Time for HUD Program Accountability


MHARR logoby Danny Ghorbani — HUD’s recently released Fiscal Year 2012 budget and appropriations request for the federal manufactured housing program shows why Congress needs to carefully scrutinize program spending and demand accountability from HUD regulators for the misdirection of funds previously appropriated by Congress. The time for the industry to press for such intervention, moreover, is now, when all aspects of the program budget are subject to oversight by Congress based on section 620 of the Manufactured Housing Improvement Act of 2000, and not later, during a HUD administrative rulemaking on higher label fees, when the only issue will be the amount of the increase and industry objections are unlikely to receive any kind of hearing.

Act of 2000, and not later, during a HUD administrative rulemaking on higher label fees, when the only issue will be the amount of the increase and industry objections are unlikely to receive any kind of hearing.  As one of its first actions in the 112th Congress, MHARR opened communications with the House Transportation, Housing and Urban Development and Related Agencies Subcommittee to raise the profile of this nearly forgotten, but extremely important issue, for congressional awareness and action. More specifically, in a January 28, 2011 letter to Tom Latham, Chairman of the Subcommittee, MHARR called on Congress to seek “full accountability from HUD regarding its use of all appropriated funds” and to “carefully scrutinize any claimed need for further general revenue appropriations at a time of historically low industry production.”

MHARR brought this issue to Congress based upon HUD’s five-year track record of misleading program funding requests that have ballooned the program budget and have led to multi-million dollar infusions of tax revenue that have been misdirected by the program. And the Department’s proposed FY 2012 budget, which requests $7 million in taxpayer funding as well as a more than 50% increase in the label fee paid by manufacturers to fund the program (i.e., from $39.00 to $60.00 per home section), illustrates why such congressional action is fully warranted.

Since 2007, despite a devastating decline in industry production (now 87% below peak production in 1998), the HUD manufactured housing program budget has more than doubled. Contrary to repeated claims by HUD in prior budget requests, this dramatically increased funding has not been used to fully implement the federal installation and dispute resolution programs mandated by the Manufactured Housing Improvement Act of 2000 — programs that were, by law, to have been in place by December 2005. Indeed, after being appropriated a whopping $16 million in 2009, including a $5.4 million appropriation of tax funds, and $16 million in 2010, including $9 million more in tax revenues, on the strength of assertions by the program that it needed additional money to fund installation and dispute resolution contracts, HUD, in its 2011 budget justification document, refers to its “budgetary inability to implement the new installation and dispute resolution programs.” Nor has this increased spending authority or millions of dollars in tax funds been used to properly fund program functions expressly mandated by Congress in the 2000 law.

Instead, the increased funding approved by Congress each year has been misdirected by HUD to impose a totally new structure of needless and needlessly costly de facto regulation on manufacturers and consumers, in contravention of relevant reform provisions of the 2000 law. This has provided HUD with a pretext for increasing program staff and increasing or maintaining payments to contractors — including its “monitoring” contractor of 34 years (now a de facto sole-source contract) — at a time when it otherwise would have been forced to reduce expenditures due to falling production. In addition, and despite a projected funding carry-over that — together with the $14 million total FY 2012 funding request — would provide the program with $20 million of expendable funds, HUD continues to refuse to use a small part of its funding to hire a non-career manufactured housing program administrator, as expressly provided by the 2000 law to bring order and accountability to a dysfunctional program.

To make matters worse, at the same time that HUD has been funding its make-work regulatory expansion, its proposed budgets have reduced funding to unrealistically low levels for its state partners — State Administrative Agencies (SAAs) — which serve as the first line of protection for consumers living in both new and existing manufactured homes. Between FY 2005 and FY 2011, funding for the program monitoring contract remained nearly level, at 23-24% of the total program budget, even as industry production fell by more than 66%. By comparison, over the same period, funding for state programs was cut almost in half, from 50.7% of the total program budget in FY 2005, to just 26.4% of the total program budget in FY 2011. This has led some states — at a time when state budgets are facing dramatic cuts — to seriously consider dropping their manufactured housing programs altogether. A further loss of already diminished state participation, because of the misdirection of ample program funds to contractors and reckless regulatory adventures, would be a shame and a needless loss for consumers and the industry.

It is precisely because of this track record of budget increases at a time of production declines, misdirection of appropriated funds and the failure of the HUD program to use those funds to implement mandatory functions and reforms under the 2000 law, that led MHARR, even before the release of the 2012 budget, to inform Congress that “there is no legitimate basis” for such a large program budget and to call on the 112th Congress to seek full accountability from HUD officials for all aspects of the program budget and the program’s use of budgeted funds since the passage of the 2000 law. Such an accounting is long-overdue and badly needed, and should be a pre-condition to the appropriation of further funds for the program, starting with the FY 2012 budget.

Moreover, the proper time to address funding and expenditures is now, when Congress can examine and consider funding needs in relation to the specific functions authorized and mandated by section 620 of the 2000 law, in light of HUD’s past failure to comply with those provisions, and not later, during possible rulemaking on the proposed 50%+ increase in manufacturer label fees, as suggested by some in the industry.

Based on all these factors MHARR, has conducted a critical analysis of HUD program budgets and expenditures since 2007, and has prepared a document reflecting that analysis, as well as conclusions and suggested approaches and remedies, that will be submitted to Congress in connection with the appropriations process for FY 2012.

In MHARR’s view, it is long past time for Congress to hold HUD accountable for the needless expansion of the manufactured housing program budget and the misuse of those funds for purposes not approved by Congress, that have seriously harmed the industry and consumers of affordable housing.

Danny D. Ghorbani is President of the Manufactured Housing Association
for Regulatory Reform. MHARR is a Washington, DC-based national
trade association representing the views and interests of producers of federally-
regulated manufactured housing.

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