MHARR Washington Update February 12, 2010

HUD INSENSITIVITY TOWARD CONSUMERS AND INDUSTRY
HUD MHCC ACTION SHOWS CONTEMPT FOR CONGRESS
NEGATIVE IMPACTS OF NO ADMINISTRATOR DOCUMENTED
INDUSTRY WEAKNESS ON PREEMPTION CONTINUES
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HUD INSENSITIVITY TOWARD CONSUMERS AND INDUSTRY
HUD MHCC ACTION SHOWS CONTEMPT FOR CONGRESS
NEGATIVE IMPACTS OF NO ADMINISTRATOR DOCUMENTED
INDUSTRY WEAKNESS ON PREEMPTION CONTINUES

MHARR CITES HUD INSENSITIVITY TOWARD CONSUMERS, INDUSTRY

In a February 8, 2010 letter (copy attached) to the HUD Assistant Secretary for Housing, MHARR has expressed its disappointment at – and disapproval of – the federal housing agency’s disregard for the plight of manufactured housing consumers and the HUD Code industry, and has called on the Department to take effective, concrete steps, now, to address and resolve this matter.

This comprehensive letter first notes that the nearly 90% decline in industry production over the past ten years has resulted in a catastrophic loss of affordable nonsubsidized housing opportunities for millions of lower and moderate-income Americans, as well as business closures and significant job losses within all sectors of the industry. It then factually recounts and questions HUD’s failure to provide consumer financing relief for potential HUD Code homebuyers, as well as mismanagement of the federal manufactured housing program, and calls upon the Agency for action now to reverse the dramatic and accelerating decline of the manufactured housing industry, which is subject to the comprehensive authority of the federal government.

It is significant that in the wake of HUD’s mismanagement of manufactured housing industry affairs (both consumer financing and the federal program) in the years immediately following the enactment of the 2000 reform law, industry members had optimistically anticipated the governmental reform agenda and orientation of the Obama Administration, and had hoped that the new HUD leadership would fully embrace and implement the manufactured housing program reforms of the 2000 law. The promise of a different approach to the federal program, however, including full compliance with the 2000 law and the faithful implementation of its key reforms has, thus far, not been fulfilled. As a result, conditions for manufactured housing consumers and the industry are not improving, but are actually becoming worse.

HUD CONTEMPT FOR CONGRESS – FURTHER DOWNGRADES MHCC

HUD regulators, in their continuing effort to gut the 2000 reform. law and further neuter the Manufactured Housing Consensus Committee (MHCC), have taken their most brazen action to date. On February 5, 2010, HUD issued an “Interpretative Rule” (effective immediately), without opportunity for public comment, which eliminates advance MHCC review and comment on any HUD action or “statement” that does not rise to the level of a “rule” as defined by the federal Administrative Procedure Act (APA). This renders the “catchall” section of the 2000 reform law (section 604(b)(6)) meaningless, effectively eliminates an important part of that law, and undermines much of the utility and benefit of the consensus process.

Under other sections of the 2000 reform law, standards, regulations and formal “Interpretative Bulletins” — which required notice and comment rulemaking under the APA and HUD’s regulations respectively, even before the 2000 reform law was ever passed — are subject to advance MHCC review and comment to the Secretary. MHCC review for such matters is thus in addition to notice and comment rulemaking.

The catchall section, however, was included in the 2000 reform law specifically to apply the consensus process — in advance — to an entire range of interpretations and changes to program practices and procedures relating to enforcement, inspection and monitoring that do not rise to the level of a formal rule or “Interpretative Bulletin” and are, therefore, subject to notice and comment rulemaking. This was done in order to eliminate the sort of closed-door, non-transparent procedures that HUD regularly used prior to 2000 to impose new or modified enforcement procedures, by “interpretation,” without rulemaking or input from program stakeholders, or regard for their concerns — as well as disputes related to those practices — and bring the entire HUD standards and enforcement process into the open.

By limiting the consensus process to matters that rise to the level of an APA “rule,” HUD’s February 5, 2010 action undermines the role, authority and functionality of the MHCC by placing a multitude of HUD interpretations and other decisions affecting enforcement, inspections and monitoring beyond the Committee’s consideration and reach. This, moreover, is in addition to the elimination of collective industry representation on the MHCC, stacking the MHCC against the industry, and recent unilateral HUD changes to the MHCC Bylaws that will allow HUD to control the membership of all MHCC subcommittees – where most of its substantive work is accomplished.

The February 5, 2010 rule is thus an unabashed power-grab by HUD program to overrule by administrative fiat a congressional grant of authority to the MHCC that its regulators have always rejected. If the industry, consumers and Congress have any illusion about the MHCC continuing to function as an effective check and balance against unrestrained HUD power, this action must be opposed and reversed.

MHARR DOCUMENTS IMPACTS OF NO PROGRAM ADMINISTRATOR

Prompted by encouragement from Congress, MHARR has prepared a comprehensive White Paper that documents, in detail, and in a uniform and consistent manner, the damaging and negative impacts that have resulted for both the HUD Code industry and consumers of affordable housing from HUD’s failure and continuing refusal to appoint the non-career program Administrator provided by the 2000 reform law. The White Paper explains such impacts as they specifically relate to consumer financing, the deteriorating condition of the manufactured housing program, and the interaction of the program with the Manufactured Housing Consensus Committee. The White Paper also contains a number of startling revelations, that industry apologists have attempted to sweep under the rug for some time.

After disseminating this document to Members of Congress and staff, MHARR plans to release the White Paper to industry members, state associations and the public for their information and use in addressing this critical matter.

INDUSTRY INCOMPETENCE – WEAKNESS ON PREEMPTION CONTINUES

Continuing wrong-headed activity by part of the industry, to “study” federal preemption and develop a “strategy” to strengthen preemption based on the 2000 reform law, while apparently abandoning opposition to state or local fire sprinkler laws, reflects an alarming weakness on both issues, as well as a lack of understanding – or unwillingness to understand – the 2000 law.

For those who did the heavy lifting and worked hard for its development and enactment, the enhancement of preemption under the 2000 reform law requires no “study.” Congress took two major steps in that law: (1) it rejected HUD’s narrow interpretation and application of preemption up to that point and instructed it, instead, to apply preemption “broadly and liberally;” and (2) it recognized that federal superintendence of the manufactured housing industry can be hampered not only by state and local construction standards that are inconsistent with the HUD Code (the position long taken by HUD), but also by other types of state and local “requirements.” Accordingly, it extended federal preemption to any kind of state or local “requirement” that interferes with federal “superintendence” of the industry.

There is nothing vague or unclear about this action or the language used to express it. Federal preemption is to be employed liberally to protect the industry and its consumers from all types of state or local requirements that are inconsistent with the federal standards and the purposes of the 2000 law. This includes state or local mandates that discriminate against or exclude manufactured housing, or unnecessarily increase its cost, or deprive consumers of the full protection of the federal standards and the federal enforcement of those standards.

Applying this in the context of fire sprinklers, the proper course for the industry is very clear. If, HUD wrongly asserts that state or local fire sprinkler laws are not preempted under the current standards, then HUD should stay out of the matter entirely, and the industry should work to keep it out. Instead, the industry should continue to work — as part of a coalition encompassing all other segments of the housing industry – to stop or modify this sweeping mandate on a state-by-state and jurisdiction-by-jurisdiction basis. Where the relevant authorities agree — as many thus far have — the matter is resolved. Where they insist on a sprinkler mandate for all dwellings, the NFPA 13D standard could be applied, as it specifically addresses the unique aspects of manufactured housing. This approach, which has been — and continues to be – used in numerous jurisdictions, could ultimately protect the industry in most areas of the country, in conjunction with other segments of the housing industry, without undermining preemption and without forcing manufacturers to install sprinklers in all homes regardless of their destination.

Industry acquiescence, however, in a continuing HUD position which ignores the 2000 enhancement of preemption, and/or the imposition of a “defensive” federal fire sprinkler standard, or the imposition of such standards at a state or local level, would surrender the preemption protection that Congress fully intended to provide to the industry and its consumers. Even worse, it reflects a continuing incompetence, weakness and reluctance to learn the intricate details of preemption reform under the 2000 law. The industry should resist such a misdirected approach and, instead, act strongly to protect its rights under federal law.

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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