WASHINGTON / CATHERINE COLLINS : Legislation for Factory Homes Debated

Is manufactured housing the answer to the nation’s affordability crisis? Not surprisingly, members of the trade say yes. But even its critics say maybe.

The typical family making its first home purchase has a median income of $23,400, which would enable it to spend $59,600 for a house, according to the National Assn. of Realtors.

Unfortunately, the median price of a new, single-family house is $129,900, and the median price of an existing house is $97,500.

However, the average price of a single-family house, constructed in a factory is $26,600. Of course, that price does not include the purchase or rental of a site on which to put a house.

The debate on the ability of the manufactured housing industry to fill in the ever-increasing affordability gap hinges on reform of the national code that regulates it. The House of Representatives version of the Omnibus Housing Bill contains an amendment to do just that. The Senate housing legislation sidesteps the issue.

The author of the controversial House amendment, Rep. John Hiler (R-Ind.), pushed the sweeping revisions of the 16-year-old federal construction and safety standards through the House Committee on Banking, Finance and Urban Affairs, despite the often rancorous debate.

Later he said: “Manufactured housing is a critical source of affordable housing for the American people. And modernization of federal laws regulating this housing is needed to give all Americans a shot at the dream of home ownership.”

Hiler’s district in Northern Indiana claims to be the birthplace of the manufactured housing industry, which employs more than 15,000 people there.

But what Hiler describes as overdue modernization of the code is really a step backward in terms of quality and consumer protection, say his detractors--the Consumers Union, National Assn. of Home Builders and the American Assn. of Retired Persons.

Although the U.S. Department of Housing and Urban Development has supported Hiler’s proposal, it has not been a wholly enthusiastic endorsement.

“We are concerned that this amendment is being cast as an affordability enhancer,” said Michelle Meier, legislative counsel for Consumers Union. “But it won’t help the consumer if they pay lower up-front costs and higher long-term costs for maintenance because of shoddy construction.”

Reform is needed, but in the other direction, said Don Redfoot, a housing lobbyist for AARP. “We feel Hiler’s amendment represents a weakening of consumer protections,” he said.

The federal code for manufactured housing “is not as rigorous as the code for site-built or modular homes and can best be understood as a code for lighter-weight construction,” said Ronald A. Rosenfeld, deputy assistant secretary for single-family housing at HUD, while testifying before the House Subcommittee on Housing and Community Development.

Even the inspection program is more lax, say officials of the National Conference of States on Building Codes and Standards, a not-for-profit organization funded by states to monitor codes.

Under the federal manufactured housing program, each house is inspected just once, and at that time the entire home can be deemed to comply with the federal standards.

In contrast, under the Uniform Building Code used in California, a site-built house is inspected a minimum of four times: for the foundation, framing, insulation and final finish.

In addition, the manufactured-housing inspection process is “riddled with conflicts of interest,” Meier said, because the industry is free to choose its own HUD-approved, inspection companies, which are then compensated directly by the manufacturers.

In defense, Bruce Butterfield, vice president of the Manufactured Housing Institute, said “This is the only housing in America always built to a code. At least 25% of all jurisdictions have no code at all.”

Much of the debate about the Hiler amendment concerns two provisions. The first disagreement is about the provision under which a manufacturer must notify consumers about defects.

Under current law, manufacturers must notify homeowners if the structure violates a federal construction or safety standard. And defect is defined as “any defect in the performance, construction, components, or material of a manufactured home that renders the home or any part of it not fit for the ordinary use for which it was intended.”

The House amendment would require notification only when a defect threatens a homeowner’s safety. It defines defect differently: “a defect is the performance, construction, compliance or material of a manufactured home that constitutes a safety hazard.”

Even if a defect may not pose a safety hazard, it could certainly affect the long-term value of the structure, is the concern. “It is not a step forward in affordability if someone loses his life savings because a product does not hold up,” Redfoot said.

Calling the notification requirement “Byzantine,” Butterfield said, “As a trade for not requiring notification the amendment will require manufacturers to provide a two-year warranty.”

The second controversial provision is the elimination of the manufactured home’s permanent chassis.

“If you take a manufactured home, pull out the permanent chassis and put it up on a basement, it’s going to look like the equivalent of a stick-built house. How is the consumer going to know the difference?”asked Floyd Williams, vice president and legislative counsel for NAHB.

“In addition, a builder selling to the lower end of the market is not going to be able to compete, even though his product is better.”

AARP, however, would not object to the removal of the permanent chassis, if stronger standards for the manufacture, transportation and installation were in place.

“My concern,” said Meier of the Consumers Union, “is that without the permanent chassis to distinguish manufactured housing from modular housing which must adhere to stricter local standards, you could sweep the whole modular housing industry into the weaker federal program also.”

It may seem strange that when Congress first passed legislation in 1974 directing HUD to enact standards for manufactured housing--the first and to date the only national building code--that it turned for guidance to the National Traffic and Motor Vehicle Safety Act, which governs the assembly of cars.

But applying car regulations to housing regulations made sense at the time because of a historic link between the two. Today’s manufactured home is an outgrowth of the 1920s travel trailer. During World War II, trailers were used to house defense workers. The real technological developments began in the 1950s when the houses started getting bigger.

Today, manufactured housing is defined as three-dimensional, single-family units, that are built in factories right down to the finishing touches--the installation of carpeting, window treatments and appliances.

They are shipped, either as complete houses or sections on permanent steel chassis. If installed on a rented site, they are often mounted on concrete or steel piers. When the site is owned by the homeowner, they may be installed on a poured concrete foundation or over a basement, just like a site-built house.

The technology has traveled a long road in recent years, and everyone agrees that a house code, not a car code, is necessary as the industry captures an increasing amount of the entry-level market.

” There are all kinds of reasons we sell a less expensive house. The price does not mean that it is an inferior product,” Butterfield said.

“We can price it well because it is built in a factory with production efficiencies. We buy in volume. We use employees, not itinerant labor. We build to a national code; we do not have to stop at state or local lines to change.”

There are 7.1 million manufactured houses in the United States, sheltering 12.9 million people. Since 1980, 2.5 million units have been constructed--representing 14% of all new production during that period and 28% of all single-family houses sold. More than 20% of all manufactured homeowners are over 65 years old.

As the Senate and House hammer out the differences in their two housing bills, the challenge in dealing with the manufactured-housing industry will be to balance the nation’s need for affordable shelter with safety and long-term durability.

In Senate hearings about the subject, Sen. Alan Cranston (D-Calif.) summarized the problem: “In the case of manufactured homes, perhaps even more than in the case of other consumer products, an affordable home must be a durable product and a product that remains safe for a very long period of time.

“For a consumer, the real affordability of a home involves not only the home’s initial purchase price, but also the costs of maintaining that home as a decent place to live,” he said.