MHARR – ISSUES AND PERSPECTIVES
By Mark Weiss
“HUD’s Failure on Zoning Equity Hurts Manufactured Housing Industry and Consumers”
Since the publication of MHARR’s July 2022 White Paper, entitled “The Exploitation of Federal Housing Finance and Mortgage Funding Assistance Programs and Potential Solutions,” industry members have requested further explanation and expansion of the White Paper’s principal findings. Those findings, specifically, were that discriminatory and exclusionary zoning, as well as a lack of competitive government-backed consumer financing, due to the non-implementation of the Duty to Serve Underserved Markets (DTS) within the dominant manufactured housing chattel lending market, prevent federal housing programs from “reaching the ground” for the benefit of manufactured housing consumers. Even more broadly, these factors have suppressed the long-term growth and evolution of the HUD Code industry including, but not limited to, growth that might otherwise have been driven by such public support. Thus, these principal factors not only prevent government programs and funding from reaching the ground for the manufactured housing industry and manufactured housing consumers but, worse yet, stifle any significant expansion of the HUD Code market as a whole.
In response to such inquiries, this column will be the first of a two-part “Issues and Perspectives” series to expand and further illustrate the White Paper’s findings. In this installment, we will further address the negative impacts of zoning discrimination and inequity, while the second part of the series will address the failure to implement DTS and resulting lack of fully-competitive consumer financing for HUD Code manufactured homes.
Turning to zoning inequity and its negative impact on the industry, consumers, and the availability and use of government affordable housing funding (and programs) within the HUD Code market, it is worth noting at the outset that for HUD, like most of the federal government these days, money is no object. Nor, apparently, are positive results. How else to explain the fact that HUD routinely shovels mountains of cash out the front door, while failing to remedy – or even make a dent in – the nation’s affordable housing crisis? While it doles out these bales of greenbacks, HUD could do a great deal more, at virtually no cost at all, to advance the utilization of a key affordable housing resource right under its nose – inherently affordable manufactured housing – but refuses to do so. Indeed, notwithstanding a specific legal obligation and matching congressional directive to advance manufactured housing – and directly-corresponding legal authority to override and nullify obstacles that stand in the way – HUD has failed to step-up for the benefit of millions of lower and moderate-income Americans in every corner of the United States. So, while HUD pats itself on the back for its good intentions, the affordable housing crisis expands every day, while manufactured housing production has dramatically declined over two consecutive quarters.
In a May 3, 2023 News Release, for example, HUD touted the “allocation” of $382 million to state government agencies to help them “produce affordable housing.” Among other things, HUD Secretary, Marcia Fudge, stated: “We’re proud to invest in states to create more affordable housing…. The Biden-Harris Administration is committed to improving the nation’s housing affordability crisis and the Housing Trust Fund provides communities resources they need to produce more safe, sustainable and affordable housing.” (Emphasis added). The News Release goes on to note that the Housing Trust Fund “is capitalized through contributions made by Fannie Mae and Freddie Mac (to be addressed further in the second part of this IP) and is designed to increase “production of and access to affordable housing for the nation’s most vulnerable populations.”
There are two problems, though, with the spending detailed by this News Release. First, “states,” per se – or any other unit or level of government for that matter – do not themselves “create” or “produce” affordable housing. It’s not as if those political entities had their own construction battalions. They may buy housing for various reasons and uses, but they do not “produce” housing in a physical sense, as that term is normally understood. Housing, rather, is produced almost entirely by (and within) the private sector and this, in turn, points to the second problem with the $362 million “allocation” to the states. And that is, quite simply, while the $362 million “allocated” to the states by HUD can be used for “real property acquisition,” there is no mention in the News Release of a manufactured housing component to this program, even though manufactured homes are directly – and comprehensively – regulated by HUD itself. HUD, therefore, is effectively doling out cash to supposedly finance the acquisition of “affordable housing” without: (1) providing a dime (at least directly) to the private sector entities that actually produce that housing; or (2) acting to ensure that the largess being distributed can be – and is – utilized to acquire genuinely affordable manufactured housing that, again, HUD itself regulates.
Effectively, then, this is yet another example of government spending on supposedly “affordable housing” that does not – and will not – “reach the ground” for HUD regulated manufactured housing or lower and moderate-income manufactured housing consumers, as was documented in MHARR’s July 2022 White Paper. This despite the fact that manufactured housing according to a 2010 HUD study, represents the best, most affordable housing value in the nation for lower and moderate-income Americans.
At the same time that HUD engages in galactic-level deficit spending, with little or nothing to show for it, it could advance the availability of truly affordable manufactured housing by simply enforcing a law that it is already required to uphold – i.e., the enhanced preemption provision of the Manufactured Housing Improvement Act of 2000.
This idea – and its underlying legal rationale – are very straightforward. It begins by recognizing that HUD’s statutory authority over – and responsibility for – the manufactured housing industry is quite broad. That’s why HUD’s regulations under the National Manufactured Housing Construction and Safety Standards Act of 1974 did – and still do – refer to HUD’s “superintendence” of the industry. That language was not an accident. It refers to HUD’s statutory obligation to advance the availability and accessibility of affordable HUD Code manufactured housing for all Americans as an essential affordable housing resource. And, just in case there was any doubt, when Congress updated the law in 2000, it explicitly emphasized that HUD’s mission with respect to manufactured housing involves more than mere “structural” regulation. Thus, in the “Purposes” section of the 2000 Reform Law, Congress stated that one of the key purposes of the law (and hence, HUD’s regulation of manufactured housing), was “to facilitate the availability of affordable manufactured homes and to increase homeownership for all Americans.”
Again, the word “facilitate” was not an accident. It was chosen to reflect an affirmative statutory obligation, on the part of HUD, to use all of the powers and authorities available to it, to advance the availability and utilization of HUD Code manufactured homes across all areas of the United States, among all groups and populations, and among all income levels.
So, the 1974 law, as augmented by the 2000 Reform Law, tasked HUD with a broad affordable housing role with respect to manufactured housing. But that role cannot be fulfilled if states and local jurisdictions can use their zoning authority to discriminatorily exclude HUD Code homes and simultaneously undermine housing equity. Consequently, Congress paired this broad affordable housing role with an amendment to the 1974 law’s federal preemption language, to make it clear that the scope of federal preemption under the Act as amended would be equally broad and up to the task of removing such baseless exclusions when and where needed. Congress, accordingly, extended the scope of federal preemption not just to state and local building standards, but to all state or local “requirements” affecting manufactured housing. Indeed, key sponsors and proponents of the 2000 law, made the connection between HUD’s expanded role and authority unmistakably clear in a 2003 letter to HUD, where they wrote, “the 2000 Act expressly provides, for the first time,” that federal preemption “be ‘broadly and liberally construed’ to ensure that local ‘requirements’ do not affect ‘federal superintendence of the manufactured housing industry.’” “These combined changes have given HUD the legal authority to preempt local requirements or restrictions which discriminate against the siting of manufactured homes….”
HUD, though, despite this enhancement of federal preemption, specifically to target discriminatory and exclusionary state and local zoning laws, has failed to use that authority even once in the ensuing nearly-quarter century, to invalidate zoning laws which prohibit or discriminatorily restrict the siting of manufactured homes and manufactured housing communities comprised of homes that HUD itself regulates.
Not to put too fine a point on it then, the reality is that today’s modern, affordable and energy efficient manufactured homes are the single best solution for the nation’s affordable housing crisis. Quite simply, in terms of both the substance of the home and affordability, there is no legitimate or valid basis for the exclusion of HUD Code homes from any compatible area of single-family housing anywhere. Yet, HUD Code homes routinely are excluded. Therefore, the only veiled, unspoken and unacknowledged reason for their exclusion (or other discrimination) is the fact that manufactured homes are built to a federal building code enforced by HUD, rather than a state or local building code enforced by the state or a local jurisdiction. HUD, though, clearly lacks the institutional fortitude to defend and assert the validity of its own building standards and code for manufactured homes.
All of this proves the validity of the central thesis of MHARR’s July 2022 White Paper, which shows that federal affordable housing programs, grants, aid and other related federal benefits do not “reach the ground” with respect to manufactured housing or manufactured housing consumers, in large measure because state and local zoning and placement exclusions (and restrictions) on HUD Code homes undermine the utilization of such benefits. At the same time, these exclusions and restrictions prevent the HUD Code manufactured housing industry from reaching its full potential as an affordable housing resource for millions of Americans whose housing choices are being unlawfully restricted.
It is evident, then, that while HUD Code manufacturers can and do produce outstanding homes with any feature that buyers may seek, the national association which collects dues payments from the industry’s post-production sector has failed to take aggressive action to demand an end to discriminatory zoning exclusion and inequity that harms both the industry and millions of Americans in need of affordable housing. Most specifically, the Manufactured Housing Institute (MHI) has failed to demand that HUD select a case of overt zoning discrimination against HUD Code manufactured homes and pursue that case as far as necessary in the federal courts to ensure that the clear intent and objectives of Congress with respect to affordable manufactured housing are being fulfilled and not subverted. If HUD, though, continues to stall and deflect, as it has for far too long, there should be a specific (and speedy) legal challenge to HUD’s failure to act to fully implement the enhanced federal preemption of the 2000 Reform Law. ##
MHARR is a Washington, D.C.-based national trade association representing the views and interests of independent producers of federally-regulated manufactured housing.
“MHARR-Issues and Perspectives” is available for re-publication in full (i.e., without alteration or substantive modification) without further permission and with proper attribution and/or link back to MHARR. ###