Better Homes, Better Loans: Better Business

Stacey Epperson

History shows that it doesn’t pay to stand still. While many may scoff at the idea that innovation is taking place within the manufactured housing industry, it truly is.

At its core, manufactured housing revolutionizes the traditional concept of homebuilding. The economies of scale and volume created allow the industry to build better, faster and at a lower cost than is possible using traditional building methods.

In Kentucky, manufactured homes represent an important source of affordable housing for low- and moderate-income (LMI) families, accounting for 14 percent of the state’s overall residential stock. However, an estimated 85,000 of these homes were built before 1976, when the federal building code for manufactured homes (the HUD Code) went into effect.

This aging and deteriorating housing stock presents many concerns for families living in these homes (see Figure 1), including energy costs that can make up an excessive portion of their household budget. A report by the American Council for an Energy-Efficient Economy (ACEEE) found that owners of manufactured homes typically spend twice as much on energy as owners of site-built homes,1 paying $200-$400 for utility bills in the summer and $400-$800 in the winter.

Figure 1

FIGURE 1: Pre-HUD Code mobile home in Kentucky. Source: Next Step.

Yet over the last five years, less than one percent of the 2,000 manufactured homes sold each year in Kentucky were certified as ENERGY STAR homes. Those without this certification are more expensive to own and operate and, as a result, place undue strain on LMI families who could benefit most from energy cost savings.

Despite these challenges, manufactured homes have the potential to be more energy-efficient than traditional site-built homes—and at a lower cost—by using high-efficiency building techniques and by maximizing the industry’s economies of scale and volume purchase.

Manufactured housing is positioned to be a leader in energy efficiency. New products are being tested and introduced to the market that truly raise the bar. Some innovators in the field include Modular Lifestyles, Systems Building Research Alliance and Next Step® Network members (e.g., Community Frameworks and Affordable Housing Alliance). (See Figure 2.)

Figure 2

FIGURE 2: High-performance manufactured home prototype in Bothell, Wash., developed by Community Frameworks, a Next Step Network member, in partnership with Habitat for Humanity–King County. Source: Habitat for Humanity.

However, widespread adoption of energy efficiency in the marketplace has not been achieved; we hope to change that with a new program called SmartMHSM KY. (See Figure 3.)

Figure 3

FIGURE 3: Source: Next Step

Over the past year, Next Step Network convened a diverse group of stakeholders—the SmartMH KY Alliance (the Alliance)—to investigate this potential and present a solution. The Alliance is a partnership of the manufactured housing industry, lenders, retailers, utilities, nonprofits and public stakeholders. Partners include:

  • Kentucky Housing Corporation (KHC)
  • CU Factory Built Lending
  • Systems Building Research Alliance
  • Kentucky Manufactured Housing Institute
  • Next Step Network

The program developed with the Alliance is two-fold; it includes ENERGY STAR upgrades on manufactured homes and quality financing options for buyers.

The upgrade program is administered by the Systems Building Research Alliance. Backed by incentives from the East Kentucky Power Cooperative, Tennessee Valley Authority and Kentucky Housing Corp., participating factories are offering ENERGY STAR upgrades on manufactured homes to Kentucky homebuyers at or near zero cost.

Homeowners need this program, for reasons beyond the inevitable move toward increased energy efficiency. ENERGY STAR homes bring much-needed financial relief, saving homeowners about $800 in energy costs annually. For families replacing pre-HUD Code mobile homes, savings are projected to be even higher—approximately $1,800 per year. In addition to these savings, the homes are comfortable, quieter, require less maintenance and have a higher resale value. (See Figure 4.)

Figure 4

FIGURE 4: ENERGY STAR manufactured home in Morehead, Ky., developed by Frontier Housing, a Next Step Network member. Source: Next Step.

The second part of the Alliance program includes quality financing products for buyers of ENERGY STAR manufactured homes. Next Step is partnering with the Alliance to identify loan products that meet their mission; benefits include good rates, better terms and assistance with a down payment or utility costs. Currently, SmartMH loans are available to homebuyers through KHC and CU Factory Built Lending at partnering home retail centers.

Homeowners who finance their ENERGY STAR manufactured homes with SmartMH loans have the potential to gain even more savings, which enhances their homeownership. Ultimately, this will make them better homeowners who can improve their bottom line and increase their cash flow. Any extra money can be spent where it’s most needed (e.g., groceries, health care, education), rather than on exorbitant heating bills or costly mortgage payments.

The goal of the Alliance is market transformation, increasing access to ENERGY STAR homes with better loans across Kentucky. As previously noted, less than one percent of manufactured homes coming into the state are ENERGY STAR-certified. The Alliance hopes to increase that to 50 percent in two years by upgrading 1,000 homes, 15 percent of which are anticipated to be replacements of aging pre-HUD Code mobile homes. Of those 1,000 homes, it is projected that about half will be financed with SmartMH loans.

The impact in Kentucky when this goal is met will be huge. Each year, families in these ENERGY STAR manufactured homes will collectively save nearly $1 million on their energy costs, and the families who finance their homes with SmartMH loans will collectively save up to $2 million in additional interest savings. The environment will also be positively impacted, with greenhouse gas emissions reduced by 2,250 tons annually.

In the end, it’s all built from a simple formula: Better homes plus better loans equals better business.

Stacey Epperson is the president and CEO of Next Step Network. Next Step® is an innovative social venture that mobilizes a national network of nonprofits to provide affordable housing solutions tailored to the needs of their communities. This proven system—Manufactured Housing Done Right—connects responsible financing, comprehensive homebuyer education and a system for delivering high-quality, sustainable manufactured housing at scale. Next Step is the sponsoring partner of the SmartMH KY Alliance. To learn more about SmartMH KY, visit


  1. Talbot, Jacob. Mobilizing Energy Efficiency in the Manufactured Housing Sector, American Council for an Energy-Efficient Economy, 2012, [back to text]


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