Issue link: https://read.dmtmag.com/i/733263
MHARR, its fair to say, has been a consis- tent critic of a HUD manufactured housing pro- gram enforcement system that is overly dependent on paid contractors, and a contract- ing system that – in addition to being funda- mentally non-competitive over its entire history -- improperly allows contractors to perform in- herently governmental functions and, worst of all, incentivizes contractors to find fault with the homes, plants and offices that they "audit." While all this is bad enough, HUD, since 2010, has made matters far worse with its unilateral program of expanded in-plant regulation, which changed the entire focus and nature of that reg- ulation. From the very start, MHARR (alone) went on record objecting to this change as not only being in violation of the Manufactured Housing Improvement Act of 2000, but also a make-work sop for the entrenched program monitoring contractor. And now there is spe- cific data -- ironically from the contractor itself -- which confirms the fundamental "make- work" character of this program. To start, let's review the known – and indis- putable – facts. Between 1998 and 2015, the production of HUD Code manufactured homes fell from 374,143 to 70,544 homes per year, a contraction of approximately 81 percent. Records of HUD's contract spending before 2005 are not readily available, though, so we'll focus on the period between 2005 and 2015. During that ten-year period, HUD Code pro- duction fell from 146,881 homes in 2005, to – again – 70,544 homes in 2015, or a contraction of just under 52 percent. Now, one would think, during an extended period of declining production covering multiple contract terms, that the amounts budgeted (and paid) for con- tract "monitoring" services (as defined in the 2000 reform law) would have declined, roughly in proportion to the decline in production (ad- justed for inflation). But that did not happen. Budget justifica- tions submitted by HUD to Congress each year between Fiscal Year (FY) 2005 and FY 2017, show that budgeted payments to the program monitoring contractor remained effectively con- stant until FY 2010. In FY 2011, however, budgeted contractor funding increased and, since that time, has increased by a factor of 62 percent, from $3,200,000 to now $5,200,000 in the HUD FY 2017 program budget request. So even though industry production, in total annual numbers, has fallen signifi- cantly since FY 2005, with corre- sponding decreases in the number of manufacturers, production facilities and retailers, funding for the pro- gram monitoring contract has been heading sig- nificantly higher. Meanwhile, since 2005, the cumulative rate of inflation has been 23.2 per- cent. Even adjusted for inflation, therefore, budgeted payments to the monitoring contrac- tor, since 2005, have grown by nearly 40 per- cent in real dollars. So, the obvious question, is "why?" In 2008, with HUD Code production in freefall, the HUD program (through its then- Administrator) approached the Manufactured Housing Consensus Committee (MHCC) with proposed changes to the in-plant regulatory sys- tem, including, among other things, the role of Primary Inspection Agencies (PIAs), the na- ture of the "inspections" and corresponding re- ports provided by PIAs, and the "monitoring" of those activities by HUD, though the program's one – and only – "monitoring" contractor. After fully debating this series of disconnected and disjointed HUD proposals, the Committee ultimately determined that it could not reach the consensus required by the 2000 reform law. And the matter should have ended there, but did not. Contemporaneously with the de facto rejec- tion of these proposals by the MHCC, the HUD program, without further consultation with the MHCC, began to develop and -- by March 2010 – implement, the paper blizzard of "Stan- dard Operating Procedures," "guidelines," "field guidance," flow charts and other pseudo-regu- latory mandates that changed the fundamental focus of the in-plant regulatory system to the re- view (and modification) of manufacturer "qual- ity control" systems. With this program of expanded in-plant regulation, came multiple new reports and paperwork by manufacturers, PIAs and the monitoring con- tractor, multiple reviews of those reports, multiple layers of meetings and "consultations" between manufacturers, PIAs and the contractor and, of course, new, additional and expanded "audits." All of this change – without the benefit of actual rulemaking (as required by the 2000 law) -- was touted by HUD (and others), at the time, as a money-saver. But it has not worked out that way. Once the program of expanded in-plant regulation went into effect in 2010, budgeted funding for the contractor – despite declining production, numbers of manufacturers, numbers of manu- facturing plants and numbers of retailer locations – began to increase, and has increased at an ac- celerating rate ever since. Naturally, in order to keep pace with these rising contract expenditures at a time of sub- stantially-reduced industry production, and with a new $25 million five-year contract awarded to the contractor in 2013, HUD – in 2014 – raised the certification label fee for every new manufactured home by a record-setting 156 percent, claiming, incredulously, that despite significant, long-term industry production de- clines, the magnitude of its "responsibilities" re- mained "unchanged." Manufacturers, therefore, in addition to facing higher regula- tory compliance costs resulting from increased paperwork, record-keeping, information track- ing, reporting requirements, and audit pressures under this new system, also now pay more in label fees (together with their customers) to fi- nance this unnecessary regulatory expansion (as OCTOBER 2016 12 THE JOURNAL Production, Paperwork and Contractor Make-Work MHARR VIEWPOINT BY MARK WEISS