than offset over time by annual energy savings of $177 for single-section home residents and $475 for multiple-section home residents.

‘Immediate’ Housing Crisis

Manufactured homes are produced at 139 factories across the country and shipped to housing sites, making certain efficiency measures difficult, Gooch said.

For example, requirements around the use of foam insulation will make assembly and transportation much more costly and labor-intensive, Gooch said. Factories would have to totally shut down to redesign their production lines to meet a one-year compliance deadline, causing an “immediate affordable housing crisis,” she told the department in Feb. 22 comments.

On Wednesday, the group said it would focus on pressuring HUD to adopt a different standard that would account for the unique qualities of a manufactured home.

Congress also has gotten involved. Rep. David Kustoff (R-Tenn.) introduced the Manufactured Housing Affordability and Energy Efficiency Act (H.R. 7651) to require the Energy Department to document that the standards are cost-effective based on the impact of home-buyer price and cost increases. The bill, co-sponsored by two Republicans, requires the department to consult with HUD and that HUD adopt the new standards.

HUD declined to say whether it would seek to adopt a different standard than the one DOE finalized Wednesday.

“Since DOE began this rulemaking effort, HUD has been engaged with DOE and has championed affordability as central to the considerations while supporting energy and climate goals,” a HUD spokesperson wrote in an email. “HUD looks forward to continued work with DOE and industry partners as we all seek to ensure that manufactured housing remains affordable and energy efficient.”

(Updated with additional comment from HUD in final two paragraphs.)

To contact the reporter on this story: Daniel Moore in Washington at dmoore1@bloombergindustry.com

To contact the editors responsible for this story: Chuck McCutcheon at cmccutcheon@bloombergindustry.com; Zachary Sherwood at zsherwood@bloombergindustry.com