Issue link: https://read.dmtmag.com/i/696291
JULY 2016 12 THE JOURNAL DOE's Assault on Manufactured Housing With Help From Industry Enablers MHARR VIEWPOINT BY MARK WEISS With a measly 38,000 new jobs produced by the U.S. economy in May 2016, economic growth during the first quarter of 2016 at a pa- thetic 0.8%, home ownership rates at historic- low levels and the Administration in Washington bragging about killing-off entire American indus- tries (think coal) in the name of "global climate change," the U.S. Department of Energy (DOE) has now launched an all-out assault on – you guessed it -- manufactured homes. That assault, in the form of so-called "energy conservation stan- dards" for HUD Code homes (yet to be officially published as a proposed rule in the Federal Regis- ter as of the publication deadline for this article) will needlessly add thousands of dollars to the cost of new manufactured homes, drive millions of po- tential purchasers out of the market, kill-off con- sumer free choice and replace it with a coercive big-government mandate, and – by DOE's own admission – seriously harm the industry as it strug- gles to recover from record-low production levels. And, if that were not enough, this catastrophe in-the-making has been advanced at every step of a long and scandalous process, by the industry's self-proclaimed "preeminent" national trade asso- ciation. The numbers on this proposed rule – even the ones acknowledged by DOE itself – are (and should be) alarming. By DOE's own admission, the proposed standards would add up to $2,422 to the retail price of a single-section manufactured home (with a national average of $2,226) and up to $3,748 to the cost of a new multi-section man- ufactured home (with a national average of $3,109) – for non-"life-safety" energy measures that are already available to homebuyers who want them as optional features. These figures, however, are drastically under- stated. First, data compiled by MHARR shows that average retail-level price increases will likely be closer to $4,000 for single-section homes and $6,000 for multi-section homes. Second, as MHARR has consistently emphasized -- and as DOE acknowledges in its proposed rule – these projected cost increases do not include additional amounts that will inevitably be passed to con- sumers for re-design, certification, testing, en- forcement and other regulatory compliance costs, all of which will be substantial, particularly with the life-of-the-home Subpart I notification and correction requirements of the HUD regulatory system. What kind of impact will this have on the man- ufactured housing market? According to an analysis by the National Association of Home Builders (NAHB) presented to the DOE manufactured housing "Working Group" (the only such analysis presented to that group), "in- creasing the price of new single manu- factured homes by $1,000" would "disqualify 347,901 households from being able to afford [that] home. Similarly, if the price of new double [section] manufactured home[s] rises by $1,000, 315,385 households will be priced out of the market." From there, it does not take a math wizard to calculate the likely market impact of a retail price increase of $6,000, and more. Mil- lions of potential purchasers will be excluded from the HUD Code market and from the American Dream of home ownership altogether. Of course, DOE predictably maintains that these draconian price increases will be offset by net energy savings to consumers over the "life-cycle" of a home. But, just as predictably, DOE ignores the fact that there is no "life-cycle" if the poten- tial homebuyer cannot buy the home to begin with, because of the significantly higher up-front costs the rule will impose. Somehow, though, DOE's eye-glazing economics modelling fails to miss this basic fact and fails to account for it as a negative consumer impact. DOE further concludes that consumers -- pre- sumably those not excluded from the market alto- gether -- will recover increased home purchase costs with energy "savings" realized over 7.1 years in the case of a single-section home and 6.9 years in the case of a multi-section home. Yet, as DOE admits (and putting aside for now the fact that many homebuyers do not remain in their home for seven years or more) the "costs" estimated in the proposed rule are not the full and final costs that will be passed to consumers, as the current pro- posal – as previously noted – does not include cost estimates for testing and enforcement (the specifics of which have not been developed yet, and which DOE specifically excluded from discus- sion by the manufactured housing "Working Group"), and all other aspects of compliance with HUD's chaotic, contractor-driven regulatory sys- tem, among other things. DOE's de- ceptive consumer-level cost-benefit analysis, therefore, compares "apples to oranges," netting out all conceiv- able "savings" against only part of the costs (using numbers that again, are already significantly understated) that will be added to the price of the home. As a result, there is no basis, whatsoever, for DOE to conclude – in connection with this rule - - that consumer benefits exceed costs, because the full costs of the proposed standards (even using DOE's own bogus numbers) are not known and cannot be known until DOE settles on a compli- ance and enforcement system, which – it admits – has not occurred. Nor can a cost-recovery period be accurately calculated because costs -- again – are not known and not fully quantified as of now, and cannot even be accurately estimated with so many unknowns. Indeed, the attempt to pass this off as any kind of legitimate cost-benefit analysis is itself disingenuous and deceptive. And what about the industry? Well, DOE, in a rare moment of candor, actually admits that its proposed energy rule will harm the industry. Using its convoluted "discounted industry net present value" calculation method -- based on so many unverified assumptions that it could have been drawn out of a hat -- DOE acknowledges that the total industry would lose as much as $36.8 million in "net present value" (in 2015 dollars) under the proposed rule. Like its other cost calculations, however, this appears to be wildly understated. For example, DOE concludes that its rule would cost each HUD Code manufacturer a mere $37,500 in "conversion costs" to upgrade to a rule that exceeds standards for multi-million homes in all but four states, a figure that is laughable on its