Trailblazers '23: Clayton Powers Cost-Of-Ownership Game-Change

For sheer and lasting impact, it's the nation's biggest private-sector, single-family for-sale housing story of the year so far ... by a long shot.

Why?

Because it has to do with "pricing in" households at scale for an opportunity at homeownership. This, precisely a moment homebuilders' asking prices, mortgage rates, insurance rates, and, energy costs together conspire to price more and more would-be homebuyer prospects out of the ballpark.

In other words, it's a story more about households and their capability to become homeowners than anything else, at an instant all eyes have been glued to supply constraints and their follow-on effects.

That news comes with Clayton's announcement that 39 of its manufacturing facilities around the nation have been tooled for its teams to assemble and distribute homes certified to meet US Department of Energy’s Zero Energy Ready Home™ specs.

Such excitement built up among team members across our organization," Keith Holdbrooks, CEO and Executive Chairman of Clayton Home Building Group tells The Builder's Daily. "From the standpoint of consumers and our increasing focus ‘consumer for life' this ability to impact their cost-of-living so positively as part of the homeownership experience is the thrill of a career for the entire team."

Here's the top line narrative impact, from a statement:

Remarkably energy-efficient, eBuilt™ homes can help homeowners save up to 40-50% on their annual energy costs with the potential to save thousands of dollars in energy costs throughout their homeownership journey. eBuilt™ homes are also built to accommodate a renewable solar energy system if the homeowner chooses to add after purchase for even more savings."

Taken together, housing's affordability crisis and the late-pandemic-era cost-of-living crisis have fused into a drag factor on households, their ability to make monthly payments – principle, interest, taxes, insurance, and energy costs – and down-payments, and consequently the wider economy.

Single-family for-sale homebuilders have done admirable work at getting homebuyer prospects across qualifications hurdles and monthly payments on the mortgage interest front, as well as dropping asking prices when necessary.

However, challenges for a large number of would-be homebuyer prospects – beyond the downpayment and principle and interest parts of the PITI plus E (energy) monthly payment stack, are rapidly inflating gas and electric costs.

As Clayton's statement notes:

Last year, more than 20 million American families struggled to pay their utility bills, with average residential electricity prices increasing more than 14 percent– double the rate of inflation - across the country."

That home affordability-cost-of-living crisis fusion is exactly the opportunity the Clayton seized on as its "first principles" problem to solve.

We’d been trying to figure out the cost of energy for several years now, because the impact on the consumer was just too much," Holdbrooks tells The Builder's Daily. "We've evolved and pushed hard on our ENERGY STAR homes. Last year, we were the No. 1 builder of single-family ENERGY STAR homes in the U.S. -- about 23,000 [of 62,620 homes delivered in 2022]. When the DOA came out with Zero Energy Ready standards – it was their first major initiative since 1994. Instead of having a fixed mindset about it, we thought, well, ‘let’s use the new bar of ambition as a catalyst.' The good news is, we’d get tax credits from the program, but we’d have to up our game."

Part of the challenge, Holdbrooks tells us, was integrating partners on both structure and systems that would map the Clayton homes to DOE standards, and propagate the design and construction process across Clayton's national manufacturing and distribution ecosystem.

All our facilities got certified and we accomplished that – and the line-up of partner integrations – in a relatively short period of time," Holdbrooks says. "And thanks to the DOE tax credits, we're able to produce our TRU®, Epic®, Tempo® and CrossMod® lines of homes at no charge, so that the charge to consumers is not a penny more than our product was 30 days ago."

Features and functionality, structure and systems of the home include the following energy-performance and cost-reduction impacting highlights:

• Rheem® hybrid water heater, which uses less energy than a 100-watt light bulb3
• Low-E windows with argon gas, which reduce energy loss by 30-50%4
• LED lighting throughout, which use up to 90% less energy and last up to 25 times longer than incandescent bulbs5
• SmartComfort® by Carrier high efficiency heat pump or gas furnace
• Frigidaire® ENERGY STAR® certified dishwasher and refrigerator
• ecobee® smart thermostat
• Insulated exterior doors
• Tight thermal envelope with additional insulation and whole home exhaust system

The Clayton eBuilt initiative announcement coincides with a new Harvard Joint Center for Housing Studies analysis, comparing costs of site-built and manufactured housing. Here's the bottom line:

The results of this analysis confirm that manufactured homes continue to offer significant cost advantages, with single-section, double-section and CrossModTM manufactured homes costing 35 percent, 60 percent, and 73 percent, respectively, as much as comparable site-built homes. Adding finished-lot costs to these construction costs does reduce these advantages, but they remain significant for land values that prevail in most counties in the country." – Harvard University Joint Center for Housing Studies

The JCHS analysis goes on to say that "today’s relatively low level of production of manufactured housing represents a missed opportunity to expand homeownership and improve housing affordability."

Clayton's initiative – not only to bend the cost barriers in the ways the JCHS analysis calls attention to but to impact, at scale, costs to own during the total lifecycle of ownership – looks like an investment and commitment to address that "missed opportunity."

How the Clayton team came together to actually pull this thing off by far the biggest team accomplishment in my long career in housing," Holdbrooks tells us.

Changing the game on cost-of-owning is a first principle housing affordability issue.