Post-Production Segment's Difficult Decision

MHARR Viewpoint - October 2010
By Danny D. Ghorbani

This is the second of a two-part series designed to explore the difficulties confronting the manufactured housing industry, consider the causes of those difficulties and suggest common-sense solutions to help the industry recover from its steep decline of the past twelve years and expand further to meet the needs of consumers of affordable housing. For purposes of this article, the term "production sector" refers to HUD Code manufactured home producers and product suppliers. The term "post-production sector" refers to HUD Code retailers, communities, developers, installers, finance providers and insurers.

The first part of this series – the August 2010 MHARR Viewpoint – concluded that although manufactured housing and the manufactured housing industry are a favorite of lawmakers at every level of government, because the industry provides badly needed manufacturing jobs and affordable housing that does not require costly taxpayer-funded subsidies, the industry has been unable to effectively advance its well-being and prosperity and that of its consumers – particularly after production activity gives way to the post-production phase.

To illustrate this, consider the principal problem that has emerged during the past twelve years and today stands as the main bottleneck for the entire industry and its consumers – the lack of consumer financing. As experts on the subject have pointed out, problems with consumer financing – a transaction between and controlled by retailers, finance providers and consumers – did not spring up overnight. Instead, the decline of consumer financing has festered for years without effective industry action. The same holds true for other matters that have fueled the industry's decline, including restrictions on zoning, placement and installation. And now that Congress has enacted laws designed to restore and expand financing to help the industry and its consumers, through the duty to serve mandate and reforms to the Federal Housing Administration Title I program, the same ineffectiveness is allowing those reforms to be undermined and then languish at the administrative level.

This is occurring because of a basic structural defect in the collective representation of the industry in the nation's capital. The current illogical and dysfunctional structure of that "one-size-fits-all" collective representation, stands in the way of strong policy positions tailored to advance the specific interests of the two primary segments of the industry (i.e., production and post-production). Instead, it pits interests within the industry against each other, producing policy positions that are a needlessly weak and ineffective lowest common denominator before the implementation phase even begins. Worse yet, as manufacturers have learned to their dismay, these diluted positions are deftly exploited by regulators and others to blunt and resist stronger and more focused positions from other parts of the industry. This dysfunctional structure only seems to work for the select few who benefit at the expense of all others.

In an age of specialization, where a tightly focused agenda, a clear message and strict accountability are essential to wringing the maximum value and benefit from every member's representation dollar. This defect should have been addressed by the post-production sector with the cooperation and assistance of producers sooner. Instead, the manufactured housing industry stands alone among major industries in the nation's capital in maintaining a structure of collective representation that lumps together both the production and post-production sectors of the industry.

To better understand the flaws of this structure, consider the representation structure of the two production industries that are closest in character to manufactured housing – the site-built housing industry and the recreational vehicle (RV) industry. Both industries have separate production (National Association of Home Builders/ Recreational Vehicle Industry Association) and post-production (National Association of Realtors/Recreational Vehicle Dealers Association) organizations in the nation's capital. Manufactured housing effectively stands between the two because its product, like the site-built industry, is housing, while post-production activity more closely resembles that of RVs, particularly in the area of financing And, the fact that nearly every production industry is represented this way in the nation's capital except manufactured housing is particularly ironic because the manufactured housing industry is subject to comprehensive federal regulation on the production side – requiring a very special laser-like focus – while the post-production sector is subject to a multitude of laws and requirements at the national, state and local level, requiring a different kind of focus.

But, it was not always this way. When the industry first moved its national representation to Washington, D.C., the post-production sector had its own dedicated advocacy organization, the National Manufactured Housing Federation (Federation). Although painfully under-funded, the Federation effectively advanced the specific views, positions and interests of the post-production sector in the nation's capital before ultimately, due to such under-funding, coupled with the desire of some large manufacturers to vertically integrate their operations, the Federation merged into what is now an "umbrella" organization.

Since that merger, the huge post-production sector has not had its own unified and distinct voice, even though its members pay significant representation dues at all levels. Instead, its voice is submerged within a broad mix of other interests, through committees, councils, task forces, working groups and other filters, leading to a weak, unfocused message that harms not only the post-production sector, but manufacturers as well, as it is ineffective and fosters gamesmanship by regulators (e.g., holding the issues of one segment hostage to the other, or by playing favorites with certain entities within each sector).

Instead of this weak, ineffective model of collective representation that currently works against the interests of all segments of the industry, the post-production sector needs and should once again have, its own identity and its own organization in the nation‘s capital, with ultimate decisions made by its own members through a governing body comprised of an independent board of directors, to focus on its specific concerns, issues and interests. Such a realignment of the industry's collective representation in the nation's capital, creating two associations, a production association and a post-production association, would streamline the representation of both sectors, would ensure the advancement of unified positions for both sectors without pitting the interests of different sectors against each other, and provide improved benefits for consumers. Such a structure would also liberate each sector to take the strongest, most effective approach possible, without having to achieve a multi-sector lowest-common denominator.

By streamlining operations and increasing the effectiveness of each sector, this new structure – which would have a joint coordinating council with 2-3 members from each association that would meet 1-2 times a year to coordinate on joint issues – would cost each industry member less for representation than they are paying now at all levels. It would also provide the industry with a means to directly hold its national representatives responsible and accountable, so that it would not feel the need to throw good money after bad by bringing in new messengers to reinvent the wheel.

In MHARR's view, the post-production sector can enhance and strengthen its representation in the nation's capital and working jointly with the production sector save the industry through bold and decisive actions.