To assess whether the HUD Manufactured Housing Program was  meeting the Act’s intent for establishing a consensus process for  developing, revising, and interpreting standards, we reviewed:
Federal Register Notices from HUD, from 2002 until 2013, to  understand the creation of the MHCC;
MHCC documents, such as available meeting minutes and voting  ballots from 2002 until 2013 to assess the timing and topics of MHCC  recommendations to HUD; proposed and final rules from 2002 until 2013 to assess the status of documentation of HUD’s efforts to ensure the operation of the MHCC  and rulemaking process, such as the contract for the administering  organization and related documents; and
HUD’s staffing and other resources allocated to the program. To assess HUD’s efforts to facilitate the availability of affordable  manufactured homes, we collected and analyzed fiscal year 2012 data  from Federal Housing Administration (FHA) loan programs. Like other site-built homes, modular homes are categorized as  real property and are built to state and local building codes, most  commonly the International Residential Code (IRC). The Manufactured Housing Improvement Act of 2000 and General Duties of the HUD Office of Manufactured Housing Programs

The National Manufactured Housing Construction and Safety Standards  Act of 1974 was amended by the Manufactured Housing Improvement  Act of 2000 (2000 Act) to create a balanced consensus process for  establishing and revising manufactured home building standards. Owners of manufactured homes also had lower monthly costs than  renters. Although manufactured homes generally cost less to purchase than other  homes and have lower monthly costs, owners of manufactured homes  are more likely to have higher-priced financing than owners of site-built  homes. HUD Has Not Fully Achieved the Manufactured Housing Program’s Key Purposes

HUD has encountered challenges in meeting key purposes of the 2000  Act, as seen by, among other things, delays and backlogs in its  rulemaking process, limited assessment of financing alternatives, and  incomplete documentation of enforcement-related activities. The  purposes of the 2000 Act include (1) establishing a consensus-based  process to update and interpret manufactured housing safety and  construction standards and regulations for enforcing them; (2) facilitating  the availability of affordable manufactured housing; and (3) ensuring  uniform and effective enforcement of manufactured housing standards  and protecting consumers. HUD Has a Process for Updating the HUD Code, but Has Not Resolved Delays Related to the Lack of Economic Analyses

HUD has met the requirements for the initial establishment of both the  MHCC and a process for updating the HUD Code. HUD has also put in place a process for updating the standards. As required by the Act, if two-thirds of the MHCC members approve a  proposal, the committee finalizes it and recommends it to HUD in the form  of a proposed rule with an economic analysis. However, we  observed that HUD had not accepted, rejected, or modified any of the  MHCC recommendations for updating the HUD Code within 1 year of  their submission. Recognizing the impact that a lack of low-cost financing could have on  the affordability of manufactured homes, Congress directed HUD in the  2000 Act to review the FHA programs for manufactured home loans. However, HUD has not  yet examined or researched the effectiveness of these loan programs  because its research has focused on other priorities. Under the 2000 Act, all HUD label certification fee collections from HUD  transportable units are deposited into the Manufactured Housing Fees  Trust Fund and are available for use to the extent provided in annual  appropriations acts. In order to meet its increasing budget obligations, the program has relied  on congressional appropriations from the U.S. Department of Treasury’s  general fund. Recommendations for Executive Action

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 take the following  three actions:
Develop and implement a plan for updating construction and safety  standards for manufactured homes on a timely, recurring basis to  include: addressing unresolved issues related to defining and developing  sufficient economic analyses tied to proposed changes to the  construction and safety standards; and ensuring sufficient resources and capacity within HUD and the  MHCC 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. 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. HUD  provided written comments that are discussed below and presented in  Appendix I. HUD agreed with two recommendations, partially agreed with  two recommendations, and stated its intent to consider the remaining two  recommendations. We therefore continue to recommend that  HUD act on the report’s recommendations. However, HUD did not agree to  develop a plan to assess how FHA financing might further promote the  affordability of manufactured homes. However, as  noted in the report, HUD has not taken action to fully address this  requirement.
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.

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.

What GAO Recommends

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.