Manufactured Housing: Efforts Needed to Enhance Program Effectiveness and Ensure Funding Stability
GAO-14-410
Published: Jul 02, 2014. Publicly Released: Aug 01, 2014.
Skip to Highlights
Highlights
What GAO Found
HUD has established a process for updating the preemptive building standardsfor manufactured homes known as the HUD Code but has not fully met key purposes of the 2000 Manufactured Housing Improvement Act (2000 Act). Key purposes of the Act include:
- Establish a balanced, consensus-based process to update manufactured housing construction and safety standards. HUD has not accepted, rejected, or modified any of the Manufactured Housing Consensus Committee’s recommendations for updating the HUD Code within 1 year of their submission. The 2000 Act requires HUD to act on the committee’s recommended standards within 1 year if they were submitted in the form of a proposed rule with an economic analysis. According to HUD, because the committee did not include economic analyses in the proposals, HUD staff performed this task. They also stated because the proposals lacked the analyses, the Act’s 1-year timeline was not triggered. In some cases, HUD has not decided on recommendations made more than a decade ago and lacks a plan to address the backlog. Meanwhile, some states’ and localities’ residential building codes require standards not in the HUD Code, resulting in post-production upgrades that may increase costs to homeowners. Not updating the HUD Code delays its intended benefit—to improve the quality, durability, safety, and affordability of manufactured homes.
- Facilitate the availability of affordable manufactured homes. Owners of manufactured homes have lower monthly housing costs than site-built owners and apartment renters, but high financing costs often keep these homes from being even more affordable. HUD’s Federal Housing Administration (FHA) has two insurance programs for manufactured home loans. Although most manufactured homes are titled or owned as personal property, HUD’s programs primarily insure loans on manufactured homes financed as real estate. Additionally, owners of manufactured homes are more likely to have higher-priced financing than owners of site-built homes. The 2000 Act required HUD to review the effectiveness of the FHA programs, but HUD has not developed a plan to do so. Such research would help HUD determine whether and how it might further facilitate the availability of affordable manufactured homes.
The 2000 Act establishes HUD’s authority to collect fees for certification labels on manufactured homes built to the HUD Code. The fees are placed in the Manufactured Housing Fees Trust Fund that provides annual appropriations to fund the expenses of the Manufactured Housing Program. The current fee rate does not produce sufficient collections to fully fund the program’s expenses and must be supplemented by annual appropriations from Treasury’s General Fund. HUD has indicated its intent to raise the label fee, which currently stands at $39. As we provided a draft of this report, HUD issued a proposed rule to increase the label fee, but has not yet completed the rulemaking process. It has also not fully assessed the feasibility and benefits of putting in place other fees authorized by recent appropriation acts, in part, because it has carryover balances from past years. Without more fee revenue, however, the program will continue to require Treasury’s General Fund appropriations.
Why GAO Did This Study
Manufactured housing traditionally has been a low-cost option in the U.S. housing market. For nearly 40 years, HUD has provided standards for the manufactured housing industry by developing and updating the HUD Code. The 2000 Act was intended, among other things, to establish a balanced consensus process for updating the standards and regulations for enforcing them and to encourage manufactured housing as an affordable option. GAO was asked to study HUD’s implementation of the 2000 Act.
This report addresses, among other things, the extent to which HUD has met key purposes of the 2000 Act and assesses whether user fees cover program costs. GAO interviewed and collected data for 2000-2013 from HUD, other agencies, and industry groups. GAO also visited large and small plants that built manufactured housing to solicit industry perspectives.
Recommendations
GAO makes several recommendations, including that HUD develop and implement a plan for updating construction and safety standards in a timely fashion; develop a plan to assess how FHA financing might further manufactured home affordability; complete label fee rule-making; and assess the need for other user fees. Of these, HUD agreed with the first recommendation and partially agreed with the next two because it believes it has already taken actions. HUD stated it would consider the last recommendation. GAO continues to believe these recommendations remain valid as discussed in the report.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Housing and Urban Development | To better ensure the viability and safety of manufactured housing produced in accordance with the HUD Code, the Secretary of the Department of Housing and Urban Development (HUD) should develop and implement a plan for updating construction and safety standards for manufactured homes on a timely, recurring basis to include: (1) addressing unresolved issues related to defining and developing sufficient economic analyses tied to proposed changes to the construction and safety standards; and (2) ensuring sufficient resources and capacity within HUD and the Manufactured Housing Consensus Committee and its administering organization; or if such a plan cannot be devised and implemented, identify and report to Congress on alternative methods of ensuring the quality, durability, safety, and affordability of manufactured homes, including the possibility of relying more extensively on existing industry standards. | In response to this recommendation, as of March 2018, HUD awarded a new administering organization of the Manufactured Housing Consensus Committee (MHCC) in June 2014. Although MHCC has held in-person, teleconference, and subcommittee meetings in 2015 and 2016 and has some planned for 2018, updates to construction and safety standards have continued to not be done in a timely manner. However, HUD officials outlined recent steps to develop a plan to implement more timely changes. First, HUD has included an option in its contract with the administering organization to conduct economic analyses for proposed changes, when deemed helpful by HUD. Second, HUD officials stated they have engaged... in efforts to streamline the regulatory process for manufactured home construction and safety standards by exploring the possibility of implementing an expedited approval process within HUD. Third, as part of the overall HUD effort to review regulations, officials stated that they are currently conducting a review of current and planned federal regulations for manufactured housing with the goal to facilitate the affordability of manufactured housing and to promote durable, safe, and cost effective construction techniques for manufactured homes. Fourth, in response to Executive Order 13771 on "Reducing Regulation and Controlling Regulatory Costs,'' and Executive Order 13777 entitled, ''Enforcing the Regulatory Reform Agenda," HUD sought public comment in January 2018 to determine outdated, ineffective, or excessively burdensome regulations related to the manufactured housing program. The comment period ended in February 2018. HUD received approximately 151 comments, which are currently under review. HUD does not anticipate moving forward with any manufactured housing regulations until it completes its review. By taking steps to develop and implement a plan for updating manufactured home construction and safety standards, HUD can begin to address needed updates in a timely manner.
View More |
| Department of Housing and Urban Development | To better ensure the viability and safety of manufactured housing produced in accordance with the HUD Code, the Secretary of the Department of Housing and Urban Development should develop a plan to assess how FHA financing might further promote the affordability of manufactured homes and identify the potential for better securitization of manufactured housing financing. | As of June 2023, HUD has implemented this recommendation. Since we made this recommendation, HUD has taken steps to assess how FHA financing might further promote the affordability of manufactured homes and identify the potential for better securitization of manufactured housing financing. More specifically, according to officials, HUD offices, including FHA and Ginnie Mae, have met to discuss financing options for manufactured housing. In November 2021, HUD consolidated its Title I policy guidance into its single-family handbook to make it easier for lenders to understand and use the program and also expanded eligibility requirements to make them consistent with those for mortgage...
|
| Department of Housing and Urban Development | To better ensure the viability and safety of manufactured housing produced in accordance with the HUD Code, the Secretary of the Department of Housing and Urban Development should strengthen the oversight of inspections and enforcement-related activities by (1) consistently documenting actions taken to resolve recommendations from completed audits and the outcome of such actions, (2) completing a Transition Plan for the monitoring contractor activity, and (3) exploring the feasibility of developing a cost-effective systematic process for collecting and evaluating information on the content of complaints. | HUD has taken the following steps to address this recommendation. First, the Office of Manufactured Housing Programs maintains that it has significantly increased its diligence in its oversight of inspections and enforcement-related activity. HUD states that its Office of Manufactured Housing Programs has created master logs tracking various inspection and enforcement-related activity and the office has taken follow-up actions to resolve recommendations from completed audits, and ensure documentation of enforcement outcomes. These logs track program actions related to inspection findings, which helps to identify systemic issues and other production-related issues by manufacturers,...
|
| Department of Housing and Urban Development | To better ensure that Congress, stakeholders, and agencies have complete information about changing costs and whether a fee needs to be changed, HUD should complete the necessary rulemaking changes to allow the Office of Manufactured Housing Programs to adjust its label fees from the $39 per label toward levels up to the congressionally authorized level that better reflect the current levels of manufactured home production, while considering the impact that such fees may have on the industry; put in place a process for regular fee reviews to determine whether the fees currently being charged will allow the program to respond to spikes and surges in label fee revenue and to identify any factors that may drive label fee revenue instability; and identify any additional sources of funding that may mitigate initial revenue shortfalls and the program's fixed and variable costs. |
On August 13, 2014, the Department of Housing and Urban Development (HUD) published a final rule that increased its revenues for the Program by implementing a user fee increase from $39 per manufactured home unit to approximately $100 per unit. The final rule became effective in September 2014. As of March 2018, HUD stated the label fee is adequately funding the program within congressionally authorized and appropriated levels. Further, HUD maintains that the label fee is reviewed by the Office of Manufactured Housing Programs on a regular basis to ensure that label fee revenue can continue to adequately fund the program.
|
| Department of Housing and Urban Development | To better ensure that Congress, stakeholders, and agencies have complete information about changing costs and whether a fee needs to be changed, HUD should assess the feasibility, including an analysis of the benefits and costs, of putting in place user fees for its dispute resolution and installation programs. | As of September 2023, HUD has implemented this recommendation, HUD stated that the Office of Manufactured Housing Programs continues to implement both the installation and dispute resolution programs in the default states with the technical assistance of contractors for both programs. The installation and dispute resolution programs are continuing to mature. Officials stated in its assessment of these programs since these programs have been implemented, there is no need to establish user fees for these programs. More specifically, for the dispute resolution program, officials explained the average intake of possible dispute resolution cases in HUD-administered states is 10 per year....
|
| Department of Housing and Urban Development | To better ensure that Congress, stakeholders, and agencies have complete information about changing costs and whether a fee needs to be changed, HUD should establish the goals for use of reserves of the Manufactured Housing Fees Trust Fund, and the minimum and maximum thresholds for the reserves appropriate for meeting these goals. | As of September 2023, HUD has implemented this recommendation. Since we made this recommendation, HUD has developed a policy framework and management strategy to guide the manufactured housing fee trust fund. The document provides historical industry trends for manufactured housing, a review of the manufactured housing program economic needs, and proposed policy framework and management strategy.More specifically, according to the document, HUD Reserve Policy Framework and Management Strategy (as of May 2023) will apply for both the Manufactured Housing Trust Fund balance and the budget carryover to help ensure the long-term financial stability of the fee-funded program. The strategy...
|
Full Report
GAO Contacts
Matthew Scirè
Public Inquiries
Topics
Building codesEconomic analysisFederal fundsFeesFunds managementHousing constructionHousing programsInternal controlsLending institutionsMortgage programsPersonal propertyReal propertySafety standardsStandardsUse of funds