Sofie E. Miller
Manufactured homes (MH) —formerly known as mobile homes—provide affordable housing for many elderly and low-income households throughout the U.S., particularly in the South and in Western states. Recently, the Department of Energy (DOE) proposed new energy efficiency standards that would mandate building requirements for manufactured housing in four U.S. climate zones. If finalized, the standards would increase the price of manufactured homes in exchange for reduced long-term operating costs, primarily reductions in heating costs. However, this tradeoff may not make sense for many MH owners who live in climates where heating cost savings don’t add up. In addition, increased efficiency is unlikely to pay off for low-income MH owners, many of whom are financing their homes at much higher interest rates than DOE assumes.
In 2014, MH accounted for 6% of all occupied homes in the U.S., though many states have higher rates of MH ownership—particularly in Climate Zones 1 and 2 where the price increases that DOE projects as a result of its rule are largest. These Climate Zones include Arizona, Texas, Louisiana, Alabama, Mississippi, Florida, Georgia, and South Carolina, where rates of MH ownership range from 9% in Arizona, Florida, and Georgia to as high as 17% of all occupied homes in South Carolina, the highest in the nation.
The regional distribution of effects means the Southern states will bear the highest costs. This is particularly important because the South has emphasized manufactured housing as a means to increase homeownership, particularly for low-income residents. What’s more, because they live in warm climates, households in these regions aren’t likely to be able to recoup the higher upfront price with savings from reduced heating costs. This leaves many households in these regions bearing more costs than benefits as a result.
The regions in these Climate Zones also have much higher poverty rates than their northern counterparts: according to our analysis, consumers are likely to bear net costs as a result of the standards in Miami, Houston, and Charleston, S.C., where poverty rates are 29.9%, 22.9%, and 19% respectively. For reference, the national poverty rate is 14.8%. Because this proposed standard would overwhelmingly affect low-income and elderly households, DOE should take special care to evaluate the distributive impacts of its rule and any potential regressive effects.
One way that DOE may be overestimating the benefits of its proposal is by disregarding resale market obstacles that prevent MH owners from recouping higher upfront costs from increased efficiency. For example, DOE calculates large benefits for MH owners by assuming that homeowners will save money on their utility bills for 30 years after the purchase of their manufactured home. While most MH owners live in their homes for less than half the time, they should be able to recoup those higher upfront costs when they resell their manufactured homes… right? Maybe not: MH owners looking to sell their units find so many obstacles in the resale market—from home depreciation to difficulty financing a used MH—that many abandon their homes instead of attempting to resell.
In addition to these concerns, the higher upfront costs will price many consumers—particularly low-income consumers—out of the market for homes entirely. For example, there are already a variety of manufactured homes on the market, including energy efficient homes. However, the higher cost of more efficient units already makes them inaccessible to many potential customers. How much less accessible will housing be if DOE imposes mandatory, across-the-board increases in efficiency on all units?
In proposing this rule, DOE is fulfilling its statutory obligation to regulate energy efficiency for manufactured homes. However, the law allows DOE to set a different standard if these prove not to be cost-effective. In this case, DOE’s proposal doesn’t pass the cost-efficacy test. Instead, it would impose net costs on many MH consumers throughout the U.S.—particularly on poorer households in the South.