HUD Proposes Rule to Adopt EPA Formaldehyde Standards — Eliminate Formaldehyde “Health Notice”

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The U.S. Department of Housing and Urban Development (HUD), in the March 22, 2019 edition of the Federal Register, has issued a proposed rule that would amend the Federal Manufactured Housing Construction and Safety Standards (24 C.F.R. 3280) and Procedural and Enforcement Regulations (24 C.F.R. 3282) to incorporate formaldehyde emission controls and related certification requirements previously adopted by the U.S. Environmental Protection Agency (EPA) pursuant to the Formaldehyde Standards for Wood Products Act of 2010. HUD’s action implements a directive in that law, requiring HUD to update its manufactured housing formaldehyde standards to ensure consistency with the EPA standards, within 180 days of the enactment of the EPA standards.

Given the statutory nature of this mandate, MHARR, in comments before the Manufactured Housing Consensus Committee (MHCC), at its October 25-27, 2016 in-person meeting, and in separate regulatory reform comments pursuant to Trump Administration Executive Orders 13771 and 13777, submitted to HUD in June 2017 and February 2018, specifically called on the Department to repeal the red formaldehyde “health notice” currently required by section 3280.309 of the federal manufactured housing standards. Emphasizing that the new EPA requirements apply to composite wood building materials across-the-board, and that “manufactured homes utilize the same construction materials as site-built and other types of homes,” MHARR stated that the “discriminatory requirement [for] each manufactured home [to] prominently display” the red formaldehyde “health notice,” must be repealed.

And now, based on MHARR’s consistent position on this matter, HUD is planning, as part of its March 22, 2019 proposed rule, to eliminate this red formaldehyde “health notice,” which has been a subject of significant controversy – and a discriminatory impediment to the industry and its growth – for over three decades.

Comments on HUD’s proposed rule must be submitted by April 22, 2019.  MHARR, as usual, will submit comments in advance of the deadline, which may be cited by other interested parties.  This matter, in addition, will be addressed at MHARR’s upcoming Board of Directors meeting.

HUD Secretary Carson HUDdle Conference Features Manufactured Housing Association for Regulatory Reform Engagement on Zoning, Placement, and Financing

HUDSecretaryCarsonPhotoHUDdleCOnferenceFeaturesManufacturedHousingAssocForRegulatoryReformEngagementZoningPlacementFinancing600MHARRlogo

The Department of Housing and Urban Development, on March 20, 2019, held the latest in a series of “HUDdle” conferences with invited HUD-program stakeholders.  The conferences, which are an initiative of — and hosted by — HUD Secretary Ben Carson, focus on emerging issues at the Department, including, but not limited to, aspects of its ongoing regulatory reform process.

MHARR’s president emphasized the urgent need for HUD to address and resolve two key issues that continue to suppress the availability of inherently affordable manufactured housing for millions of American consumers, and the economic growth of the industry.

Those two issues are, first, discriminatoryzoning laws that exclude or severely restrict the placement of manufactured homes in large areas of the country.  The second is the critical need for reform at Fannie Mae, Freddie Mac and the Federal Housing Administration (under the “Duty to Serve” and beyond), to substantially increase the availability of manufactured home consumer financing (and especially personal property or ‘chattel’ financing) to market-significant levels.

MHARR will be following-up soon with relevant HUD officials to further pursue these key policy objectives. ##

MHARR Analysis Exposes HUD PD&R Energy Costs “Whitewash”

MHARR MHCC APRIL 2019 PD & R ENERGY COST COMMENT

Washington, D.C., March 19, 2019 –The Manufactured Housing Association for Regulatory Reform (MHARR) has filed an analysis and comments (copy attached) with the federal Manufactured Housing Consensus Committee (MHCC) exposing a blatant whitewash of supposed manufactured housing energy regulation costs developed at the request of the MHCC by the Department of Housing and Urban Development’s Office of Policy Development and Research (PD&R).

PD&R’s ostensible “analysis” of U.S. Department of Energy (DOE) cost/benefit data initially developed as part of a fundamentally tainted and contrivedDOE “negotiated rulemaking” process, not only fails to provide the independentfact-finding regarding the potentially enormous costs of proposed DOE manufactured housing energy standards sought by the MHCC, but constitutes a cover-up and attempt to legitimate, after-the-fact, a brazenly-contrived DOE rulemaking process (and related alleged cost-benefit inputs) that were rejectedby the Office of Management and Budget and its Office of Information and Regulatory Affairs (OIRA) not once, but twice.

To the extent that DOE’s most recent regulatory proposals, contained in the August 2018 “Notice of Data Availability” (NODA) allegedly “analyzed” by PD&R, expressly rest-upon and are admittedly derived from those earlier illegitimate data inputs – thoroughly deconstructed and disproven by MHARR, the George Washington University Regulatory Studies Center and the U.S. Small Business Administration — there is absolutely no valid basis for the NODA proposals, and PD&R’s alleged “analysis” of that data is completely baseless and factually worthless.  As a result, MHARR’s comments call for a completely newstandards development process for anynew manufactured housing energy standards, ifany such standards (which are unnecessary as shown by U.S. Census Bureau energy cost information) are, in fact, developed.

The Manufactured Housing Association for Regulatory Reform is a Washington, D.C.-based national trade association representing the views and interests of independent producers of federally-regulated manufactured housing.

Dear Members of the Manufactured Housing Consensus Committee:

The Manufactured Housing Association for Regulatory Reform (MHARR) submits the following comments concerning the October 26, 2018 memorandum of the U.S. Department of Housing and Urban Development’s (HUD) Office of Policy Development and Research (PD&R), entitled “Evaluation of Cost Figures Found in Department of Energy’s NODA Packages – Draft Results July 2018.”

  1. INTRODUCTION

At its September 11-13, 2018 meeting, the Manufactured Housing Consensus Committee (MHCC) reviewed a Notice of Data Availability (NODA) and related materials published by the U.S. Department of Energy (DOE) regarding proposed energy standards for federally-regulated manufactured homes.[1]The NODA constitutes, by its own terms, a “re-evaluation” of DOE’s approach to manufactured housing energy regulation pursuant to section 413 of the Energy Independence and Security Act of 2007 (EISA) and a “re-examination”[2]of the specific manufactured housing standards, methodologies and underlying data and analytics published by DOE as a proposed rule on June 17, 2016.  Pursuant to this review, the MHCC adopted two resolutions — one objecting to the timing and substanceof the NODA, and seeking a re-delegation of the entire matter of manufactured housing energy standards back to HUD and the MHCC[3]and a second resolution, requesting HUD PD&R to “submit a document to the MHCC which includes comparable cost figures similar to” the DOE NODA package draft results.[4]

Ostensibly in response to this request, HUD PD&R conveyed a cursory three-page memorandum to the Acting Administrator of the HUD Manufactured Housing Program on October 26, 2018.[5]Inexplicably, this memorandum was not made available to MHCC members, interested parties, or the general public until late-January 2019. Without offering anyspecific analysis of DOE’s data or assumptions, or details of its own alleged review, the PD&R memorandum nevertheless posits two broad conclusions, stating: (1) that PD&R “does not object” to DOE’s “cost figures;”[6]and (2) that PD&R “broadly speaking… does not object to the methodologies and assumptions used within DOE’s [life-cycle cost analysis] and annualized spreadsheets.”[7](Emphasis added). These conclusory assertions,[8]however: (1) are not responsive or even relevantto the actual data and analysis requested by the MHCC; (2) rely on discredited, illegitimate alleged data and related analytics developed as part of the fundamentally-tainted, sham DOE 2014-2016 “negotiated rulemaking” process (see below); and (3) rely, in part, on assumptions that have since been repudiated by the Trump Administration.[9]For all of these reasons, the October 26, 2018 PD&R “analysis” – like DOE’s NODA and June 17, 2016 proposed rule — is factually worthless and illegitimate, and, if anything, demonstrates that any additional manufactured housing energy standards, if pursued at all,[10]must be the subject of an entirely new, legitimate and fully-transparent rulemaking process.

  1. PROCEDURAL SUMMARY AND BACKGROUND

As MHARR has extensively detailed in prior comments filed in response to DOE’s original June 2016 Notice of Proposed Rulemaking (NOPR) and its 2018 NODA, the substantive proposals andalleged supporting data contained in bothDOE actions, are the product of a fundamentally tainted, illegitimate and arguably scandalous DOE “negotiated rulemaking” process. DOE has admitted[11]that it initiated this supposed “negotiated rulemaking” in 2014 – some seven years following the enactment of EISA – after a 2011 “draft” DOE manufactured housing energy rule was “impermissibly” (and discriminatorily) leaked to parties in interest[12](including industry representatives and energy special interests) and DOE was instructed by the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs (OIRA) to begin its regulatory process for the development of manufactured housing energy standards “anew.”[13]

Instead of “starting-over” with a completely new, legitimate rulemaking and standards development process, however – as shown by multiple documents disclosed by DOE pursuant to the Freedom of Information Act (FOIA) — DOE, with the support of the Manufactured Housing Institute (MHI)[14]and multiple allied energy special interests,[15]instead orchestrated a highly-truncated, non-substantive, sham “negotiated rulemaking” process to serve as a fig-leaf to satisfy OIRA while simultaneously continuing to pursue the “impermissibly disclosed” 2011 “draft” manufactured housing energy standards rule already developed by DOE. Toward this end, former MHI Regulatory Affairs Vice President Lois Starkey, on March 14, 2014, wrote to DOE, seeking to revive the then-moribund DOE manufactured housing rulemaking process via a negotiated rulemaking with “a tight meeting schedule” and “a minimum of meetings” (emphasis added) – notwithstanding the complex, highly-technical and price-sensitive nature of the subject matter involved, based on the previously “impermissibly distributed” 2011 “draft NOPR and Technical Support Documents for opening discussion” – i.e., in order to facilitate a whitewashof the 2011 “draft” DOE rule and appearto “begin the [regulatory] process anew,” as directed by OIRA, while, in fact, doing no such thing.

The specific coordination of this sham process between DOE and outside energy special interests is confirmed by a May 21, 2014 email exchange between DOE official John Cymbalsky and then-Natural Resources Defense Council (NRDC) official (and later MHCC member) Robin Roy, also disclosed to MHARR by DOE pursuant to FOIA:

Robin Roy:  “[Can] I send you a letter …?   It would be a joint letter in support of [a] working group on manufactured housing with diverse signers from our regular MH discussion group (including industry, consumer interests, EE advocates).”

Cymbalsky: “That would be great to have sooner than later. *** How much time do you anticipate asking for in terms of negotiating a NOPR?”

Robin Roy: “Short. 2 meetings would be great.  But we won’t be specific in the letter.”[16](Emphasis added).

Subsequently, in a May 28, 2014 letter to DOE, MHI, NRDC and other energy special interests again sought a negotiated rulemaking based on “a tight meeting schedule with a minimum of meetings, e.g., 2 two-day meetings” utilizing the 2011 “draft NOPR and Technical Support Documents” as the basis for further discussion.  (Emphasis added).[17]

These exchanges resulted in a rushed, truncated and superficial process utilizing a “negotiating” Working Group comprised almost entirely of energy special interests and other intra-industry supporters of DOE energy regulation, including alleged manufactured housing energy “experts” which – as disclosed through FOIA document requests – had previously been paid millions of dollars by DOE for supposed “research” contracts.[18]Cost estimates for the proposed standards, moreover, were developed behind closed doors by a Working Group contractor, based on an undisclosed survey of unidentified manufactured housing producers selected by MHI and   conducted in secret, with no indication that any smaller manufacturers were surveyed. Indeed, open cost figures developed by MHARR manufacturers show a retail cost impact of nearly $6,000.00 for the Term Sheet-based standards, while DOE posited cost impacts of slightly more than $2,000.00 in its initial June 17, 2016 NOPR.  Not surprisingly, given that the DOE rulemaking process was entirely contrived, the final “Term Sheet” assembled by the Working Group was approved with MHARR casting the onlynegative vote.  This huge cost discrepancy, however — which is highly relevant to lower and moderate-income consumers within the largely price-inelastic manufactured housing market — is totally ignored by PD&R in its October 26, 2018 memorandum. 

While the June 17, 2016 DOE proposed rule – derived from the tainted Working Group Term Sheet — was subsequently rejected once againby OIRA and withdrawn, as a result, by DOE in January 2017,[19]the 2018 NODA, as it expressly acknowledges, is based on the alleged cost “information” developed by the fundamentally illegitimate “negotiated rulemaking” Working Group.[20]Thus, the 2018 NODA derives from and is itself an ultimate product of the fatally-tainted and illegitimate DOE “negotiated rulemaking” process. By referring this matter to HUD PD&R for supposed “analysis,” however, the MHCC has inadvertently invited yet another “whitewash” of this matter, insofar as the so-called PD&R “analysis” is non-responsive to the MHCC’s actual inquiry, is based on a non-transparent methods, assumptions, methodologies and inputs that cannot be legitimately evaluated, and ignores OIRA’s repeated rejection of underlying DOE proposals and the supposed justifications and bases for those proposals. Moreover, given HUD PD&R’s own history of political bias in favor of – and as an enablerof — greater and more costly federal manufactured housing regulation (before being curbed to some degree by MHARR), any analysis produced by PD&R is inherently suspect.

 

  • COMMENTS 
  1. PD&R’S ALLEGED “ANALYSIS” IS NOT RESPONSIVE

OR RELEVANT TO THE MHCC’S 2018 DATA REQUEST  

The MHCC, in its September 11, 2018 resolution, specifically requested that HUD PD&R develop, and submit to the MHCC, a document including “comparable cost figures, similar to” the DOE NODA package draft results.[21](Emphasis added). The October 26, 2018 PD&R memorandum, however, does no such thing. Instead, without anyindependent data, transparent, publicly reproducible (or reproduced) analysis, disclosure of sources, methods and inputs, or, apparently, consideration or even recognitionof the multiple fatal flaws in the alleged data inputs to the tainted and illegitimate DOE “negotiated rulemaking” process identified by MHARR in written comments in the DOE public rulemaking docket, the October 26, 2018 memorandum summarily concludes with the opinionthat  PD&R “concurs with DOE NODA’s “methodology and resulting cost figures.”[22]There is, however, no valid, legitimate, or credible basis offered for that opinion, meaning that the PD&R memorandum not only failsto deliver the independent information requested by the MHCC, but instead illegitimately seeks to buttress the unreliable, unreproducible[23]and ultimately invalid alleged “data” underlying both the June 17, 2016 DOE proposed manufactured housing energy rule andthe 2018 DOE NODA. As such, the October 26, 2018 PD&R memorandum is not only factually worthless for purposes of MHCC review, but affirmatively misleading.

First, the MHCC did not request or seek a simplistic, conclusory three-page opinion piece affirming alleged DOE data that MHARR, in previous DOE comments, has already shown is baseless – both under-representing the consumer-level cost of the June 17, 2016 DOE proposed rule and, by necessary implication, the 2018 DOE NODA proposals, while simultaneously over-stating the alleged benefits of both proposals. Instead, the MHCC sought and requested independent data and related analysis from PD&R, which was not provided.  If PD&R required additional time to perform the functions assigned to it by the MHCC, it should have sought that time, rather than produce and offer to the MHCC a warmed-over rehash of the same illegitimate alleged “data” and “analysis” already produced by DOE.

Second, PD&R states that it “contacted multiple individuals with expertise in manufactured housing related-energy matters.”[24]PD&R, however, does not disclose who those “individuals” are, what their qualifications may be, which specific “matters” were addressed, what their business and/or organizational affiliations are, whether they are part of or represent a special interest or special interest group, or whether any of those alleged “individuals” represent smaller industry businesses. One relevant question regarding the “individuals” contacted by HUD PD&R, however, doeshave a clear and unequivocal answer that is discernible on the public record. HUD PD&R did notbother contacting the one organization representing smaller, independent industry businesses that voted againstthe recommendations of the DOE Manufactured Housing Working Group (MHWG) and aggressively opposed both the June 17, 2016 DOE proposed rule and the 2018 NODA – i.e., MHARR. This begs the question whether PD&R’s undisclosed alleged inputs were solicited and received solely from proponents of – and active participants in – the sham, contrived “negotiated rulemaking.” Regardless, though, without transparent, legitimate data and/or factual inputs, the PD&R report is unverifiable and useless.

  1. PD&R’S ALLEGED “ANALYSIS” RELIES ON ILLEGITIMATE DATA AND ANALYTICS FROM DOE’S SHAM “NEGOTIATED RULEMAKING

Significantly, DOE’s 2018 NODA admits that its underlying cost-benefit calculations were based on – and derived from – “methods and data presented in” the original June 17, 2016 DOE NOPR.” This, in and of itself, invalidates the NODA proposals and related cost-benefit calculations, and illustrates the need for a completely newrulemaking process to develop energy standards pursuant to EISA section 413 (as expressly directed by OIRA), if indeed, any such standards are developed. As MHARR stated in its September 17, 2018 NODA comments:

“’As an initial matter, the threshold inquiry posed by DOE in the August 3, 2018 NODA, is ‘What analytical aspects related to DOE’s June 2016 proposal … should DOE consider re-examining as part of its of its ongoing consideration of a final rule for manufactured housing?’ *** MHARR’s simple and straightforward response to this threshold inquiry is that allof the ‘assumptions,’ data and alleged factual predicate underlying the June 2016 proposed rule should not only be ‘re-examined, but should be expressly rejectedby DOE, withdrawn, and replaced with valid, legitimate and transparent data developed by and through a valid, legitimate and transparent process. This is particularly the case insofar as DOE’s 2016 draft final rule — based on the June 2016 proposed rule and the “negotiated rulemaking” process which led to that draft final rule – did ‘not clear’ regulatory review by the OMB Office of Information and Regulatory Affairs and was withdrawn as a result.

“[E]ven if the alleged DOE ‘negotiated rulemaking’ in this matter were not fundamentally and irretrievably tainted – which it was – the data, information and ‘assumptions’ underlying that proceeding, its final Term Sheet and, ultimately, the June 2016 DOE proposed rule, were not produced, obtained or developed pursuant to an open or “transparent” process within the meaning of [Executive Order] EO 13777. Specifically, cost information inputs (apparently still being utilized by DOE in calculating the cost of its proposed energy “packages”) were provided to DOE by the Manufactured Housing Institute (MHI) — through a now-former Vice President who was a member of the “negotiated rulemaking” Manufactured Housing Working Group (MHWG) — without those cost inputs, or their source, or derivation, being disclosed either to other MHWG members, to the Manufactured Housing Consensus Committee (MHCC), or to the public. To the contrary, requests for the full disclosure of such information by MHARR’s representative to the MHWG were specifically denied.

“As a result … noneof the data, information, or assumptions utilized or produced by the MHWG or by DOE in developing or supporting the June 2016 proposed rule is legitimate, reliable, or consistent with EO 13777. Accordingly, allof that data should not merely be “reconsidered,” but should be affirmatively rejected … and replaced (ifDOE proceeds with any such standards) with new research, research methods, data and analytics that are fully transparent and fully consistent with Trump Administration regulatory policy.”

PD&R’s alleged analysis of the “data” relied-upon by DOE in its 2018 NODA, accordingly, is irrelevant, as is the alleged “data” itself. Insofar as that “data” was developed as part of an illegitimate, contrived DOE “negotiated rulemaking” process, allof that alleged “data” should be discarded and repudiated by DOE, thereby making any analysis of that “data” by HUD PD&R superfluous.

  1. PD&R’S ALLEGED ANALYSIS RELIES ON DATA ASSUMPTIONS THAT

HAVE SINCE BEEN REPUDIATED BY THE TRUMP ADMINISTRATION

Furthermore, even if the alleged “data” inputs to the DOE “negotiated rulemaking” process and 2018 NODA were not inherently unreliable and part of a sham process, the cost-benefit calculations underlying the June 17, 2016 DOE proposed rule and, by necessary implication, the 2018 NODA, were based, in part, on a “Social Cost of Carbon” construct that was subsequently withdrawn by the Trump Administration.

As MHARR previously noted in July 14, 2017 comments to DOE in response to its May 30, 2017 Request for Information seeking public comment pursuant to EO 13777 and EO 13771 (“Reducing Regulation and Controlling Regulatory Costs”) on DOE rules that are “outdated, ineffective, or excessively burdensome,” the June 17, 2016 DOE proposed rule was based, in substantial part, on cost-benefit information derived from the Obama Administration’s so-called “Social Cost of Carbon” (SCC) construct.  The SCC construct relied-upon by DOE, however, was later repealed by the Trump Administration through Executive Order 13783 (“Promoting Energy Independence and Economic Growth”), issued on March 28, 2017, which stated that the SCC was being “withdrawn as no longer representative of [federal] government policy.” Given this action, the June 2016 proposed DOE rule, which substantially relies on alleged consumer “benefit” information derived from the SCC, violates Section 3(d)(vi) of EO 13777, which provides for the repeal, replacement, or modification of regulations that “derive from or implement Executive Orders or other presidential directives that have been subsequently rescinded….” And, given the fact that the 2018 DOE NODA Packages – Draft Results document, by express acknowledgment, is premised upon “incremental costs and savings calculations … based on methods and data presented in the [June] 2016 NOPR,” those calculations – and the resulting NODA “packages” — likewise contradict and violate EO 13777, and should be rejected.

  1. CONCLUSION

For all of the foregoing reasons, the MHCC should reject HUD’s October 26, 2018 alleged “analysis” of the DOE NODA, and should reiterate its rejection of both the NODA and the entire DOE process underlying the NODA and the June 17, 2016 DOE proposed rule for manufactured housing energy standards and should further: (1) continue to seek and recommend the re-delegation of manufactured housing energy regulation back to HUD; and (2) if any new manufactured housing energy standards are deemed necessary, ensure an entirely new and legitimate rulemaking process which ensures accurate factual inputs and complete transparency.

Sincerely,
Mark Weiss
President and CEO

cc: Hon. Brian Montgomery
Ms. Teresa Payne
HUD Code Industry Members and Consumers

[1]See, 83 Federal Register, No. 150, August 3, 2018, pp. 38073-38080, Notice of Data Availability; Request for Information and related materials, attached hereto as Exhibit 1.

[2]Id.at p. 38075, col.1.

[3]Inexplicably, the full text of this resolution, quoted by MHARR in its contemporaneous written report on the MHCC meeting (see, September 19, 2018 MHARR Washington Update at p. 4), is not included in the “draft” minutes of the meeting – an issue that MHARR intends to address at the upcoming April 30 – May 2, 2019 MHCC meeting.

[4]See, Draft MHCC September 11-13, 2018 Meeting Minutes at pp. 7-8.

[5]See, Exhibit 2, attached hereto.

[6]Id.at p. 1.

[7]Id.at p. 3.

[8]Trump Administration Executive Order 13777 (“Enforcing the Regulatory Reform Agenda”) specifically targets for reconsideration and repeal, “regulations that rely in whole or in part on data, information, or methods that are not publicly available or that are insufficiently transparentto meet the standard for reproducibility….” (Emphasis added). See, 82 Federal Register, No. 82, March 1, 2017 at p. 12286.

[9]See, Section III C, infra.

[10]Consistent with the MHCC’s resolution calling on DOE to re-delegate this entire matter to HUD, there is no valid or legitimate basis for the imposition of punitive and discriminatory energy standards on federally-regulated manufactured homes.  HUD Code manufactured homes, as demonstrated by MHARR in its August 8, 2016 written comments on DOE’s June 17, 2016 proposed rule and its September 17, 2018 NODA comments (attached hereto as Exhibit 3), are already energy efficient, as demonstrated by U.S. Census Bureau data.

[11]See, Exhibit 4, attached hereto – Transcript of August 5, 2014 exchange within the DOE Manufactured Housing Working Group.

[12]Id. at p. 56.

[13]Id. at p. 57-58.

[14]A representative of the industry’s largest businesses, with the ability to absorb greater, more costly and unnecessary regulation.

[15]See, Exhibit 5, attached hereto.

[16]See, Exhibit 6, attached hereto.

[17]See, Exhibit 7, attached hereto.

[18]See, MHARR August 8, 2016 comments at pp. 14-17

[19]See, Exhibit 1 at pp. 38074-38075

[20]See, 2018 DOE NODA Packages – Draft Results, at p. 2: “Incremental costs and savings calculations are based on methods and data presented in the 2016 NOPR.”

[21]See, Exhibit 4, attached hereto.

[22]It is important to note again that the DOE NODA Packages – Draft Results document which is the subject of PD&R’s purported “analysis,” specifically states that its “incremental costs and savings calculations are based on methods and data presented in the [DOE August] 2016 [Notice of Proposed rulemaking.” As a result, the 2016 NODA, and its related cost-benefit calculations were based on the same alleged “data” developed as part of the fundamentally-tainted 2014-2016 DOE “negotiated rulemaking” process.  

[23]See, Exhibit 2, supra, at p. 3: “PD&R staff was not able to recreate the survey conducted by the [DOE Manufactured Housing] Working Group given the short timeframe provided by the MHCC.”  The excuse cited by PD&R, however, is irrelevant and not a valid, lawful, or legitimate basis for proffering an uninformed, factually-vacant opinion on a fundamentally tainted DOE process, based on a warmed-over rehash of the same illegitimate, contrived alleged “data” assembled by DOE.

[24]See, Exhibit 2, hereto, at p. 2.

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Court Rules That Sierra Club Has Standing to Sue DOE Over Manufactured Housing Energy Standards

CourtRulesThatSierraClubHasStandingtoSueDOEOverManufacturedHousingEnergyStandardsManufacturedHousingAssocRegulatoryReformMHARR

COURT RULES THAT SIERRA CLUB HAS STANDING TO SUE DOE OVER MANUFACTURED HOUSING ENERGY STANDARDS

In a development that was not unexpected, the U.S. District Court for the District of Columbia has denied a motion by the U.S. Department of Energy (DOE) to dismiss a lawsuit filed by the Sierra Club, seeking to compel DOE to issue manufactured housing energy standards under section 413 of the Energy Independence and Security Act of 2007 (EISA).

In its Motion to Dismiss, DOE maintained that Sierra Club lacked either organizational or associational standing to sue on behalf of members who allegedly have been “injured” as a result of delays in the establishment of DOE energy conservation standards for manufactured homes. The court’s denial of that Motion – under legal standards that tend to favor plaintiffs seeking to sue – is not a ruling on the substantive merits of the case, but rather, simply means that the case can go forward with Sierra Club acting as a representative for its members.

MHARR will carefully monitor this litigation as it progresses, insofar as the DOE “negotiated rulemaking” process, which led to both DOE’s now withdrawn 2016 proposed rule and, more importantly, currently pending proposals published by DOE in a 2018 Notice of Data Availability (NODA), was inherently and fundamentally tainted and illegitimate, as MHARR has extensively detailed in comments filed with DOE. As a result, that “negotiated rulemaking” process does not provide a valid, lawful or permissible basis for any rulemaking, and DOE, as MHARR has consistentlymaintained, must go back to the drawing board and initiate a new, legitimate and untainted rulemaking process to address any such manufactured housing standards.

2020 Federal Budget Request For HUD Manufactured Housing Program Needs Further Reform

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The White House, in its Fiscal Year 2020 proposed federal budget, unveiled March 11, 2019, has requested an annual appropriation of $12 million for the federal manufactured housing program, an amount that is identical to the President’s 2019 budget request for the program, but $1 million more than the program received on an annualized basis under Congress’ 2019 Continuing Resolution to fund the federal government.

While MHARR has made it clear to both Congress and HUD in prior written testimony that it does not object to additional program funding (from available label fee receipts) for the purpose of increasing payments to the states for the operational expenses of State Administrative Agencies (SAAs) under the National Manufactured Housing Construction and Safety Standards Act of 1974 as amended by the Manufactured Housing Improvement Act of 2000, it has made it equally clear that it strongly objects to any increase in funding for the program “monitoring” contract, given the narrow definition of the monitoring function enacted by Congress as part of the 2000 reform law, and lower levels of manufactured home production over the past decade.  Indeed, payments to the program monitoring contractor should be substantially reduced.   Toward this end – and also in order to press for full and fair competition for the next HUD monitoring contract – MHARR has recently engaged directly with senior-level HUD officials, and will continue to seek a reasonable, competitive and cost-effective monitoring contract and monitoring process.

MHARR, going forward, will closely monitor the proposed HUD budget as the 2020 appropriations process unfolds in the House and Senate, and will take appropriate steps to address the proper allocation and use of HUD label fee proceeds by the program, in order to ensure that the program fully complies with the regulatory reform policies of President Trump.

We shall keep you apprised of any and all new developments on this matter.

Manufactured Home Production Decline Persists As 2019 Begins

ManufacturedHomeProductionDeclinePersistesJan2019ManufacturedHousingAssociationRegulatoryReformMHARRLogo

Washington, D.C., March 4, 2019 – The Manufactured Housing Association for Regulatory Reform (MHARR) reports that according to official statistics compiled on behalf of the U.S. Department of Housing and Urban Development (HUD), year-over-year HUD Code manufactured home production declined once again in January 2019. Just-released statistics indicate that HUD Code manufacturers produced 7,556 homes in January 2019 — up from the 5,943 homes produced in December 2018, but down, 12.5%, from the 8,636 homes produced in January 2018.

This downward trend — at a time when production of the industry’s inherently affordable homes should be increasing — points once again to headwinds that the industry faces as a result of discriminatory zoning and placement restrictions in many areas of the country, but most importantly, a continuing lack of market-significant support by the Government Sponsored Enterprises for the personal property (chattel) loans which comprise nearly 80% of all consumer loans for manufactured home purchases. All of this warrants reconsideration of existing industry policies and positions, and adjustments as appropriate. This entire matter will be addressed at MHARR’s upcoming Board of Directors meeting.

A further analysis of the official industry statistics shows that the top ten shipment states from the beginning of the industry production rebound in August 2011 through January 2019  — with cumulative, monthly, current year (2019) and prior year (2018) shipments per category as

StateCumulativeCurrent Month (Jan. 2019)20192017
Texas87,805 homes12981,2981,881
Louisiana32,745 homes282282451
Florida29,262 homes592592497
Alabama20,887 homes389389787
N.C19,753 homes413413375
California17,567 homes364364345
Mississippi17,530 homes204204351
Michigan16,876 homes392392333
Kentucky15,694 homes176176302
Tennessee13,518 homes206206239

The latest information for January 2019 moves California into 6thplace on the cumulative top-ten list, while Mississippi drops to 7thplace on the cumulative shipments list.

The Manufactured Housing Association for Regulatory Reform is a Washington, D.C.-based national trade association representing the views and interests of independent producers of federally-regulated manufactured housing.

HUD Whitewash on DOE Rule Costs, More Washington Manufactured Housing Updates

  • HUD WHITEWASHES ALLEGED DOE ENERGY RULE COSTS
  • PROCEDURAL CHANGES SHOULD APPLY TO ANY DOE MH RULE
  • REVISED DTS PLANS RELEASED – CHATTEL STILL IN LIMBO
  • 2018 PRODUCTION UP – BUT SHORT OF 100,000 HOME BENCHMARK
  • UNFINISHED BUSINESS – HUD MONITORING CONTRACT REFORM
  • CONGRESS TAKES UP GSE REFORM
  • HUD ANNOUNCES MHCC/SUBCOMMITTEE MEETINGS

HUD PRODUCES WHITEWASH OF DOE ENERGY RULE “COSTS”

In the lead-up to the Manufactured Housing Consensus Committee (MHCC) meetings now scheduled for April and May, 2019 (see, article below), HUD’s Office of Policy Development and Research (PD&R) has produced a purported analysis of the cost data underlying the Department of Energy’s (DOE) August 3, 2018 Notice of Data Availability (NODA), setting forth possible revised approaches to DOE manufactured housing energy standards. The bare-bones (and obviously hurried), three-page PD&R analysis, however, developed in response to a request by the MHCC, at its September 2018 meeting, for “PD&R to submit a document to the MHCC which includes comparable cost figures similar to [the DOE-published NODA Package Draft Results],” is little more than an unsubstantiated whitewash of “data” derived from the illegitimate and irretrievably tainted manufactured housing energy standards “negotiated rulemaking” conducted by DOE in 2014-2015.  While the federal manufactured housing program, as noted in other articles below, has thus progressed to some degree as a result of the regulatory reform policies of the Trump Administration, the HUD bureaucratic “swamp” still exists and still must be confronted and curbed by both the industry and consumers.

PD&R, in its memorandum (dated October 26, 2018, but only released to the public and presumably MHCC members as well on or about February 14, 2019) states that: “in response to the MHCC’s request, PD&R staff conducted a review of relevant documents” (emphasis added) from the DOE manufactured housing energy standards “public comment webpage, and contacted multiple individuals with expertise in manufactured housing related-energy matters.” The PD&R memorandum, however, fails to specifically identify what data from the DOE webpage that it reviewed and which“individuals” with alleged “expertise in manufactured housing related energy matters,” it contacted.  Nevertheless, while admitting that “PD&R staff was not able to recreate the survey conducted by the [DOE manufactured housing negotiated rulemaking] Working Group given the short timeframe provided by the MHCC,” PD&R, on the basis of threeunsupported, conclusory paragraphs in its October 26, 2018 memorandum, states that it “concurs with the [DOE] methodology and resultant cost figures.”

As MHARR will set forth soon in greater detail in a comprehensiveresponse, analysis and refutationof the PD&R memorandum in advance of the relevant MHCC subcommittee and full committee proceedings on this matter, however, the underlying data and “information” used to develop the NODA were the same, non-credible, fatally-flawed and irretrievably-tainted data developed as part of, and incident to, the contrived and illegitimate DOE “negotiated rulemaking,” as was fully described and exposed by MHARR in its August 8, 2016 comments on DOE’s initial proposed manufactured housing energy standards rule andits September 17, 2018 NODA comments. To the extent that the NODA proposals and related DOE cost calculations rely on the same fatally-flawed data, analyses and assumptions (including the now discarded “Social Cost of Carbon” construct) that were the purported basis for the original 2016 DOE proposed manufactured housing energy standards rule, anymaterials derived by PD&R from the DOE manufactured housing energy webpage or the NODA itself, would necessarily be invalid, illegitimate, irrelevant and baseless. Consequently, PD&R’s “concurrence” with DOE’s “methodology and resulting cost figures,” means – and proves – exactly nothing.

Furthermore, the PD&R memorandum, insofar as it: (1) does not identify, in any way, the “multiple individuals with expertise in manufactured housing related-energy matters,” that it allegedly contacted; (2) does not indicate or disclose whether those unidentified “individuals” might have – or might represent — special energy interests or other related special interests; (3) does not indicate or disclose whether it contacted smaller, independent manufactured housing businesses or national representatives of those businesses that would be disproportionately impacted by DOE energy standards (as emphasized by both MHARR and the U.S. Small Business Administration in DOE energy rule comments), particularly in light of information provided to DOE by MHARR showing a retail cost impact for smaller, independent manufactured housing producers approaching $6,000.00 for a multi-section home; and (4) does not indicate or disclose whether it contacted potential manufactured housing purchasers to assess the impact of significantly higher home purchase prices that would result from the DOE proposals — provides no legitimate factual basis for its supposed “concurrence” with the fatally-flawed DOE cost calculations.  As a result, the MHCC should reject – and should advise HUD and DOE that it rejects – the purported “factual” and/or data predicate for boththe 2016 DOE proposed manufactured housing energy standards rule andthe August 3, 2018 DOE NODA.

DOE PROCEDURAL CHANGES SHOULD APPLY TO ANY PROPOSED MH RULE

As recently reported by MHARR, the U.S. Department of Energy (DOE), on February 13, 2019, published a proposed rule in the Federal Register that would significantly modify its procedures for developing new or revised energy conservation standards and related testing procedures for consumer products, “appliances,” and certain commercial and industrial equipment. While this proposed rule, as published, does not specificallyreference standards development and/or testing procedures under section 413 of the Energy Independence and Security Act of 2007 (42 U.S.C. 17071) directly pertaining to manufactured homes, the proposed rule does, by its terms, apply to DOE’s Appliance Standards Program — the sameprogram under which the original June 17, 2016 proposed DOE manufactured housing energy standards rule was developed and subsequently supplanted by DOE pursuant to a Notice of Data Availability (NODA) published on August 3, 2018 (see, article above).

Given that the proposed (and still pending) DOE manufactured housing standards were developed under DOE Appliance Standards Program procedures that areaddressed by the changes proposed in the February 13, 2019 DOE Notice, the procedural modifications noted in that proposed rule shouldbe applied to the manufactured housing proceeding – as MHARR will assert in comments to be filed with DOE.  That, in turn, would constitute yet another basis (among many others previously detailed by MHARR) for the withdrawal of any and all previously-proposed versions of the DOE manufactured housing standards – developed under or derived from — the inherently tainted DOE “negotiated rulemaking” process, and the ultimate development of a new rule (if necessary) based on a legitimate and lawful standards-development process consistent with the regulatory policies of the Trump Administration. The application of the new procedural rule to the manufactured housing energy rulemaking, could also help to assure that any future revisions of that rule are not subjected to the same type of coordination between part of the industry and energy special interests that led to the fatally-tainted and illegitimate “negotiated rulemaking” which resulted in both DOE’s original 2016 proposed manufactured housing energy standards rule and subsequent 2018 NODA proposal.

Among other things, the February 13, 2019 proposed DOE procedural rule would: (1) expand various procedural protections to the development of testing standards for regulated products; (2) define “a significant energy savings threshold that must be met before DOE will update an energy conservation standard;” (3) address issues related to the cumulative regulatory burdens imposed on regulated products and consumers of those products; and (4) “clarify DOE’s commitment to publish a test procedure six months before a related standards [Notice of Proposed Rulemaking].”  This latter provision is particularly significant in relation to DOE’s proposed manufactured housing energy standards, insofar as proposed test procedures were not published by DOE until afterpublication of the June 17, 2016 proposed rule, as was pointed out by MHARR at the time.

Written comments on the proposed DOE procedural rule are due by April 15, 2019.  MHARR will provide industry members with copies of its written comments on this matter for consideration and possible use, in advance of the comment submission deadline. 

REVISED DTS PLANS LEAVE MH PERSONAL PROPERTY (CHATTEL) LOANS IN LIMBO

The first annual revisions to the erstwhile “Duty to Serve Underserved Markets” (DTS) implementation plans developed by Fannie Mae and Freddie Mac were approved by the Federal Housing Finance Agency (FHFA) and published recently by the Government Sponsored Enterprises (GSEs).  While Freddie Mac’s DTS plan – which provided for only minimal possible purchases of the personal property (i.e., chattel) loans which comprise nearly 80% of all manufactured home consumer loans over its three-year term – was not modified with respect to manufactured housing, the manufactured housing provisions of Fannie Mae’s original DTS plan have, in fact, been substantively modified, in a manner which could seriously dilute, to the point of virtual insignificance, the already miniscule targeted purchases of manufactured home personal property/chattel loans set forth in its original DTS plan.

As proposed by Fannie Mae, and as approved by FHFA, Fannie Mae’s supposed commitment to purchase a sharply limited number of manufactured home personal property/chattel loans as part of a supposed “pilot program” in the out-years of its DTS plan, would be reduced by an alternative option to either “participate in a debt structure,” or “guarantee a security” containing manufactured home chattel loans instead. Fannie Mae sought to justify this modification to its original DTS plan by noting its “conclus[ion] that there is limited interest in selling whole [chattel] loans.” Instead, it noted that after “extensive industry outreach,” “multiple lenders expressed unwillingness to sell loans because they perceived that chattel assets perform well and provide strong returns when kept on portfolio,” while another potential seller “indicated that it has sufficient outlets for chattel assets….”

There is no indication, however, as stressed by MHARR in its comments to FHFA on the proposed modifications, that this supposed “extensive outreach” included any potential newlenders not already involved in the manufactured housing personal property/chattel loan market that could become competitors with existing industry-dominant lenders – with resulting market pressure for lower interest rates – if DTS personal property/chattel loan purchases were implemented in a market-significant manner, as MHARR has sought.  Instead, it appears from Fannie Mae’s own language (in its DTS plan modification request), that this “outreach” was directed at – and to – the existing handful of industry-dominant lenders.  These same lenders have benefited from the failure of the GSEs and FHFA to implement DTS to anysignificant degree with respect to manufactured housing personal property/chattel loans and also possess, but have reportedly failed to provide to the GSEs, Ginnie Mae and FHFA, the type of loan performance data which they all claim to need in order to establish a market-significant manufactured housing personal property/chattel loan securitization program – thus creating a classic “catch-22” for both potential manufactured housing consumers and the broader industry.        

Such action, to further minimize the GSEs’ already negligible and glacially-paced alleged “commitment” under DTS to support and expand manufactured home personal property/chattel loans — which, again, comprise the vast bulk of HUD Code consumer lending (as well as a parallel effort to divert DTS from the mainstream of the existing manufactured housing market) is — and should be — unacceptable to both the industry and consumers of affordable housing. This is particularly the case insofar as a January 2019 report by the Consumer Financial Protection Bureau (CFPB) entitled “Ability to Repay and Qualified Mortgage Rule Assessment Report,” shows that manufactured housing loans, since 2012, have declinedas a share of home loan originations for bothlarge and small lenders. (See, January 2019 CFPB Report, p. 222, Table 39 and related text).

Thus, while Congress intended to bolsterGSE support for consumer lending on affordable manufactured homes through DTS to market-significant levels, and thereby increase the availability of affordable manufactured homes for lower and moderate-income American families, the GSEs’ continuing failure to comply with that mandate — particularly with respect to manufactured home personal property/chattel loans — has actually had an adverse impact on manufactured home consumer lending, and is further indication that the GSEs are not, in fact, interested in providing market-significant support for the personal property/chattel loans that the vast bulk of moderate and lower-income American families rely upon to purchase an inherently affordable manufactured home.

MHARR, accordingly, will continue to aggressivelypress for the full and market-significant implementation of DTS as FHFA (and oversight of the GSEs) transitions to new leadership appointed by President Trump.

MH PRODUCTION GROWS IN 2018 BUT STILL SHORT OF 100K BENCHMARK

While the production of HUD Code manufactured homes in 2018 continued to gradually increase from its historic low of just 49,683 homes in 2009, total production for the year still failed to break the benchmark 100,000 home level, last surpassed in 2006. While the consistent production growth achieved by industry manufacturers since 2009 is encouraging, the industry’s inability to return to production levels that consistently exceeded 100,000 homes-per-year for decades – often by significant margins – in a strong economy with strong corresponding demand for the type of inherently affordable homeownership that manufactured housing provides, points to continuing problems affecting the manufactured housing market, and particularly its post-production sector, that must be effectivelyaddressed to allow the entire industry to meet its full economic potential.

As reported by the U.S. Department of Housing and Urban Development (HUD), industry manufacturers, in 2018, produced a total of 96,555 homes, an increase of 3.9% over the 92,902 HUD Code homes built by industry manufacturers in 2017. After nearly 85 months of sustained production growth, however, 2018 ended with four consecutive months of year-over-year production declines, leaving the annual production total just short of the 100,000-home benchmark. While overall industry production, therefore, has expanded by a factor of nearly 95% since reaching its low-point in 2009, production over the same period has remained well below not only the 100,000-home benchmark, but also the industry’s twenty-year (1999-2018) production average of 166,008 homes per year, and its thirty-year (1989-2018) production average of 169,662 homes per year.

The fundamental question arising from this data is, why is the HUD Code industry – from both a short and longer-term perspective – not doing better (i.e., producing and selling hundreds-of-thousands-of homes per year)? As MHARR has explained in detail, the problem does not currently lie within the industry’s production sector. While still burdened by HUD (and other government) regulatory overreach and regulatory compliance costs in various respects, the production (or supply) side of the industry’s economic equation is notthe principal culprit in its failure to return to – and exceed – its historical level of market performance.  Rather, objective analysis shows that the principal market-limiting factors for the industry today, are clustered, almost entirelyon the demand – or post-production— side of the equation (i.e., once the home leaves the factory), where they have not been addressed either decisively or effectively.

Those market-limiting post-production factors are primarily concentrated in three areas: (1) exclusionary local zoning ordinances and mandates that discriminate against manufactured homes and manufactured homeowners; (2) other types of local placement restrictions or limitations on individual manufactured homes and manufactured home communities; and, most importantly (3) the continuing lack of support for mainstream manufactured home consumer financing – and most particularly manufactured home personal property (i.e., chattel) loans — by Fannie Mae and Freddie Mac under the “Duty to Serve Underserved Markets” (DTS) mandate, and the Federal Housing Administration (FHA) and Government National Mortgage Association (Ginnie Mae) under HUD’s nearly moribund Title I manufactured housing program.

Both individually and in combination, this post-production “brick wall,” has created an economic “perfect storm” that especially harms smaller industry businesses and HUD Code consumers, while benefitting only the industry’s largest businesses. Being unresolved and left to fester through ineffective national-level representation of the post-production sector, they have taken a cumulative toll on the industry as a whole, while eliminating large numbers of potential purchasers from the manufactured housing market and unfairly penalizing the rest. This state of affairs must change in order for the industry to reach its full potential. But that will require industry members to demand aggressiveaction on these and a full-range of other post-production issues, including, but not limited to, national-level marketing, promotion and advertising programs to advance the industry and its homes.

Consistent with this, and as with its in-depth November 1, 2017 study exposing the dire need for an independent, national manufactured housing post-production representation, MHARR will now undertake a new study regarding such much-needed, national-level programs.  This subject will then be addressed at the upcoming MHARR Board of Directors meeting.

FOCUS SHIFTS TO HUD MONITORING CONTRACT

As activity continues at HUD on the implementation of Trump Administration regulatory reform Executive Orders (EOs) 13771 and 13777, a crucial ongoing issue for the institutional reform of the HUD manufactured housing program will be the award of a new program “monitoring” contract.

The Manufactured Housing Improvement Act of 2000 mandates, among other things, two major institutional reforms of the HUD manufactured housing program — (1) the appointment of a non-career administrator to run the program; and (2) the competitive selection of an independent “monitoring” contractor, responsible for the statutorily limited and definedfunction of evaluating the performance of Primary Inspection Agencies. And while MHARR continues to urge HUD to appoint a non-career program administrator as required by the 2000 reform law, and addressed that issue at a recent meeting with HUD Assistant Secretary Brian Montgomery, only a few months remain before HUD solicits and awards a new contract for program “monitoring” services, which directly impacts in-plant regulatory (and regulatory-related) activity.

As was previously reported by MHARR, the last multi-year HUD manufactured housing monitoring contract expired in mid-2018. In November 2017 HUD hosted an “Industry Day” event for potential bidders, which attracted several interested firms. With the Trump Administration’s reassignment of former program Administrator, Pamela Danner at the end of 2017, however, the procurement of a long-term replacement contract did not take place. Instead, HUD issued a one-year, sole-source, “bridge contract” to the incumbent contractor – the Institute for Building Technology and Safety (IBTS). That non-competitive contract, however, will expire soon, meaning that HUD will once again be faced with soliciting a new replacement contract.

While “monitoring”-related abuses within the program appear to have abated somewhat, over the short-term, due in part to oversight by the Trump Administration and HUD Secretary Ben Carson, as well as apparent caution on the part of the incumbent contractor with the award of a new contract hanging in the balance, the reality is that this abatement in a long-term history of regulatory abuses, ever-expanding contract functions and baseless, costly intrusions in the factory-based construction process — with a resulting program “culture” that needlessly stifles innovation and additional cost savings that could be passed to consumers — could (and, most likely, would) turn on a dime and return to, or even exceed, unacceptable past levels.  It is essential, therefore, that the Trump Administration fullycomply with the 2000 reform law in soliciting and awarding the next full-term monitoring contract, and that it act decisively to end the 40-year-plus defactocontract monopoly of the incumbent contractor, IBTS.

Indeed, for any of the Trump Administration’s regulatory reform agenda to have a real or lasting impact on the federal manufactured housing program, the 40-year-plus monitoring contract monopoly mustbe ended, and the contracting process itself mustbe reformed in order to produce full and fair competition, as required by law throughout the federal government.  Put differently, real and lastingchange for the federal program will require a fundamentalshift in the way that the program does business with respect to the monitoring function, including the monitoring contract itself, the nature and scope of the monitoring function, and ultimately, hiring a new program monitoring contractor.

The contract manipulation that has sustained this defactomonopoly and the resulting domination of the program over the course of its existence by oneentrenched, self-servingcontractor, has had a ruinous effect on the HUD manufactured housing program, the industry itself and consumers in particular, as the purchase price of manufactured homes has needlessly been inflated by unnecessary, unjustified and baseless expansions of regulatory compliance burdens at the initiative and behest of the entrenched contractor.  The needless regulatory costs and burdens imposed because of the contractor, moreover, disproportionatelyimpact and harm smaller industry businesses (and consumers of affordable housing) while conversely benefitting the industry’s largest producers, which can spread spurious pseudo-regulatory costs over a larger base of production.

If this is to change and if the HUD manufactured housing regulatory “swamp” is to be “drained,” the program mustconduct an open, competitive and unbiased monitoring contract solicitation, leading to full and fair competition and, most importantly, a new contractor.

CONGRESS RENEWS GSE REFORM DEBATE

The institutional reform of the housing finance market – and federal government involvement with that market — has once again emerged as a potential issue both in Congress and within the Trump Administration.

In Congress, the Chairman of the Senate Banking Committee has offered a summary “blueprint” for reform of the two Government Sponsored Enterprises (GSEs) – Fannie Mae and Freddie Mac. Similarly, there have been indications that the Treasury Department and/or the Federal Housing Finance Agency (FHFA) – soon to be under the leadership of a new Director appointed by the Trump Administration — could unilaterally propose and implement unspecified changes to the role and/or activities of the GSEs via existing administrative oversight and enforcement authority.

In conjunction with these reports, some within the industry have touted the alleged need for – and ostensibly have begun to pursue as part of the GSE “reform” process – new statutory provisions to supposedly spur institutional GSE (or GSE-successor organization) support for manufactured home consumer lending.  New laws, however, are not only unnecessary, given the good laws that the industry already has on the books, but represent a distraction and diversion from the effort that is genuinely neededand, in fact, essential for manufactured housing to realize its full economic potential, i.e.– (1) the full and market-significant implementationof all aspectsof the Duty to Serve Underserved Markets (DTS) addressing manufactured housing but, most particularly, the full implementation of DTS with respect to the personal property loans/chattel which constitute the vast bulk of the manufactured housing consumer finance market; and (2) the full and proper implementation of allremaining reform aspects of the Manufactured Housing Improvement Act of 2000, including the appointment of a non-career program administrator and a “top-to-bottom” reform of the process for the solicitation and selection of a new monitoring contractor, leading to an end to the existing 40-year-plus monopoly on that contract.

Simply put, there is no legitimate need to “reinvent the wheel” with respect to either manufactured home consumer financing or the full, proper and final reform of the HUD manufactured housing program in accordance with the 2000 reform law. In each case, the industry — and relevant federal government agencies — have all the statutory authority that they need to accomplish the ends that Congress intended.  (And in the case of GSE reform, MHARR has already researched and draftedrelevant statutory reform language, which was previously included in a proposed GSE reform bill, S. 1217, entitled “The Housing Finance Reform and Taxpayer Protection Act of 2014” — in the event that such language is ever needed.)  What is needed now, however, is not a new statutory diversion, but a legitimate, focused and aggressive effort to fully implement the good laws that have already been enacted to spur the growth of the HUD Code manufactured housing industry and the availability of affordable manufactured homes for millions of American homebuyers.  MHARR is fully committed to such an effort, and, accordingly, will develop new and additional approaches to this matter for consideration at its upcoming Board of Directors meeting.

HUD ANNOUNCES MHCC AND SUBCOMMITTEE MEETINGS 

HUD, in a series of notices published in the February 14, 2019 edition of the Federal Register, has announced the next in-person meeting of the full Manufactured Housing Consensus Committee (MHCC) (April 30, 2019 to May 1, 2019) and teleconference meetings of both he MHCC’s Regulatory Enforcement (April 2, 2019) and Technical Systems subcommittees (April 3, 2019). Based on the tentative agendas published together with the meeting notices, the April 2, 2019 Regulatory Enforcement Subcommittee meeting will focus primarily on the revised manufactured housing energy standards proposed by the U.S. Department of Energy (DOE) in its August 3, 2018 Notice of Data Availability (NODA), while the April 3, 2019 Technical Systems Subcommittee meeting will focus primarily on issues (including de-regulatory proposals) relating to HUD’s proposed Interpretive Bulletin (IB) concerning “frost-free” foundations.  The full MHCC meeting, in turn, will address a long list of pending log items left-over from the MHCC’s September 2018 in-person meeting, including numerous de-regulatory proposals growing out of HUD’s Executive Order 13771 and 13777 regulatory review processes, as well, possibly, as any recommendations flowing from the subcommittee meetings in early April.

In addition, with the end of the partial federal government shutdown, HUD has named new members to the MHCC — including a new producer-member — although the names of the new appointees (as of press time for this Update) have not yet been made public by the Department.

MHARR, as always, will fully participate in all MHCC and MHCC subcommittee proceedings to ensure that the interests of the industry’s independent manufactured housing businesses – as well as manufactured housing consumers – are fully represented and protected.  In addition, as noted previously, MHARR will prepare and distribute, in advance of the MHCC meetings, a comprehensive analysis and refutation of a HUD Office of Policy Development and Research (PD&R) memorandum concurring with DOE data and methodologies underlying its August 3, 2018 NODA proposals for manufactured housing energy standards (see, article above).

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New Proposed Energy Standards Rule Should Apply To Manufactured Housing Energy Rule making

NewProposedEnergyStandardsRuleShouldApplyManufacturedHousingEnergyRulemaking

The U.S. Department of Energy (DOE) has published a new proposed rule in the February 13, 2019 Federal Register (copy attached) that would significantly modify its procedures for developing new or revised energy conservation standards and related test procedures for consumer products, “appliances,” and certain commercial and industrial equipment.

While the proposed rule, as published, does not specificallyreference standards development and/or test procedures under section 413 of the Energy Independence and Security Act of 2007 (42 U.S.C. 17071) directly pertaining to manufactured homes, the proposed rule does, by its terms, apply to DOE’s Appliance Standards Program — the same program under which the original proposed DOE manufactured housing energy standards rule (published June 17, 2016) was developed and subsequently modified by DOE pursuant to a Notice of Data Availability (NODA) published in the Federal Register on August 3, 2018. Industry members will recall that the manufactured housing energy rule had not substantially progressed at DOE until a segment of the industry, together with energy special interests (and DOE) in 2014, sought and engineered an illegitimate, truncated, dysfunctional “negotiated rulemaking” under DOE’s “appliance” rulemaking process, as a fig-leaf designed to achieve a pre-ordained result.

Given that the proposed (and still pending) DOE manufactured housing standards were developed under DOE Appliance Standards Program procedures that areaddressed by the changes proposed in the February 13, 2019 DOE Notice, MHARR will file comments with DOE seeking to have the procedural modifications noted in the proposed rule applied to the manufactured housing proceeding, which would constitute yet another basis (among many others previously detailed by MHARR) for the withdrawal of any and all previously-proposed versions of the DOE manufactured housing standards – developed under or derived from — the inherently tainted DOE “negotiated rulemaking” process, and the ultimate development of a new rule based on a legitimate and lawful standards-development process consistent with the regulatory policies of the Trump Administration.

Among other things, the February 13, 2019 proposed rule would: (1) expand various procedural protections to test procedure rulemakings for regulated products; (2) define “a significant energy savings threshold that must be met before DOE will update an energy conservation standard;” and (3) “clarify DOE’s commitment to publish a test procedure six months before a related standards [Notice of Proposed Rulemaking].”  This is particularly significant in relation to DOE’s proposed manufactured housing energy standards, insofar as proposed test procedures were not published by DOE until afterpublication of the June 17, 2016 proposed rule, as was pointed out by MHARR at the time.

Written comments on the proposed rule are due by April 15, 2019.  MHARR will submit comprehensive comments (and participate in related meetings) in advance of the April 15, 2019 deadline and will make its comments available for reference by industry members.

As always, MHARR shall keep you apprised of any new developments in this matter.

 

HUD Code Manufactured Home Production Decline Persists – Time For Action Not Excuses

HUD Code Manufactured Home Production Decline Persists – Time For Action Not Excuses

Washington, D.C., February 4, 2019 – The Manufactured Housing Association for Regulatory Reform (MHARR) reports that according to official statistics compiled on behalf of the U.S. Department of Housing and Urban Development (HUD), HUD Code manufactured home production declined again in December 2018. Just-released statistics indicate that HUD Code manufacturers produced 5,943 homes in December 2018, a nearly 18% decline from the 7,245 new HUD Code homes produced during December 2017. On a cumulative basis, then, industry production for 2018 totaled 96,555 homes, a 3.9% increase over the 92,902 HUD Code homes produced in 2017.

Annual HUD Code industry production totals for the past ten years – from 2009 to 2018 – are thus:

  • 2009 – 49,683 homes
  • 2010 – 50,056 homes
  • 2011 – 51,618 homes
  • 2012 – 54,881 homes
  • 2013 – 60,228 homes
  • 2014 – 64,334 homes
  • 2015 – 70,544 homes
  • 2016 – 81,136 homes
  • 2017 – 92,902 homes
  • 2018 – 96,555 homes

While the four-consecutive-month decline in industry production that began in September 2018, as previously noted by MHARR, is disconcerting, continuing strength in the broader economy, as well as the exceptional quality and value of today’s HUD Code manufactured homes, demonstrate – once again – that constraints on industry sales and production levels exist primarily, if not exclusively, within the post-production sector, as was detailed by MHARR in the January 2019 edition of “MHARR: Issues and Perspectives.” And, while those constraints, including exclusionary and discriminatory zoning and placement restrictions, as well as wholly inadequate consumer financing support from Fannie Mae, Freddie Mac and Ginnie Mae, are quite real and extremely damaging to both the industry and American consumers of affordable housing, the remedies for those constraints are also quite real and already in existence, in the form – among other things – of the “Duty to Serve Underserved Markets” (DTS) provision of the Housing and Economic Recovery Act of 2008 (HERA) and the enhanced federal preemption of the Manufactured Housing Improvement Act of 2000.  In short, the industry and consumers do not need new laws.  What is sorely needed, rather, is a willingness to aggressively advance and fully implement all aspects of these existing laws, instead of chasing after illusions – i.e., new laws that, even if enacted by a politically-divided Congress, would take still more years to implement.

MHARR, as a key proponent of both DTS and the enhanced preemption of the 2000 reform law, will continue to aggressively advance the full implementation of both provisions to remedy the post-production limitations that continue to be the primary obstacle to the ability of the industry to achieve its full potential for all families – at every rung of the economic ladder – seeking to achieve the American Dream of homeownership.

A further analysis of the official industry statistics shows that the top ten shipment states from the beginning of the industry production rebound in August 2011 through November 2018  — with cumulative, monthly, current year (2018) and prior year (2017) shipments per category as indicated — are:

HUD Code Manufactured Home Production Decline Persists – Time For Action Not Excuses mhThe latest information for December 2018, does not result in any changes to the cumulative top-ten list.

The Manufactured Housing Association for Regulatory Reform is a Washington, D.C.-based national trade association representing the views and interests of independent producers of federally-regulated manufactured housing.

“The Illusion of Motion Versus Real-World Challenges”

MHARR-Issues and Perspectives The Illusion of Motion Versus Real-World Challenges

Motion – or, more accurately, activity – in and of itself, is not necessarily synonymous with, or equivalent to, realprogress, or, in fact, anyprogress at all.  Recent reports emerging from elsewhere within the universe of organizations representing the manufactured housing industry paint a uniformly rosy picture of almost non-stop engagement, dialogue, meetings, conferences, photo-opportunities (presumably to prove the reality of the supposed engagement, dialogue, meetings and conferences) and other related confabs, particularly at the national level. This “good news” all the time meme, in turn, is replicated, repeated and touted by those who, for whatever reason, have determined that it is to their advantage to do so. Indeed, an entire new publication has appeared with the apparent mission of wet-nursing this meme. Meanwhile, others touting and promoting the new meme, urge industry-wide “boycotts” – the intellectual equivalent of book-burning — of anyone who dares question the legitimacy of the meme, or the possible motives of some of its proponents.

As President Ronald Reagan famously said, though, “facts are stubborn things.”  And the irrefutable facts that are emerging from behind the veil of “group-think” (defined as “a psychological phenomenonthat occurs within a group of peoplein which the desire for harmony or conformity in the group results in an irrational or dysfunctional decision-makingoutcome”), unfortunately, show that the happy-talk is just that – talk — a veneer designed to create an “illusion of motion” regarding the critical issues that helped tank industry progress and prosperity a decade ago and continueto needlessly restrain and undermine its recovery, growth and development years later, even as the need for affordable, non-subsidized homeownership reaches new heights every day.

So, instead of the endless hype and happy-talk that industry members can get elsewhere if they wish, let’s take a look at those stubborn facts and what they actually mean for the HUD Code industry and the millions of lower and moderate-income Americans who rely on its affordable, non-subsidized homes.

Put simply, where does the HUD Code industry stand today? While the industry initially appeared poised to exceed its historical 100,000 homes-per-year benchmark in 2018, that prospect has now substantially diminished, and, while the recent statistical production decline could turn on a dime, the industry’s longer-term status relative to the broader housing market has remained low and continues to decline, particularly when contrasted with the huge and growing need in the United States for inherently affordable housing and the vast potential possessed by mainstream manufactured housing to meet that need for millions of American families.

The key question, then, for the industry, its representatives and its consumers, is why is the HUD Code industry — both over the longer-term and currently – not doing better?  In a climate of significanteconomic growth, job creation (with unemployment at an 18-year low) and wage growth (with an average hourly wage of $22.95 per hour, an all-time high) on the one hand, and increasingly unaffordable prices and interest rates for other types of homes and other types of consumer home loans on the other – and with HUD Code manufacturers today producing their best homes ever at the most affordable prices ever (both inherently and relative to other types of housing) – why is the industry not producing and selling hundreds-of-thousandsof homes each and every year?

The short answer, is that the problem – for the most part — does not currently lie within the industry’s production sector. While still burdened by HUD (and other government) regulatory overreach and related costs in various respects, the production (or supply) side of the industry’s economic equation is notthe principal culprit in the industry’s failure to reach its full market potential. Instead, it is afterthe industry’s outstanding, inherently affordable homes leave the factory that they hit a proverbial “brick wall.” Indeed, objective analysis shows that the principal market-limiting factors for the industry today, are clustered, almost entirelyon the demand – or post-production— side of the equation (i.e., once the home leaves the factory) where they have not been addressed either decisively or effectively.

And what are the principalpost-production problems that have – and continue to – substantially hamper the growth of the HUD Code manufactured housing industry?  As MHARR has previously explained and analyzed in detail, they are: (1) exclusionary local zoning ordinances and mandates that discriminate against manufactured homes and manufactured homeowners; (2) other types of local placement restrictions or limitations on individual manufactured homes and manufactured home communities; and, most importantly (3) the continuing lack of support for mainstream manufactured home consumer financing – and most particularly manufactured home chattel loans— by Fannie Mae and Freddie Mac under the “Duty to Serve Underserved Markets” (DTS) mandate, and the Federal Housing Administration (FHA) and Government National Mortgage Association (Ginnie Mae) under HUD’s nearly moribund Title I manufactured housing program. Together and in combination, these elements of the post-production “brick wall,” have created a perfect economic storm that especially harms smaller industry businesses and HUD Code consumers, while benefitting only the industry’s largest businesses.

And while none of these problems are new, nearly all have gotten substantially worse, particularly in recent years. Being unresolved and thereby left to fester by a national-level post-production representation that has been ineffective at best, and a failure at worst, they have taken a regressive and cumulative toll on the industry as a whole, while eliminating large numbers of potential purchasers from the manufactured housing market and unfairly penalizing the rest.

With regard to zoning and placement restrictions that have severely limited or virtually eliminated the expansion of existing manufactured home communities, or the development of new ones, or even single-home placements, the existing national post-production representation (as detailed by MHARR in its December 2015 and January 2016 MHARR Viewpoint articles) has failed to take effective advantage of the enhanced federal preemption provision of the 2000 reform law drafted jointly by MHARR officials and the late-president of the Texas Manufactured Housing Association (TMHA) Will Ehrle, and subsequently incorporated into the law after further development and refinement through the legislative process. That provision extends federal preemption beyond state and/or local standards that differ from the HUD Code standards, to also reach other state or local “requirements” which impair the federal superintendence of the industry or otherwise hinder or interfere with the accomplishment of the federal policy goals of the National Manufactured Housing Construction and Safety Standards Act of 1974. MHARR has consistentlyencouraged the post-production sector to aggressively advance the enforcement of this enhanced preemption to its full extent – through federal court action as appropriate – to curtail or eliminate, wherever possible, exclusionary local zoning and placement mandates. Support for that position by the nominal post-production representative at the national level, however, has historically been either weak, half-hearted, or non-existent.

As a result, the number of manufactured housing communities across the nation – a key direct consumer of manufactured homes anda placement resource for new and existing manufactured homeowners – has at best been stagnant and has at worst declined, as illustrated by the fact that virtually no new manufactured housing communities have been approved in key manufactured housing states in approximately two decades. This phenomenon, replicated on a large scale throughout the country, and combined with other land-use-type restrictions in both urban and non-urban areas, not only limits the market for HUD Code manufactured housing, but also amounts to defactodiscrimination against lower-income Americans and various economically-disadvantaged minority groups that rely on HUD Code homes as a source of affordable homeownership.  Indeed, a national post-production representative of any other industry would have taken full advantage of the hard-earned enhanced federal preemption of the 2000 reform law – litigating it all the way to the Supreme Court if necessary to have it fully and properly implemented.  That has not happened, though, nearly two decadesafter the 2000 reform law was enacted. Why? Why not even make the effort when this factor alone substantially limits and restricts the industry’s growth potential and ability to serve millions more Americans?

Even more importantly, it goes without saying that consumer financing is the lifeblood of any “big-ticket” industry, such as manufactured housing.  Regardless of how affordable manufactured homes are, most consumers ultimately need third-party financing to purchase a HUD Code home. Accordingly, the availability and relative affordability of consumer financing is a vital factor for the success and growth of the HUD Code market.  A necessary corollary to that truism is the simple reality that a robust financing market (including secondary market and securitization support by the Government Sponsored Enterprises as well as Title I program support by FHA and Ginnie Mae) drives competition, which, in turn, yields competitive interest rates and the best overall value for consumers.

Unfortunately, though, the unavailability of any(let alone comparable) GSE support for the manufactured housing chattel market, has had the opposite effect, severely limiting the number of lenders serving that market, and needlessly inflating interest rates. Indeed, data presented in a January 2019 report by the Consumer Financial Protection Bureau (CFPB) entitled “Ability to Repay and Qualified Mortgage Rule Assessment Report,” shows that manufactured housing loans, since 2012, have declined as a share of home loan originations for bothlarge and small lenders. (See, CFPB Report, p. 222, Table 39 and related text). DTS, with its specific allowance for the inclusion of manufactured home chattel loanswas meant to address this, but Fannie Mae and Freddie Mac, while touting chattel lending support, are actually doinglittle or nothing. Instead, citing a lack of performance data for manufactured housing chattel loans, which could be, but apparently has not been made available by the current few industry-dominant lenders, the GSEs continue to seek to dilute even the miniscule level of support for such loans — comprising nearly 80% of the manufactured housing consumer finance market– which they proposed in their initial DTS “implementation plans.” Meanwhile, the same industry-dominant lenders, free from the increased competition that would be engendered by the full and robust implementation of DTS, continue to originate (and retain on portfolio), manufactured home chattel loans, albeit at a much higher interest rate, with absolutely no incentive to provide such information to Fannie Mae, Freddie Mac, or Ginnie Mae.

Sadly, this is a self-perpetuating vicious cycle on all sides. The GSEs, having failed for years to properly serve the HUD Code market are directed to do so by Congress through DTS. They then rely on a “lack of data” arising from the very same failurethat Congress sought to remedy, to continuefailing to serve the vast bulk of the manufactured home consumer finance market represented by chattel loans. Meanwhile, the industry-dominant portfolio lenders that have benefited from the GSEs’ failure to properly serve the HUD Code chattel market, have (apparently) not disclosed the type of chattel loan performance information that the GSEs and Ginnie Mae allegedly need.  As a result, their competition remains limited or non-existent, enabling them to continue charging higher interest rates within an artificially and needlessly limited market that is increasingly under-performing broader economic parameters.

This unacceptable state of affairs will not change without aggressive push-back by – and on behalf of – the industry’s post-production sector. Quite simply, in 2019, thatis where the problems are that limit the potential of the mainstream manufactured housing market, and, with it, the growth of the industry to where it shouldbe. The existing scenario for the post-production sector is a façade that primarily serves the narrow interests of the industry’s largest corporate conglomerates while smaller businesses – and lower and moderate-income American families — suffer the consequences. This situation must change.  But for that to occur, industry members must reject the “fluff” that they are constantly peddled, confront the “stubborn facts” that will not just go away otherwise, and demand real, aggressive action on these and a full-range of other post-production issues.pdf-images.-2jpg

Mark Weiss
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.