Subcommittee on Housing and Transportation


Hearing on S.1452 - "The Manufactured Housing Improvement Act"


Prepared Testimony of Mr. Rutherford Brice
Member of the Board of Directors
American Association of Retired Persons


9:30a.m., Tuesday, October 5, 1999

Good morning, Mr. Chairman and members of the Subcommittee on Housing and

Transportation. My name is Jack Brice. I live in Decatur, Georgia, and I serve as a member of AARP's Board of Directors. On behalf of AARP, I thank Chairman Allard, Ranking Member Kerry, and the other members of the Subcommittee for inviting us to participate in today's hearing regarding S. 1452, the Manufactured Housing Improvement Act. Before commenting on S. 1452, I would like to take this opportunity to thank the Chairman and other members of this Subcommittee for your continuing bipartisan support for legislation designed to assist our older citizens in meeting one of their essential needs - housing. We look forward to a continuing and positive working relationship in pursuit of these shared interests.

Manufactured Housing Improvement

AARP's interest in manufactured housing and in this legislation is based on the fact that over 2 million persons age 65 and older live in manufactured homes. And, according to 1998 U.S. Census data, 44% of manufactured homeowners are age 50 and older. From a broader perspective, manufactured homes provide housing for approximately 7% of the total population, as renters or owners. Manufactured homes are an important source of affordable housing for Americans generally, and for older Americans specifically. AARP has been involved for many years in efforts to work with Congress, the U.S. Department of Housing and Urban Development (HUD), and industry to update and modernize the National Housing Construction and Safety Standards Act of 1974 (the 1974 Act), and directly participated in the work of the National Commission on Manufactured Housing. Manufactured housing is built locally, but sold to a national market, as a form of interstate commerce. Based on this fact, we believe that there is an important and continuing role for the 1974 Act in establishing and enforcing a national set of construction and safety standards for manufactured housing. No matter where the home is manufactured, or where it goes, it is essential that it at least meet minimum national construction and safety standards.

AARP also supports the goal of establishing a process for regularly updating the standards based on the 1974 Act as long as the process provides for a balanced representation of consumer, industry and general public views and interests. And finally, AARP shares a concern that manufactured housing be affordable. But clearly, affordability has at least two dimensions:

the purchase price of the manufactured home, and

the cost of repairs due to its improper manufacture, transport, storage or installation.

AARP agrees that the 1974 Act is not working well for the manufactured housing industry nor for the owners of these homes. From the consumer's perspective there is a critical deficiency in the quality assurance process regulations currently administered by HUD under the authority of the 1974 Manufactured Housing Act. That deficiency is a continuing lack of readily available and reliable data from the manufacturers that is necessary to measure each home's performance against existing federal standards. The fundamental issue is not an absence of construction and safety standards - although periodic updating is certainly needed -- but rather the failure to enforce the standards as now written.

In support of this year's renewed legislative efforts to update the 1974 Act, and in the interest of securing relevant data concerning homeowner experience with these construction and safety standards, AARP sponsored a telephone survey conducted from May 21 to June 3. 1999, by National Family Opinion Research (NFO), of 933 mobile homeowners who had purchased their homes within the past eight years. The survey sample was drawn from a nationally representative panel of approximately 35,000 adults whose manufactured home was purchased new and is their primary residence. The margin of sampling error for a sample of this size is a plus or minus 3 percent. Appendix I to my written testimony includes a "Summary of Findings" from the national survey of mobile home owners who purchased a new mobile home since 1991.

The purpose of the survey was to document the extent to which recent homeowners have experienced problems with the construction and/or installation of their manufactured home, and to explore how they dealt with these problems. The list of possible problems was derived from Part 3280 of the existing Federal Manufactured Home Construction and Safety Standards. The vast majority of the problems identified by the respondents can be described as failures to conform to existing federal construction and safety standards. The survey results are extremely troubling with regard to current quality assurance standards enforcement, and shed a bright light on the need to further perfect S. 1452

before final passage. In this regard, we would like to express AARP's willingness to work through these concerns with all interested parties.

Key Survey Findings include:

While homeowners' satisfaction with the quality of their homes was comparable to levels found in other national surveys (nearly 80% reported being "very" or "somewhat" satisfied in this survey), a closer analysis of responses showed that ratings varied significantly by whether or not a problem was reported, and by the type of problem reported.

Nearly eight in ten manufactured homeowners (77%) reported problems with the construction or installation of their homes, or other problems related to the use and enjoyment of their homes. Nearly six in ten (57%) reported more than one problem.

Nearly all (89%) of the particularly troublesome problems identified by manufactured homeowners reportedly developed within the first five years of ownership, while six in ten (61%) were reported for the first year.

Virtually all those surveyed (95%) said they received warranties with their new manufactured homes. Nevertheless, for all 944 problems identified by respondents as being of "major" or "greatest" concern, only about one-third (35%) were repaired under warranty. Two-thirds of homeowners reporting such problems either paid for the repairs or they remained unfixed. And remember, these problems are - in theory

-- covered by existing HUD regulations.

Finally, among those who reported out-of-pocket expenses for repairs, those expenses averaged $1,140 per problem.

Doesn't the purchaser of a new manufactured home deserve better service, regardless of where - or by whom -- the home was manufactured? Presently, purchasers of automobiles benefit from stronger consumer safety standards and enforceable warranty requirements than do purchasers of newly manufactured homes. Shouldn't we require at least equivalent mandatory warranty coverage for owners of new manufactured housing as we now provide for owners of FHA-insured new on-site built homes?

While owners of new manufactured homes remain committed to their choice in homeownership, the results of this study serve to confirm that the existing quality assurance program supporting that decision is not working. Perhaps even more significant is the fact that the purchasers of the most recently manufactured homes -- and again, in theory, the best homes ever made -- face substantial risk of paying out-of-pocket repair costs soon after they buy their new manufactured home. Clearly, the current array of manufacturer-offered warranties, and the general lack of effective dealer/retailer installation guarantees, do not promote more affordable homeownership - but rather often raise the price of the home post facto. Nothing has prevented the manufacturers and the dealer/retailers from collecting quality assurance data about homeownership concerns, and indeed from using this information to redress their shortcomings in meeting federal construction and safety standards.

With regard to the housing legislation that is pending before the Subcommittee - S. 1452 -- the Association has three basic concerns. AARP urges the Subcommittee to address these concerns by providing for:

First, a more balanced consensus committee for making recommendations to the Secretary of HUD to periodically update standards under the 1974 Act. A reformulated committee would reflect a better balance between consumer and industry views on enforceable national construction and safety standards than is currently proposed.

Second, federal minimum level requirements for a manufacturer's warranty, and for a state recovery fund; and

Third, a nationally mandated, performance-based installation standard.

Balanced Consensus Committee

The composition, scope of authority, and practical voting definition of what represents a "consensus" in the proposed Consensus Committee are important issues because of the importance of the Committee's recommendations to the Secretary of HUD. Currently,

S. 1452 proposes five interest categories for the Consensus Committee. Two of these categories clearly represent industry interests and thereby give undue weight to industry views. In this context, it is particularly troublesome that S. 1452 omits language that directs the Secretary to furnish technical assistance to consumer and other non-industry members of the Consensus Committee.

In order that the Consensus Committee reflect a better balance of views toward possible changes in construction and safety standards--and their enforcement -- the proposed interest categories and the numbers of members in each category should be revised. Specifically, the categories in S. 1452 designated for Home Producers (the manufacturers) and for Other Business Interests (the retailer/dealers) should be merged. The resulting category of "Home Producers and Other Business Interests" would have seven members instead of two categories of five each.

At the same time, the number of members in the Consumer interest category should be increased to 7 as a balance to the industry category. The Public Officials category and the General Interest category should be combined and given 7 members. Land-use planners should be added to the latter group. The total number of Consensus Committee members would then be 21.

Unlike procedures used by other federal government advisory committees, the administrative process in S. 1452 has been turned on its head. Under S. 1452, Consensus Committee recommendations become law unless the HUD Secretary publishes his rationale for the rejection of each recommendation. This is a very unusual process because it in effect makes an advisory committee into a regulatory agency. If the purpose of the proposed legislation is to streamline standards development, why has a whole new process been created between proposed rules and final rules? Further, this process would allow the regulated industry to propose the regulations by which it (the manufacturers and dealer/retailers) would be regulated. And, S. 1452 provides an explicit exemption for the committee members from the Advisory Committee Act (ACA). This is particularly worrisome because the ACA was specifically enacted to oversee and evaluate advisory committees such as the one proposed in this bill.

Warranties and State Recovery Funds

S. 1452 does not provide for minimum federal warranties nor for state recovery funds. A new section providing for Warranties and State Recovery Funds should be added, including the following:

Warranties shall be written and provided to the purchaser of a new manufactured home and shall warrant that the home is constructed to the standards promulgated by the Secretary and that the home is free from defects in materials and workmanship.

The warranty shall cover the correction of defects which result from the design, construction, transportation, installation and/or storage.

Manufacturers shall cover all defects which become evident within 5 years, (except as covered by the retailer's warranty), including defects in plumbing, electrical, air distribution, and structural systems.

Retailers shall provide a written warranty that the home is installed in accordance with the applicable installation standards and that any appliances or equipment added by the retailer and included with the sale of the home are properly installed and are free from defects in materials or workmanship. The term of the retailer's warranty shall be 2 years.

Warranties would be limited or voided in situations where the home purchaser does site preparation and installation and would be valid only so long as the home remains installed at the initial home site. Disputes over warranty coverage would be resolved, at the choice of the consumer, through an alternative dispute resolution (ADR) mechanism or litigation.

State recovery funds would be established to cover claims where the responsible manufacturer or retailer is no longer in business or refuses to honor claims after the ADR process or litigation. The Secretary of HUD would carry out the functions of the state recovery funds (collecting fees and distributing recovery amounts) where states have not enacted legislation to establish a fund within four years of the effective date of the Act.

Installation Standard

A definition of "installation" should be added to the Definitions section. It would require the Secretary to establish, by order, the installation standard which has been developed by the Manufactured Housing Standards Committee of the American National Standards Institute (ANSI).

Conclusion

Mr. Chairman, I would like to conclude by raising and answering three "What if" questions:

The first "What if" is: What if Congress takes no action at all? Neither industry nor the owners of manufactured homes would be served. Over the course of many years, HUD's "quality assurance" program -- required under the 1974 Act -- has been ineffective. This state of affairs would continue. Manufacturers and dealer/retailers would remain unencumbered by any warranty requirements based on the Act's construction standards. Only the homeowners would continue to be at risk.

The second "What if" is: What if S 1452, or one of its companion measures in the House (HR 710 or Title VII of HR 1776) is enacted? The formal title of the 1974 Manufactured Housing Act is: the "National Manufactured Housing Construction and Safety Standards Act of 1974". At its core, the 1974 Act is an act to protect purchasers of this important type of affordable housing from buying or living in improperly built or unsafe homes - homes that can be manufactured in one location, but then moved and sold in any other part of the country. Yet pending legislation does not require even a minimum, nationally required set of "enforceable" construction and safety (including installation) standards for manufactured homeowners. Again, manufactured homeowners would be the losers.

S. 1452 shifts the responsibility for developing construction and safety standards, and the regulations for their enforcement, to a "quasi-governmental" "consensus committee". Further, the bill exempts this committee from the basic national advisory, conflict of interest, ethics, and administrative procedures acts that govern other federal regulatory agencies.

The third "What if" is: What if Congress responds to the AARP-sponsored, NFO survey findings by amending the bills to address these problems? Homeowners and industry win.

Mr. Chairman, AARP strongly urges you to consider these comments and suggestions as the Subcommittee works to perfect S. 1452. Thank you again for the opportunity to testify on the" Manufactured Housing Improvement Act." We look forward to continuing to work with you and the other members of the Subcommittee on this and other housing issues.



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