U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT* L L * WASHINGTON, D.C 20410-6000

((I( CI (H 11(1 ICY IS VII OVt.II I

III %I ASCII

October 26, 2018

MEMORANDUM FOR: Teresa B. Payne, Acting Administrator, IIABC

THROUGH: Todd t”RIrdson General Deputy Assistant Secretary, R

FROM: Calv%ohnson, Deputy Assistant Secretary for Research,Evahf’ation and M9nitoring, RR

Adam-1ihler, Acting Director, Affordable Housing Research andTechnology Division, RRT

SUBJECT: Evaluation of Cost Figures Found in Department of Energy’sNODA Packages-Draft Results July 2018

This memorandum (memo) is in response to a request from HUD’s ManufacturedHousing Consensus Committee (MHCC) for the Office of Policy Development and Research(PD&R) to evaluate cost figures from the Department of Energy’s (DOE) Notice of DataAvailability (NODA)’; it describes PD&R’s review of the applicable data and supportingdocumentation, and specifically, does not object to DOE’s cost figures.

This memo is organized as follows:

Section I provides context relating to MHCC’s request for PD&R support in reviewingthe cost figures described within DOE’s NODA. Section II provides a historical perspective ofHUD and DOE’s roles in regulating energy conservation in manufactured housing. Section lITdescribes PD&R’s process of reviewing relevant data and contacting individuals knowledgeableof the subject matter. Section IV describes PD&R’s response to MHCC’s request for support inreviewing DOE’ s cost figures.

MHCC Request for PD&R Support

On September 11, 2018, MHCC met in Washington, D.C. to review DOE’s EnergyConservation Program: Energy Conservation Standards for Manufactured Housing, Notice ofData Availability Request for Information. As a result of their review and deliberation, MHCCmade the following request to PD&R:

Federal Register. ‘Energy Conservation Program: Energy Conservation Standards for Manufactured Housing; Notice of dataavailability; request for information’, 3 Aug. 201$. hitns://www.reeulations.gov/documeot?D=EERE-2009-BT-RC-002 1-0203

MHCC requests HUD ‘s PD&R to submit a document to the MHCC which includescomparable cost figures similar to EERE-2009-BT-BC-002] [NODA Packages-DraftRestttts July 2018] (Appendix A) by November 14, 2018.

II. Regulating Energy Conservation in Manufactured Housing

Section 413 of the Energy Independence and Security Act of 2007 (EISA)2 requires DOEto establish regulation standards for energy conservation in manufactured housing. Thisauthority specified that the established standards must be based on the most recent version of theInternational Energy Conservation Code (IECC) (including supplements), except in cases inwhich the IECC is found to not be cost-effective, or a more stringent standard would be morecost-effective. Based on the impact of the IECC on the purchase price of manufactured housingand on total life-cycle construction and operating costs.3

Prior to Section 413 of EISA, HUD regulated energy conservation for manufacturedhousing under 24 CFR 3280, Subpart F — Thermal Protection.4 This authority was establishedunder the Manufactured Home Construction and Safety Standards (MHCSS), which mandatesfederal standards for the design, construction, and installation of all manufactured (HUD-code)homes.

III. Reviewing Relevant Data and Contacting Individuals Knowledgeable of ManufacturedHoct sing

In response to MHCC’s request, PD&R staff conducted a review of relevant documentsand background materials ftom the Energy Conservation Standards for Manufactured Housingpublic comment webpage5 and contacted multiple individuals with expertise in manufacturedhousing related-energy matters.

The information collected in Appendix A was assembled by DOE with the assistance ofmembers of the Appliance Standards and Rulemaking Federal Advisory Committee (ASRAC)Manufactured Housing Working Group (Working Group), which was formed to provide DOEwith advice and recommendations related to the development of the Energy ConservationStandards for Manufactured Housing.

In July 2014, the Working Group was established and comprised of 22 stakeholders fromthe manufactured housing industry, which included one member from ASRAC and one DOErepresentative (see Appendix B). The Working Group convened six times between August andOctober 2014 to negotiate and successfully reach consensus on proposed federal standards forenergy conservation in manufactured housing. For the purposes of these meetings, DOE definedconsensus as at least a two-thirds “supermajority” in favor of a recommendation.

2 U.S. Government Publishing Oflice, ‘Public Law 110-140: Energy Independent and Security Act of 2007 (121 Stat. 492; Date:12/19/07),’ https://www.po.oo’/fcIsys/nk&PLAW- II Opubl I 40/pdf/PLAW- II Opubl I 40.pdI.

U.S. Department of Energy, ‘Energy Efflciency Standards for Manufactured Housing,’ https://www.cnergyeodcs. am/energycIticie1cu-%andards—rnanutIctttredlousi in.

U.S. Government Publishing Oflice. ‘24 CFR 3280— Manufactured Home Construction and Safety Standards, Subpart F —

Thermal Protection,’ hfl://ww.epo.aov/tdsys’pkCFR-20l 0-titIe24-vol5/pdf/CFR-20 I 0-title24-voI5-part328D-suhparrF.pdf.U.S. Regulations, ‘Energy Efficiency Standards for Manufactured Housing,’ httns://www.reuIations.gpv/doekci?t)EERE

2f)0)-l3T-RC-f)O2 I.

The elements of the energy conservation measures and cost data were developed withinput from the Working Group. Specifically, the cost data were derived from a survey of 20manufactured housing producers, ranging in size and location. Although the cost data wascollected in 2014, DOE’s analysis included multiplicative factors that accounted for inflation.

IV. Review of DOE Cost Figures

As stated, the basis for DOE’s cost figures was a survey of producers. PD&R staff wasnot able to recreate the survey conducted by the Working Group given the short timeframeprovided by MHCC. In order to conduct an independent survey, PD&R must abide by therequirements of the Office of Management and Budget’s (0MB) Paperwork Reduction Act(PRA), which requires multiple public notices and has a review period that lasts approximatelysix to nine months. However, PD&R believes that it is unlikely that the findings of anindependent survey would differ significantly from the cost data collected by the WorkingGroup. PD&R notes that the cost packages assume national average sales tax and property taxrates; however, changing these values to more localized parameters would minimally affect theanalysis. Consequently, PD&R does not object to the cost figures provided by DOE.

Although the request from MHCC was to analyze the cost figures used by DOE, PD&Rhas also reviewed the savings associated with the analysis associated with energy efficiencypackages. DOE used a life-cycle cost (LLC) analysis6 to determine the cost effectiveness of therequirements in the proposed rule and compared the results to the existing federal requirements(baseline) for manufactured homes found within MHCSS. DOE’s effort consisted of annualizingthe costs, including the added financing costs of the energy efficiency packages, and averagingthe savings based on the prevalence of different forms of heating within regions. The analysistelies on assumptions about the inflation rate of commodities, interest rates on various types ofloans, and the shares of home purchasers who finance their housing with either chattel or realestate loans, or cash.

Broadly speaking, PD&R does not object to the methodologies and assumptions usedwithin DOE’s LLC and annualized spreadsheets. However, PD&R notes two areas where DOEhas used a static assumption in place where more dynamic approaches would add value. Forone, the energy use predicted by each improvement package is fixed and does not appear to varyin response to the improvements themselves. Further review of the relevant behavioral literatureand modeling process used to produce the energy consumption rates would be necessary tovalidate this assumption. Additionally, the regional shares of various heating types are fixed.Given that the analysis suggests that homeowners with certain forms of heating will save moremoney as a result of the efficiency packages, it is worth investigating whether the share ofowners with each source would change over time in response to the rule.

In conclusion, PD&R concurs with the methodology and resulting cost figures. PD&Rremains willing to assist HUD’s Manufacture Housing Program as DOE continues its rulemakingprocess.

U.S. Department of Energy. ‘Manu_HousingNODA_LCc_20 8_07_27.xlsm.’ https://www.regulations.gov/docket?D=EERE2009-ET-BC-002 I

Appendix A — Manufactured Housing NODA Packages — Draft Results July 2018

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$975.6

1

$4,1

15

$51,

063

$59,

240

$936

.70

$153

.87

$81.

99

11.2

$6

09

.91

$8,8

00

$9

9,0

62

$1

,38

8.4

4$233.4

0

$1

26

.84

10.8

$9

59

.35

$1

2,9

86

$25,

302

$4

65

.47

$350

.43

$3

14

.71

2.8

$3

,11

3.9

4

$4,3

94

$54,

521

$6

5,5

29

- $99

3.7

3

$4

24

.80

$3

48

.54

4.3

$3

,34

2.4

3

$9,3

30

$97,

485

$1,4

77.6

9

$4

41

.14

$327

.73

6.2

$3,0

04.7

1

$1

3,8

08

$109,2

00

$161,1

40

$64

$796

$146

$1,8

16

$224

$2,7

80

$115

,779

$171

,350

$60

$743

$145

$1

,80

2

$224

$2,7

82rg

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Appendix B - ASRAC Manufactured Housing Working Group Membership

Working GroupMember Company

Joseph Hagerman Department of EnergyJohn Caskey ASRAC, National Electrical Manufacturers AssociationKeith Dennis National Rural Electrical Cooperative AssociationIshbel Dickens National Manufactured Home Owners Association (NMHOA)Scott Drake East Kentucky Power CooperativeStacey Epperson Next Step NetworkMark Ezzo Clayton Homes, Inc.Richard Hanger Housing Technology and StandardsBert Kessler Palm Harbor Homes, Inc.Eric Lacey Responsible Energy Codes AllianceEmanuel Levy Systems Building Research AllianceMichael Lubliner Washington State University Extension Energy ProgramRob Luter Lippert Components, Inc.Richard Potts Virginia Department of Housing and Community DevelopmentRobin Roy Natural Resources Defense CouncilManuel Santana Cavco IndustriesPeter Schneider Efficiency VermontLois Starkey Manufactured Housing InstituteDavid Tompos NTA, Inc.Lowell Ungar American Council for an Energy-Efficient EconomyMichael Wade Cavalier Home BuildersMark Weiss Manufactured Housing Association for Regulatory Reform