Issue link: https://read.dmtmag.com/i/657319
APRIL 2016 12 THE JOURNAL Why is HUD Bent on Destroying the Manufactured Housing On-Site Market? MHARR VIEWPOINT BY MARK WEISS As has been previously addressed in this col- umn, one of the central reforms of the Manufac- tured Housing Improvement Act of 2000 was its matching directives to HUD to: (1) "facilitate the availability of affordable manufactured homes" and (2) to "facilitate[e] the acceptance of the quality, durability, safety and affordability of manufactured housing within the Department" itself. If these directives are to have any meaning – and any pos- itive "real-world" impact – they must be read, among other things, as a statutory command to HUD to enable and empower manufactured homes to compete on an equal, non-discriminatory, free-market basis with other segments of the hous- ing industry. And it is only through that uncon- strained ability to compete and the corresponding freedom from unreasonable, unnecessary or ex- cessive market or governmental restraints, that the public (and especially lower and moderate-in- come homebuyers) can realize the full benefits of affordable, non-subsidized manufactured homes, as Congress intended when it adopted the 2000 reform law. Facilitating this kind of open and robust free- market competition to unlock an important new market segment for manufactured housing, while allowing consumers to take full advantage of all the unique attributes and benefits of HUD Code manufactured housing, was a key motivation driv- ing the industry's effort to develop and implement new on-site construction regulations to take the place (in most instances) of the existing – and ex- tremely cumbersome, costly and time-consuming – HUD "Alternate Construction" (AC) process. And, in fact, a new program for on-site comple- tion of manufactured home construction under procedures that would be faster, more flexible and more economical than the burdensome AC process, while providing expanded access to non- chattel consumer financing, was among the earli- est issues brought to and considered by the Manufactured Housing Consensus Committee (MHCC) -- initially in 2003. Following exten- sive, thorough and painstakingly detailed debate within the MHCC, a consensus recommendation was submitted to HUD, finally leading to a pro- posed on-site construction rule, published in June 2010. That MHCC consensus recommendation, con- sistent with the original objectives of all program stakeholders, was designed to take full advantage of the price and construction flexibility offered by HUD Code construction to enable the industry to compete more effectively with other segments of the housing industry – including site-built homes and the rental housing industry -- through homes eligible for readily-available mortgage-type fi- nancing, and thereby provide beneficial new op- portunities for consumers of affordable housing. Somewhere along the way, though, between the MHCC consensus submission and publication of the Department's final on-site rule in Septem- ber 2015, the HUD program (and its current Ad- ministrator) apparently decided that it was more important to "facilitate" the earnings of the pro- gram "monitoring" contractor and private Primary Inspection Agencies (PIAs) than it was to facili- tate the availability of new feature-rich manufac- tured homes for consumers of affordable housing and the industry's ability to participate effectively in an emerging new market. How else to explain the transformation of the beneficial on-site concept initially crafted by the MHCC into a distorted, convoluted caricature of the pointless paperwork, needless record-keep- ing, red-tape and duplicative, costly, multi-lay- ered "inspections" that characterize the rest of today's manufactured housing program -- and keep expanding at rates (of funding, intrusiveness and waste) that far exceed the modest growth of the industry following record-low production in 2009? Under the final rule, as detailed by HUD at the January 2016 MHCC meeting, HUD Code man- ufacturers would be responsible for 18 new and separate actions to engage in the on-site comple- tion of one or more homes, and that number re- flects only the steps that would need to be taken before the 100% inspection of all such homes on- site by the manufacturer and the manufacturer's Production Inspection Primary Inspection Agency (IPIA) (or IPIA designee), subject, in turn, to oversight by HUD's revenue-driven "monitoring" contractor. Nor does it reflect the multitude of new functions – including substantial new paper- work and record-keeping mandates – that IPIAs and Design Approval Primary Inspection Agencies (DAPIAs) would be responsible for, with signifi- cant corresponding costs passed-along to manu- facturers and, ultimately, consumers. Even worse, in addition to creating all of this time-consuming and costly new on-site bureau- cracy -- which will inevitably interfere with the timely and efficient delivery of homes to con- sumers, leading to needless but predictable dis- putes -- the HUD final rule is over-reaching and over-broad in scope, applying to routine finishing items (e.g. double-doors) that currently are not subject to the AC system and are completed now with little fanfare, cost, regulatory involvement, or -- most importantly – problems for the home- buyer. While it was not surprising to hear HUD pro- gram officials admit, at the January MHCC meet- ing, that they had not really considered the cost of this regulatory quagmire, it is worth asking HUD why -- at a time when the industry is producing its best homes ever and has achieved a documented level of construction quality that has seen referrals to federal and state dispute resolution programs (an urgent priority of consumer representatives in the development of the 2000 reform law) running near or below 1% -- it seeks to impose such a de- bilitating, cumbersome and punitive system on the industry? And, in particular, HUD should be called to account on why – as with so many other aspects of its unwieldy contractor-dependent reg- ulatory system – it seeks to impose layer-upon- layer of new regulatory mandates that are not only not supported by existing quality metrics, but would impose disproportionate burdens on, and disproportionately harm, smaller industry busi- nesses. The MHCC, for its part, recognizing that the HUD final on-site rule represents a gross distortion of the concept it originally envisaged, unanimously (and immediately) adopted a resolution calling on \ 18