A First Step by HUD

MHARR LogoAt press time, the Administration has taken a first step to reverse the free-fall of the HUD manufactured housing program by reassigning its career manager and opening the way for the appointment of a new non-career program Administrator. The appointment of a non-career Administrator is a “responsibility” of HUD under the Manufactured Housing Improvement Act of 2000 and the track record of the last several years clearly shows that such an Administrator, working with the governing Administration at the policy level, is essential to the full, proper and successful implementation of the reforms contained in all relevant laws including the 2000 reform law and the manufactured housing provisions of the Housing and Economic Recovery Act of 2008. The appointment of a new non-career Administrator, moreover, is an urgent priority because a full plate of critical program issues that have been neglected or mismanaged in recent years, urgently need to be addressed, beginning with an issue that directly impacts manufacturers and the cost of manufactured housing to the public — reform of the current procedural and enforcement regulation (P&ER) structure.

P&ER, a key aspect of the 2000 reform law, should be an immediate focus for genuine reform because of the convergence of three factors. First and most importantly, the industry is producing its best homes ever. This is driven primarily by consumer expectations and marketplace demand, rather than the current rigid and unnecessarily costly enforcement system. Indeed, the current enforcement structure of overlapping inspections, certifications and Subpart I recalls is inconsistent with the regulation of housing and is at odds with the key purpose of the 2000 reform law — to secure the status of manufactured homes as “housing” for all purposes.

Second, it makes no sense for an enforcement system designed to produce homes that are both high-quality and affordable without government subsidies, to be entirely revenue-driven, thereby creating an incentive for participants to unnecessarily drive up regulatory compliance costs. Put differently, the current system provides financial rewards for regulatory overkill and excess. This shows up in the form of more costly, expansive, intrusive and unnecessary inspections, monitoring, reporting, investigations, red-tape, documentation and record-keeping, particularly with respect to Subpart I matters — and constant pressure for even more. Such questionable costs, moreover, are a significant and needless hurdle confronting already hard-pressed consumers who face unprecedented difficulty in qualifying for and obtaining nearly non-existent financing — which has helped to fuel the industry’s dramatic decline in recent years.

HUD’s answer to all this, has been to make matters worse. Instead of re-thinking the P&ER system, HUD has promoted an expansion — called “voluntary” one day and “not optional” the next — with yet more unnecessarily costly inspection and reporting requirements and new, untested criteria that are not designed for the unique aspects of manufactured home production. No need has been shown for any of this, none of it has been through the rigors of required notice and comment rulemaking, and most has not been brought to, or considered by the MHCC. And the part that was brought to the MHCC, failed to win consensus approval precisely because HUD never showed any factual or cost justification for additional regulation. The reason this was never brought forward, as shown by HUD’s proposed 2011 budget, is because more money — not less — will be needed to “continue the transformation of [HUD’s] enforcement efforts,” meaning that this “transformation” will actually increase the billing of HUD’s entrenched enforcement contractor. And since the contractor only monitors the activities of PIAs, the direct costs paid by manufacturers to PIAs will also increase.

Third, HUD’s failure to fully and properly implement the 2000 reform law has allowed the construction quality of manufactured housing to remain disconnected from consumer satisfaction. In testimony before the National Commission on Manufactured Housing, during the legislative process leading to the 2000 reform law, and many times since, it has been confirmed that production quality (i.e., – plant quality control) is not a problem for the manufactured housing industry or its consumers. This was reiterated most recently by the retiring head of the Oregon State Administrative Agency (SAA) who stated, “production was not and still is not the problem.” Instead, as he pointed out – – and as the National Commission concluded – “how the home is set and how it is serviced” have more often been an issue for consumers. Thus, Congress, in the 2000 reform law, sought to remedy both issues by mandating nationwide installation and dispute resolution programs. But HUD’s implementation of these major reforms has been deficient from the start because of the re-codification of these programs outside of the existing standards and regulations, which has led to chaos, confusion and delay, with conflicting claims of authority.

Instead of compounding the flaws of the current P&ER system, HUD should break the mold of the past 35 years, first by opening the enforcement contract to genuine competition for the first time in the history of the program. Fresh blood and new thinking will lead to a more cost-effective model of enforcement regulation. HUD should also reverse its re-codification of installation and dispute resolution to connect construction quality with consumer satisfaction as the 2000 reform law intended, and, most importantly, it should fully comply with all relevant reform aspects of the law instead of trying to go around them, as has been the case for most of the past several years.

And while reform of enforcement regulation is critical, this will be just one of a myriad of issues that will need to be addressed by a new non-career Administrator. Other major issues that still need to be addressed and corrected include, but are by no means limited to: implementation of a final FHA Title I and Title I1 improvement rule; removal of the Ginnie Mae moratorium; restoring the role and authority of the Manufactured Housing Consensus Committee; implementation of enhanced preemption generally and particularly regarding sprinklers; full implementation of the federal installation program and standards; implementation of a final on-site construction rule; issues relating to energy standards; and the implementation of a final rule to substitute the federal installation standards for the FHA foundation guide, among many others – and these are just to catch up to where the program should have been several years ago.

In MHARR’s view, HUD has taken a first step, but much more remains to be done to ensure a manufactured housing program that not only protects consumers, but also advances their access to — and the availability of — affordable, non-subsidized manufactured housing.

MHARR is a Washington D.C.-based national trade association representing the views and interests ofproducers of federally-regulated manufactured housing.

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