By Mark Weiss
“Time for REAL Change at HUD … and Beyond”
Welcome to the inaugural issue of “MHARR -- Issues and Perspectives.” This will be the first in a new series of periodic articles addressing issues of concern to the manufactured housing industry and the American consumers who rely on affordable manufactured homes. For those accustomed to reading the “MHARR Viewpoint” column formerly published on a monthly basis in The Journal of Manufactured Housing, these articles will be familiar and will use a similar – although not identical -- format. Unconstrained by limitations related to third-party publication, these articles will offer both analysis and opinion regarding the often-complex issues facing the industry, its members and manufactured housing consumers in Washington, D.C. MHARR plans to publish these articles from time-to-time, providing them to the individuals, organizations, congressional members and staff, and government agencies on its extensive electronic distribution list. It will also make them available, on a non-exclusive basis, for re-publication in industry (and other) trade publications, reports, journals and newsletters.
That said, with a new Administration having now taken office in the nation’s capital, committed, as one of its core principles, to the “deconstruction of the administrative [i.e., regulatory] state,” the single most important national issue facing manufactured housing, as a federally-regulated industry, is the reform, reconstruction and reorganization of the federal manufactured housing program at HUD to fully implement – and fully comply with – the Manufactured Housing Improvement Act of 2000. It is the failure to implement the fundamental reforms of this law, which lies at the root of the most significant roadblocks facing the industry and manufactured housing consumers today. Put differently, while some might wish to paper it over, deny it, or offer distractions, the key reality affecting the manufactured housing industry in early 2017, is that there is a HUD aspect to every major national-level roadblock that it – and its consumers -- confront. And if that is ever going to change, the HUD manufactured housing program must change, beginning -- but not ending -- with a change in leadership at the top of the program.
What are the “roadblocks?” The most serious include: (1) needless, costly and destructive over-regulation of manufactured housing by HUD (and other agencies); (2) continuing discrimination in securitization and secondary market support for manufactured home consumer loans (i.e., implementation of the “Duty to Serve Underserved Markets” – DTS) and chattel loans in particular; and (3) discriminatory land use laws that exclude or severely restrict the placement of HUD Code manufactured homes in large swaths the country.
In spite of these major roadblocks, manufactured housing has mounted a steady – yet gradual -- economic recovery since hitting record-low production levels in 2009. This is a tribute to the industry’s homes and its people, who persevere in the face of obstacles and prejudices that are either flat-out wrong, or were outdated long ago. But a slow recovery is not enough. With the ever-growing need for affordable housing and homeownership across the United States, and with the advantages that manufactured housing offers at an inherently affordable price, the industry should rightfully be producing hundreds-of-thousands of homes each year.
So how does responsibility for these “roadblocks” and their extremely damaging consequences land at the door of the HUD program? Simple. The landmark Manufactured Housing Improvement Act of 2000 imposes broad responsibilities on the HUD program, but the program, with its present leadership, entrenched contractors and equally entrenched regulators -- all laboring under a rigid, biased and thoroughly outdated perspective of the industry, its people and its homebuyers -- has utterly failed to live-up to that statutory mission.
Under the 2000 reform law, HUD’s mission is not merely to regulate manufactured housing. Its responsibilities go much further. The law, for example, directs HUD to: (1) provide “funding for a non-career [program] administrator;” (2) “ensure that the public interest in … affordable manufactured housing is duly considered in all determinations relating to the federal standards and their enforcement;” (3) “facilitate the availability of affordable manufactured homes;” (4) “facilitate[e] the acceptance of … manufactured housing within HUD;” and (5) “broadly and liberally” construe federal preemption.” There is plenty more in the 2000 reform law, but these directives are sufficient to make the point.
Congress knew that it was asking HUD, in the 2000 reform law, to be more than a regulator for manufactured housing. It knew that manufactured housing, despite its quality and affordability, continues to face discrimination – both within and outside government. That is one of the reasons it directed the appointment of a non-career administrator for the program – knowing that in order for manufactured housing to play its full and rightful role within the broader housing market, it would need a powerful, assertive and accountable political appointee to elevate the status of the program at HUD, sweep away the bias that holds back both the industry and its consumers, and hold the line against entrenched regulators and entrenched, revenue-driven contractors.
Instead of the fundamental reform, though, that Congress sought to impose on program regulators (which the program, during the entire legislative process, sought to defeat or undermine), the basic structure and orientation of the HUD program has remained the same – with a career administrator, entrenched, revenue-driven contractors wielding the power of judge, jury and executioner, and entrenched regulators – with a severely outdated perspective of both manufactured housing and the federal program -- committed to ever more intrusive, intensive and costly regulation. Indeed, if anything, the program over the past three years, has sharply deteriorated, totally disregarding its broader mission under the 2000 law, while ratcheting-up regulation and the virtually unchecked and illegitimate power of its contractors, including, now, not just the 40-year, de facto sole-source program “monitoring” contractor, but its installation contractor as well.
The program, under the current career Administrator, therefore: (1) is completely absent from HUD’s latest five-year strategic plan; (2) has significantly intensified regulation and regulatory compliance costs, despite hard data showing that today’s manufactured homes offer an unprecedented level of quality for consumers; (3) has allowed revenue-driven contractors to turn good ideas emerging from the Manufactured Housing Consensus Committee (MHCC) – like a streamlined “on-site construction” system -- into a paperwork boondoggle that is driving producers to avoid covered site-work altogether, or deliver site-completed homes as modulars in order to avoid the HUD quagmire; (4) is allowing its installation contractor to effectively take-over the federal installation program; (5) is seeking to assume de facto control over installation standards and programs in states with approved state law installation programs; (6) has increased the certification label fee paid by manufacturers by 156%; (7) has blocked collective industry representatives, with hard-earned institutional knowledge, memory and expertise, from serving on then MHCC as voting members; and (8) shortly after the label fee increase, sought to short-shrift State Administrative Agencies (SAAs), threatening the viability of the federal-state partnership underlying the entire program, until MHARR intervened. And that is just within HUD itself.
Broaden out the focus a bit more, and the failure of the program and its leadership becomes even more evident. Take energy regulation. What has HUD done to stop the U.S. Department of Energy, in a fundamentally-tainted rulemaking process, from singling-out manufactured homes and manufactured homebuyers for crushing energy standards (strongly opposed by MHARR) that will far exceed standards imposed on million-dollar site-built homes and devastate the HUD Code market – in a still pending rulemaking? In a word, nothing.
Take the availability of consumer financing for manufactured homebuyers. Manufactured housing activity under the Federal Housing Administration (FHA) Title I program has fallen to insignificant levels due to the Government National Mortgage Association’s (GNMA) unduly restrictive 10-10 rule. Both FHA and GNMA are HUD agencies. What has HUD done to change the devastating status quo? Nothing.
Meanwhile, the Federal Housing Finance Administration (FHFA) has issued a final “Duty to Serve” (DTS) implementation rule – strenuously opposed by MHARR -- that fails to impose any mandatory “duty” regarding manufactured home consumer financing on Fannie Mae and Freddie Mac at all, other than a duty that they explain why they are doing nothing to better serve HUD Code consumers. The response from HUD in two open rulemakings? Zero, while manufactured home owners – at least the ones not excluded from homeownership altogether due to the resulting higher-than-necessary interest rates – are needlessly forced into higher-rate loans in a less-than-fully-competitive financing market.
How about land use and placement? Towns and communities discriminate against HUD Code homes, HUD Code communities and HUD Code consumers around the nation every day, often excluding manufactured homes altogether, or concentrating them into lower-income pseudo-“ghettos.” HUD, under the 2000 law, could preempt those measures. It has also claimed authority, under its Affirmatively Furthering Fair Housing (AFFH) rule, to override local zoning ordinances that discriminate against affordable housing. Indeed, it recently forced a Pennsylvania community into a consent agreement reversing a zoning enactment against an affordable housing development under that same regulation. But what has the HUD program done to prevent the wholesale exclusion of HUD Code homes that it fully and comprehensively regulates? Again, nothing.
All of this hurts consumers and the industry’s small businesses the most. Larger industry businesses, shielded by multi-billion-dollar corporate mega-empires, either do not care, or quietly applaud the disproportionate damage inflicted on smaller competitors while awaiting opportunities to corner an even larger share of the market. Warren Buffet himself alluded to this in his latest “Shareholder Letter” to Berkshire Hathaway, Inc. stockholders: “Some years the gains in underlying earning power we achieve will be minor; very occasionally the cash register will ring loud. *** Every decade or so, dark clouds will fill the economic skies, and they will briefly rain gold. When downpours of that sort occur, it’s imperative that we rush outdoors carrying washtubs, not teaspoons.” (Emphasis added).
Needlessly harsh, discriminatory and unnecessarily costly regulation only helps seed the clouds that produce the kind of “downpours” Buffet refers to. President Trump knows this. He knows that over-regulation strangles the smaller businesses that are the engines of higher employment and greater economic growth. That is why he has pledged to reduce or eliminate unnecessary, job-killing federal regulation, and has already issued Executive Orders designed to begin the process of achieving that goal.
Such policies are tailor-made for the manufactured housing industry to fundamentally reform the HUD manufactured housing program and put it on a path to fully comply with all aspects of the 2000 reform law. Another opportunity like this may never present itself again, and the manufactured housing industry – being subject to comprehensive federal regulation -- should be at the head of the queue to take full advantage of these policies rather than debating whether to get in the line at all, as some in the industry continue to contemplate.
That is why MHARR recently issued a list of policy priorities approved by the Association’s Board of Directors at its post-election, November 2016 meeting. Those priorities make it clear that after years of abuse by federal regulators acting contrary to the law and empowering entrenched revenue-driven contractors to target the industry, the new era of regulatory deconstruction being ushered-in by the Trump Administration offers a profound opportunity that must not be missed or squandered. While other segments of the industry have not given any public indication of a change in course, direction or approach based on this new reality, MHARR has already started to take action based on these fundamental objectives:
Obviously, this list is not exhaustive, as there are numerous other issues – particularly impacting the industry’s post-production sector – such as discriminatory zoning and placement restrictions, federal preemption and non-discriminatory consumer financing beyond the “duty to serve” – which also must be addressed.
But now is no time for more go-along-to-get-along. Now is the time, as President Trump said in his speech before Congress, to think boldly and act boldly – to demand new leadership at the HUD program in full accordance with the law, to seek new blood and fresh perspectives within the program and among its personnel, and to flush out the entrenched contractors and entrenched interests that use the federal program – and abuse its stakeholders – to feather their own nests.
MHARR will act. Will others? Time will tell.
MHARR is a Washington, D.C.-based national trade association representing the views and interests of independent producers of federally-regulated manufactured housing.
“MHARR-Issues and Perspectives” is available for re-publication in full (i.e., without alteration or substantive modification) without further permission and with proper attribution to MHARR.