MHARR Congressional Testimonies and Follow-Up Actions

john bostickAs you are already aware, the House of Representatives Subcommittee on Insurance, Housing and Community Opportunity held an oversight hearing on February 1, 2012 specifically focusing on HUD’s implementation of the Manufactured Housing Improvement Act of 2000. The hearing, which has been a key objective of MHARR’s intensive engagement with Congress for more than a year (together with budgetary oversight and accountability achieved during 2011), provided the Association with an opportunity to present detailed written and verbal testimony on HUD’s failure to fully and properly implement the 2000 law — and its extremely damaging impact on the industry and consumers — directly to the members of Congress who are responsible for oversight of the program and the law itself. This led to sharp questioning of HUD’s witness by subcommittee members on a variety of matters, including the program’s failure to act on MHCC standards recommendations, its re-codification of installation outside of the construction and safety standards, its treatment of the MHCC and the impact of all these issues on the availability of consumer financing — and this is just the first step for MHARR.

To begin with, it is clear that there will be follow-up by Congress on these matters as: (1) HUD was directed to provide the subcommittee with specific additional written information on the status of MHCC recommendations; (2) the subcommittee noted the pending investigation by the Government Accountability Office (GAO) on the implementation of the 2000 law; and (3) a key subcommittee member voiced a need for additional hearings to focus on regulatory issues. Needless to say, MHARR will be fully involved in all three of these areas (and has already met with the GAO investigation team) to be certain that they stay focused, on target, and are not sidetracked.

Conversely, the only setback at the hearing, as has been the case before (and is becoming even more of a problem in Washington, D.C.), is that post-production issues raised by the one consumer witness could not be authoritatively addressed or refuted because there was no post-production sector witness at the hearing to respond and maintain a clear and factual record. As MHARR’s effort to promote an industry recovery in Washington, D.C. – by hammering the link between HUD’s failure to fully and properly implement the 2000 law, leaving manufactured homes in the status of “trailers” – and major post-production issues such as financing, installation, placement and others gains more traction and more positive results, this absence of a strong, independent voice for the post-production sector becomes an ever greater handicap for the industry.

Set out below, therefore, for your review and information, are copies of the verbal hearing testimony of MHARR’s two witnesses, MHARR Chairman, John Bostick and MHARR Immediate-Past Chairman, Edward Hussey. Yesterday, we provided you with a copy of MHARR’s comprehensive written testimony detailing HUD’s failure to fully and properly implement key reforms of the 2000 law (without attachments, due to their volume – in excess of 260 pages, including copies of the Majority and Minority Reports of the National Commission on Manufactured Housing). The MHARR written testimony and supporting attachments will be discussed in greater detail (including their use as a base document for other non-legislative approaches) at the Association’s upcoming meeting in Tunica, Mississippi, this coming March.

cc: MHARR State Affiliates

Manufactured Housing Association for Regulatory Reform

1331 Pennsylvania Ave N.W., Suite 508

Washington, D.C. 20004

Phone: 202/783-4087

Fax: 202/783-4075

Email: MHARRDG@AOL.COM

(Image Credit: RV/MH Hall of Fame)

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Verbal Testimony of John Bostick, Chairman

Manufactured Housing Association for Regulatory Reform

Before the House of Representatives’ Subcommittee on Insurance, Housing and Community Opportunity Hearing on the Implementation of the Manufactured Housing Improvement Act of 2000

Washington, D.C., February 1, 2012


Good morning, my name is John G. Bostick. I am appearing today in my capacity as Chairman of the Manufactured Housing Association for Regulatory Reform (MHARR). I am also President of Sunshine Homes, Inc., headquartered in Red Bay, Alabama.

Sunshine Homes is a producer of manufactured homes built in accordance with federal construction and safety standards enforced by the U.S. Department of Housing and Urban Development (HUD). MHARR is a national trade association, founded in 1985 and based here in Washington, D.C., which represents the views and interests of mostly smaller, independent producers of federally-regulated manufactured housing, including Sunshine Homes. Also with me here to testify today is my colleague, Edward J. Hussey, my predecessor as Chairman of MHARR, who was chosen by Congress to serve on the National Commission on Manufactured Housing and has been involved in congressional efforts to reform the HUD manufactured housing program over the course of three decades.

Sunshine Homes is proud to be a producer of manufactured homes. Manufactured homes, at an average purchase price (without land) of $62,800, are the nation’s most affordable source of home ownership, available to almost every American. We are a non-subsidized industry, which means no financial burden is placed on American taxpayers.

Historically, manufactured homes have accounted for more than 20% of the new single-family homes sold in the United States. As recently as 1998, more than 370,000 manufactured homes were produced and sold in a single year. Since then, however, the industry has experienced a decline that is unprecedented in its severity and its length, that has seen production and sales decline by nearly 90%. Thus in both 2010 and 2011, total industry production was barely 50,000 homes.

While manufactured housing, like other segments of the housing industry, has been affected by the 2008 financial crisis and subsequent recession, the steep decline of our industry began long before either of those developments and has been much more severe than the downturn in the broader housing market. These facts point to the existence of other factors, unique to the manufactured housing industry, that have worked to unduly suppress the manufactured housing market, to the detriment of millions of American consumers of affordable housing.

Boiled-down to its essence, the decade-plus decline of the industry is a result of entrenched discrimination against both the product and the market segment that it primarily serves – discrimination that has festered and grown in recent years – due to intentional policy decisions by federal regulators and as an unintended consequence of other decisions within the federal sphere.

This discrimination, which affects everything from the regulation of manufactured homes in the factory, to consumer financing of manufactured home purchases, to the placement of manufactured homes within communities, was supposed to have been a thing of the past by now. More than a decade ago, Congress enacted the Manufactured Housing Improvement Act of 2000. That landmark law, which amended the original National Manufactured Housing Construction and Safety Standards Act of 1974, was designed — based on 12 years of congressional study and the findings of a National Commission on Manufactured Housing – to complete the transition of manufactured homes from the “trailers” of yesteryear to legitimate “housing” at full parity with other types of homes. Congress, in that law, not only acknowledged the importance of the affordability of manufactured homes — making the maintenance of that affordability an express purpose of the Act — but also enacted specific reforms to the HUD manufactured housing program designed to end past abuses and transform the program into a housing program that would ensure the equal treatment and role of manufactured housing for all purposes within HUD and elsewhere.

The reality, though, as the industry statistics suggest, has been much different. As is thoroughly detailed in MHARR’s comprehensive written testimony, HUD has failed to fully and properly implement the vast majority of the key program reforms that Congress deemed necessary in the 2000 law.

Whether it is HUD’s failure to appoint a non-career administrator for the program to ensure its visibility within HUD and the equal participation of manufactured housing in all relevant HUD programs, or its efforts to undermine the role and authority of the Manufactured Housing Consensus Committee, the centerpiece reform of the 2000 law, HUD has resisted or ignored most of the key program reforms that Congress wisely enshrined in the 2000 law.

The result has been continuing and worsening discrimination against manufactured housing based on the ongoing “trailer” orientation of the HUD program. In the regulatory arena, HUD continues to view manufactured housing as a deficient product, in need of constant “improvement” through increasingly more complex and costly regulatory practices implemented outside of the MHCC consensus process with no showing of need or benefit to consumers. In the financing arena, HUD’s own Federal Housing Administration (FHA) Title I program for government-insured manufactured housing personal property loans, which averaged approximately 20,000 manufactured housing loan endorsements per year between 1980 and 1993 has, since 1996, plummeted to approximately 1,000 endorsements per year, based partly on a Government National Mortgage Association (GNMA) moratorium on the securitization of Title I manufactured home loans and, more recently, discriminatory securitization criteria that have excluded most lenders from the market and have allowed the FHA Title I market to be effectively dominated by one or two large companies. Similarly, in the private financing sector, manufactured home loans, in recent years, have constituted less than 1% of the business of the Government Sponsored Enterprises (GSEs) even though manufactured housing accounts for more than 20% of all the new single-family homes sold since 1989.

As is shown by MHARR’s written testimony, these examples are just the tip of the iceberg in illustrating the many ways that continuing and worsening discrimination against manufactured housing — stemming from HUD’s institutional resistance to the reforms of the 2000 law — are hurting the industry and the millions of consumers who want to buy and own a home of their own that they can truly afford. This is waste in its worst form – waste of an outstanding, well-conceived federal law, waste of a federal program that could help the private sector meet the growing need for affordable housing, and waste of a product and an industry that simply needs an even playing field in order to meet that demand and grow stronger, providing thousands more jobs across the heartland of America in the process.

After 12 years, Congress needs to send HUD a clear and unmistakable message that the 2000 law means what it says and that HUD must change course and implement that law in accordance with its express terms and its full intent and purpose. The 2000 law is not in need of change, it is HUD’s implementation of that law which has to change.

Chairperson Biggert and Ranking Member Gutierrez, I thank you for holding this hearing and for the opportunity to appear here today and address the subcommittee. MHARR has already submitted comprehensive and detailed written testimony addressing all of these issues, which we would appreciate being included in the record of this hearing. We also look forward to answering any questions that you or your colleagues may have.

Thank you.

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Verbal Testimony of Edward J. Hussey, Past-Chairman

Manufactured Housing Association for Regulatory Reform

Before the House of Representatives’ Subcommittee on Insurance, Housing and Community Opportunity Hearing on the Implementation of the Manufactured Housing Improvement Act of 2000

Washington, D.C., February 1, 2012

Good morning, my name is Edward J. Hussey. I am appearing today in my capacity as Immediate-Past Chairman of the Manufactured Housing Association for Regulatory Reform (MHARR). I am also Vice President of Liberty Homes, Inc., headquartered in Goshen, Indiana, a manufactured and modular home builder.

Over the course of more than fifty years, I have been involved in nearly every aspect of the production and marketing of manufactured homes and the federal regulation of manufactured home construction and safety. I have had the privilege of testifying before Congress previously about the benefits and advantages that manufactured homes provide to families seeking the American Dream, and I was honored to serve as a House of Representatives appointee to the National Commission on Manufactured Housing (1993-1994) which developed the conceptual blueprint for reforms to the federal manufactured housing program at the U.S. Department of Housing and Urban Development (HUD) that were ultimately enacted by Congress as part of the Manufactured Housing Improvement Act of 2000 (2000 law).

The enactment of the 2000 law was a major watershed event for the manufactured housing industry. From humble origins nearly 80 years ago as a type of quasi-vehicle, “mobile homes,” in the 1960s and 1970s, experienced a period of rapid growth and evolution that pointed to the need for federal regulation to assure quality and protect homeowners, while ensuring their affordability and acceptance nationwide. As a result, Congress adopted the National Manufactured Housing Construction and Safety Standards Act of 1974, which established the current HUD regulatory program based on three inter-related principles – (1) uniform, performance-based federal construction and safety standards to allow innovation and take advantage of the efficiencies of factory-based construction; (2) robust federal preemption to avoid a multitude of non-conforming state and local standards that would unnecessarily increase costs; and (3) uniform federally-based enforcement of the standards.

While the original 1974 law fostered major technological advancements that saw the “trailers” of the post-World War II era become legitimate “housing” that, in almost all instances, remained at the original home-site once installed, the HUD program established by that law was effectively a program for “trailers,” complete with recall provisions. As the industry progressed, it became evident by the 1990s that both the federal manufactured housing law and the federal program needed to change in order to keep pace with the industry, allow manufactured housing to reach its full potential and remedy HUD program deficiencies that had become evident since the inception of federal regulation in 1976.

Following 12 years of study and analysis, including the recommendations of the National Commission and the submission of its majority and minority reports, Congress enacted the 2000 law, making what were supposed to be major changes to the HUD manufactured housing program. Those changes were designed, in part, to ensure the continuing affordability of manufactured housing and, more importantly, to complete the final transition of manufactured homes from the “trailers” of yesteryear to legitimate “housing” at parity with all other types of homes.

Among the centerpiece reforms of the 2000 law were – (1) the creation of a strong, independent consensus committee – similar to those used to develop every other American building code – to consider new and revised standards, enforcement regulations, interpretations and changes to enforcement policies and practices; and (2) an appointed, non-career administrator for the HUD program to finally bring manufactured housing into the mainstream of HUD programs, policies and initiatives, after decades of neglect and second-class status (at best) at the Department.

Unfortunately, it has not worked out the way that Congress intended. Instead of fully implementing the 2000 law as Congress and the National Commission intended, HUD has done everything in its power to maintain the old status quo and either ignore or materially alter the changes that Congress sought to bring about. The result is that manufactured housing, as far as HUD and other governmental and quasi-governmental agencies are concerned, stands essentially where it did when Congress convened the National Commission in 1993 – a semi-vehicular “trailer” in need of “improvement” through constantly expanding regulation and enforcement. This outdated and indefensible orientation has had a domino effect on the entire industry and its consumers, subjecting both to ever-worsening discrimination that, among other things, has virtually eliminated public and private consumer financing for manufactured home purchases and has negatively impacted the placement and acceptance of manufactured housing.

Thus, instead of advancing the acceptance, use and availability of manufactured housing as the nation’s leading source of inherently affordable home ownership — as Congress intended — HUD regulators, for the past 12 years, have devoted their energies to nurturing their own regulatory fiefdom, circumventing and negating the 2000 law, while unnecessarily expanding regulation and unnecessarily increasing the cost of manufactured housing to the public. The end result has been that despite a unique industry model providing affordability combined with quality within the economic reach of nearly every American, the manufactured housing industry, over the past decade, has declined dramatically.

As is detailed in our MHARR written testimony, manufactured housing production, since the enactment of the 2000 law, has declined by more than 86% (from 373,143 homes in 1998 to 50,046 in 2010 and 50,000 +/- in 2011). Over the same period, nearly 75% of the industry’s production facilities have closed (from 430 to fewer than 110), as have more than 7,500 retail centers. This represents a devastating loss of affordable housing opportunities for lower and moderate-income American families, while tens, if not hundreds of thousands of jobs throughout the manufactured housing industry have simply disappeared. And this has occurred, in no small part, due to HUD’s refusal to embrace manufactured housing and the clear directives that Congress set out in the 2000 law.

Manufactured housing can and should be a private sector solution (in conjunction with other programs) to meeting the housing needs of Americans on all rungs of the economic ladder without the need for subsidies that needlessly burden taxpayers and increase the federal deficit and federal debt. Manufactured housing can fulfill this role and provide the American Dream for millions of families that would otherwise be excluded from homeownership, but to do so, it must be treated as legitimate “housing” for all purposes by its federal regulator and not fodder for discrimination that hits hardest at the lower and moderate-income families which rely on the quality and affordability of their manufactured homes. The way to accomplish this transition, as Congress correctly concluded 12 years ago, is for HUD to fully and properly implement all the reforms of the 2000 law.

Just to be clear, there is nothing wrong with the 2000 law. It does not need to be altered or amended. The issue is its implementation by HUD. As Mr. Bostick just indicated, Congress needs to send HUD a clear and unmistakable message that the 2000 law means what it says and that HUD must change course and implement that law in accordance with its express terms and its full intent and purpose.

Chairperson Biggert and Ranking Member Gutierrez, we thank you for holding this hearing and for the opportunity to address the subcommittee. We also look forward to answering any questions that you or your colleagues may have.

Thank you.

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