[Federal Register Volume 79, Number 156 (Wednesday, August 13, 2014)]
[Rules and Regulations]
[Pages 47373-47377]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-19173]

Rules and Regulations
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Federal Register / Vol. 79, No. 156 / Wednesday, August 13, 2014 / 
Rules and Regulations

[[Page 47373]]


24 CFR Part 3284

[Docket No. FR-5721-F-02]
RIN 2502-AJ19

Manufactured Housing Program Fee: Final Fee Increase

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Final rule.


SUMMARY: This final rule amends HUD's Manufactured Housing Program Fee 
regulations to raise the fee for each transportable section of a 
manufactured home that the manufacturer produces in accordance with 
HUD's Manufactured Home Construction and Safety Standards. This fee is 
referred to as a label fee. After considering public comments on HUD's 
May 2, 2014, proposed rule, this final rule raises the label fee to 

DATES: Effective Date: September 12, 2014.

FOR FURTHER INFORMATION CONTACT: Pamela B. Danner, Administrator, 
Office of Manufactured Housing Programs, Room 9168, Department of 
Housing and Urban Development, 451 Seventh Street SW., Washington, DC 
20410; telephone number 202-708-6423 (this is not a toll free number). 
Persons with hearing or speech impairments may access this number via 
TTY by calling the toll free Federal Relay Service at 1-800-877-8389.


I. Background

    HUD initiated this rulemaking to amend the amount of the fee 
collected from manufactured home manufacturers in accordance with 
section 620 (42 U.S.C. 5419) of the National Manufactured Housing 
Construction and Safety Standards Act of 1974, as amended by the 
Manufactured Housing Improvement Act of 2000 (42 U.S.C. 5401 et seq.) 
(the Act). Under this authority, HUD collects these fees through the 
sale of labels which the manufactured home manufacturer must apply to 
each transportable section of a manufactured housing unit that it 
produces as evidence that the unit(s) conform to HUD's Manufactured 
Home Construction and Safety Standards regulations, codified at 24 CFR 
part 3280. HUD establishes and collects these fees to offset its 
expenses for carrying out its responsibilities under the Act, including 
carrying out inspections, developing manufactured home construction and 
safety standards under 42 U.S.C. 5403, and making payments to states as 
required by statute and HUD's regulations (see Sec.  3284.10).
    On May 2, 2014, at 79 FR 25035, HUD published a proposed rule for 
public comment proposing to increase the fee to an amount between $95 
and $105 per transportable section of manufactured housing unit 
produced. In proposing this increase, HUD stated that while it has had 
authority to modify the fee in order to collect the overall amount of 
the fee established by HUD's appropriation for the applicable fiscal 
year, HUD has not exercised this authority since 2002. Given the 
increased costs related to overseeing the quality, safety, and 
durability of manufactured housing, the substantial reduction in fee 
collections since 2002 and, based on HUD's projected production levels 
of between 95,000 and 105,000 sections, HUD proposed raising the fee to 
an amount between $95 and $105 per transportable unit.

II. The Commenters

    The public comment period for the May 2, 2014 (79 FR 25035), 
proposed rule closed June 2, 2014. HUD received two public comments in 
response to this proposed rule. The comments were submitted by national 
trade associations representing the manufactured housing industry. One 
commenter questioned the magnitude of the increase of the proposed fee 
but stated that it did not oppose the proposed fee modification, 
provided that additional revenues derived from the change were utilized 
to fund legitimate program functions in a manner proportionate to 
current and projected production levels, and are targeted and utilized 
to provide enhanced funding for State Administrative Agencies (SAAs). 
The second commenter also expressed concern regarding the magnitude of 
the increase of the proposed fee and stated that the proposed fee is 
not reflective of current production levels. The commenter also 
recommended that HUD withdraw the proposed rule and develop a formula 
for establishing a fee based on production. The following section of 
this preamble summarizes the significant issues raised by the 
commenters on the May 2, 2014, proposed rule and HUD's responses to 
these comments.
    Comment: A commenter stated that HUD's proposed fee was an 143 to 
169 percent increase over the current fee and, according to HUD, based 
on increased program expenses over the last 12 years. The commenter 
questioned, however, how program expenses could require such a 
significant increase in the fee when industry production over the same 
period decreased by 64 percent.
    Response: Program operating expenses do not have a direct 
correlation to production levels since monitoring is an ongoing 
expense. Nevertheless, HUD recognizes the magnitude of the increase. As 
discussed in the preamble to this rule, however, HUD has not increased 
the label fee since 2002. Moreover, beginning in fiscal year (FY) 2014 
and continuing through FY 2015, HUD plans to improve implementation of 
two key requirements of the Act. First, HUD plans to obtain contractual 
support to assist in the administration of the installation standards 
program in states that have not established approved programs and to 
assist in administering the dispute resolution program in states that 
have not established approved dispute resolution programs. HUD through 
its monitoring contractor also requires services to perform the design 
monitoring reviews of third party agencies as required by Sec.  
3282.452(e). Second, HUD is responsible for updating the construction 
and safety standards on a 2-year cycle, but has not been able to 
schedule a meeting of the Manufactured Housing Consensus Committee 
(MHCC) since October, 2012. To address this, HUD recently awarded a 
contract to an Administering

[[Page 47374]]

Organization as required by the Act and will begin holding regular 
meetings of the MHCC. Finally, beginning in FY 15, HUD plans to 
structure the Manufactured Housing Program to be self-supporting. This 
means that unlike most prior years, HUD will not receive a direct 
appropriation of funds from Congress but will be dependent on label 
fees for administering the program. As a result, HUD has and will 
continue to incur increased costs to administer the program and must 
establish a label at a level that will allow it to administer the 
program operations while relying less on additional appropriations from 
    Comment: The second commenter stated that HUD's proposed label fee 
represents an increase of between 243 and 269 percent over the current 
fee and fails to consider the overall cost of regulation under the 
Manufactured Housing program. According to the commenter, the industry 
pays approximately $6.4 million per year in fees to Production 
Inspection Primary Inspection Agencies (IPIAs) and Design Approval 
Primary Inspection Agencies (DAPIAs) in order to comply with the 
Manufactured Housing Construction and Safety Standards and Regulations. 
This is in addition to $10 million HUD estimates would be collected in 
label fees if the fee is increased to $100 per label. While the label 
fee is an important component of the HUD program, the commenter stated 
that HUD should consider the overall cost of regulation that is passed 
to the consumer and the impact on the affordability of manufactured 
housing prior to establishing a new label fee.
    Response: HUD is cognizant of the fees paid to IPIAs and DAPIAs by 
manufactured housing manufacturers for design reviews and inspections. 
However, these fees are a cost of doing business, established by 
contract or other agreement as agreed upon between the manufacturer and 
the primary inspection agency or, in the case of a state acting as an 
exclusive IPIA, by the state. The manufactured housing program fee, on 
the other hand, represents the fee necessary to offset HUD's expenses 
in connection with carrying out its responsibilities under the Act.
    Comment: One commenter recommended, given the magnitude of the 
increase of the proposed fee, that it be phased in over several years.
    Response: Phasing in the increase over several years is not 
contemplated by the Act which provides that the amount of the fee may 
only be modified ``as specifically authorized in advance of an annual 
appropriation.'' (Emphasis added). In addition, phasing in the increase 
would be difficult to administer and, more importantly, would not 
provide the funding required by HUD to meet the program's operating 
expenses for the balance of FY 2014 and FY 2015.
    Comment: A commenter stated that manufacture home production has 
been slowly increasing from 50,000 homes in 2010 to just over 60,000 in 
2013, and that the proposed label fee increase does not consider likely 
production increases. According to the commenter, while HUD supervision 
goes up as production rises, the relationship is not linear and that if 
the fee becomes fixed at $95 to $105, a strong recovery by the industry 
could result in a windfall for HUD that has not been justified in the 
    Response: In estimating the amount of the fee, HUD included a 5 
percent per year production increase based on historic data. However, 
if there is an unpredicted increase in production, HUD would consider 
reducing the label fee.
    Comment: A commenter stated that HUD reported in its FY 2012 
Congressional Budget Justifications that the responsibilities of its 
manufactured housing program have remained unchanged. The commenter 
questioned why the decline in industry production has not resulted in 
reduced program responsibilities and lower program expenses. The 
commenter questioned whether the increase in program expenditures might 
result from factors other than those which justify an increased label 
fee and must be addressed and corrected by the program going forward.
    Response: As discussed in response to a previous comment, program 
operating expenses do not have a direct correlation to production 
levels since monitoring is an ongoing expense. Moreover, the 
Manufactured Housing Improvement Act of 2000 increased HUD's 
responsibilities to carry out the requirements of the Act. For example, 
it established the MHCC and requires that HUD contract with an 
Administering Organization, hold regular MHCC and subcommittee 
meetings, and update the standards on a 2-year cycle. In addition, the 
Manufactured Housing Improvement Act of 2000 requires that HUD 
establish and revise model installation standards, implement an 
installation program in states without this program; and approve 
installation programs in the states that adopted installation standards 
based on the federal model installation standards and HUD's 
requirements for an approved installation program. HUD's 
responsibilities will be increasing as implementation of an 
installation program in the states without this program will be 
completed in FY 2015. Finally, HUD was required to establish a model 
dispute resolution program, administer the program in states that have 
not adopted such a program, and approve state dispute resolution 
programs based on the requirements established by HUD for such 
programs. HUD is also planning to obtain a contractor to fully 
implement a dispute resolution program in states that did not adopt 
such a program in FY 2015.
    Comment: A commenter stated, based on its review, that HUD's 
payments to the program's monitoring contractor have remained constant 
or increased even as production levels have decreased. According to the 
commenter, these sustained and increased contractor funding levels, 
during a period of decline in industry production and a falling number 
of consumer complaints and referrals to the federal dispute resolution 
system, is attributable to a major expansion of in-plant regulation 
with significant ``make-work'' activities for the program contractor 
and should be eliminated. According to the commenter, eliminating these 
unnecessary functions would realize significant cost savings that could 
be used to fund the functions and operations of the SAAs and properly 
fund the responsibilities of the Secretary.
    Response: HUD's overall monitoring costs have remained constant or 
gradually increased over the last few years due to inflation and 
efforts to enhance quality and reduce non-conformances and the number 
of consumer complaints. The improvements in overall home quality and 
reduced levels of consumer complaints are not ``make-work'' activities 
as suggested by the commenter. Rather, they are the direct result of 
the focus of HUD's cooperative monitoring activities and training over 
the past four years with manufacturers and their inspection agencies to 
improve overall construction quality. The goals of such monitoring are 
to reduce the number of consumer complaints and service calls for 
manufacturers, and enhance the manufacturer's quality assurance 
programs. While HUD believes that such goals are being achieved, 
without a similar level of monitoring, these improvements may not be 
sustained. For these reasons, HUD will be conducting oversight and 
evaluation of its inspection agencies performance to determine if the 
improvements put in place over the past four years are being

[[Page 47375]]

sustained. HUD will consider future reductions in its in-plant 
monitoring if the results warrant changes in the level of current 
monitoring activities and may use the savings to fund SAA operations as 
discussed elsewhere in HUD's responses to the comments.
    Comment: The second commenter echoed these concerns stating that 
the amount paid to the monitoring contractor has increased to $5 
million in 2013 from $3.2 million in 2011. According to the commenter, 
the costs for the monitoring contractor should be going down, not up. 
The commenter stated that while ensuring quality assurance in plants 
has been generally successful, it has also resulted in reduced service 
calls, fewer consumer complaints, and higher quality homes. According 
to the commenter, it is logical to conclude that the need for time 
consuming and costly audits should be reduced.
    Response: HUD agrees with the commenter that quality assurance 
monitoring has generally been successful. However, this shift in 
monitoring has been instituted using a training approach at 
manufacturer facilities over a period of 4 years. While the process 
appears successful in reducing the number of consumer complaints, the 
process is more time consuming for auditors and therefore, more 
expensive. As stated in a prior response, HUD believes that without 
continuing this level of monitoring, these improvements may not be 
    Comment: A commenter stated that last year annual audits in each 
plant lasted 3 days. According to the commenter, audits could be 
shortened by at least one day, saving substantial sums. The commenter 
also stated cost savings could be realized if audits were conducted 
with regional planning in mind, so that auditors could visit plants 
within the same region and save money on air fare. The commenter also 
stated that the same logic holds for HUD's oversight of the Primary 
Inspection Agencies and that over time, monitoring and review of the 
activities of DAPIAs and IPIAs should improve performance and reduce 
the need for monitoring.
    Response: HUD's current 3-day audit approach is required to conduct 
an overall and thorough evaluation and quality audit of each inspection 
agency's performance in each factory. In scheduling audits, HUD travel 
costs and locations are considered as factors in current contract 
administration. As previously indicated, HUD agrees that over time, its 
current monitoring activities could be reduced if supported by 
inspection agency performance in sustaining improvements in their 
oversight of manufacturers and their quality assurance programs and 
reductions in non-conformances and by declines in the levels of 
consumer complaints.
    Comment: A commenter stated that HUD could reduce its cost 
estimates for regulation and enforcement of installation programs in 
each of the 15 states that do not have their own approved program by 
partnering with the industry. Specifically, the commenter recommended 
that HUD partner with the Manufactured Housing Educational Institute 
which has an effective training program that has been used since 2006 
in over 15 states for installers. The commenter also recommended that 
HUD consider collecting license and inspection fees from installers as 
an alternative to label fees for activities related to administering 
installation programs in the 15 default states.
    Response: HUD is currently planning to contract with qualified 
entities to perform this function and will be looking to use resources 
currently in place. HUD will also examine the viability of collecting 
license and inspection fees from installers in the future.
    Comment: A commenter stated that HUD's expansion of in-plant 
monitoring from contractor scrutiny of the home to assess the IPIA to 
contractor inspections and analyses of the manufacturer's quality 
assurance systems should have been first considered by the MHCC for 
prior review and comment and should be eliminated.
    Response: HUD's emphasis over the past years on examining the 
quality assurance programs of the manufacturers and the third party 
agencies inspection of these programs is consistent with the Program's 
overall monitoring policies and the Program's regulations. The purpose 
of this education and monitoring approach has been to assure compliance 
with the Federal standards and to reduce consumer complaints. HUD does 
not believe that it requires prior review by the MHCC to implement 
current modified monitoring procedures which are part of HUD's 
responsibilities under the Act.
    Comment: The commenter, citing data from HUD's Congressional Budget 
Justifications since 2005, stated that payments to SAAs have decreased. 
According to the commenter, with a substantial number of states facing 
critical difficulties providing funding for SAA operations, it is 
essential that additional HUD funding of SAAs be provided. The 
commenter recommended that any additional program revenues resulting 
from HUD's proposed fee increase be utilized to increase payments to 
the SAAs, and thereby preserve the federal-state partnership that is 
the bedrock of the manufactured housing program.
    Response: SAA funding has not decreased. In fact, SAAs that were 
fully approved as of December 27, 2000, receive funding at the same 
production levels and siting as in 2000. HUD will consider future 
modifications to the current fee distribution formula to ensure states 
are provided with adequate funding to perform the required SAA 
    Comment: The second commenter also stated that it has serious 
concerns that the fees paid to SAAs are not reflective of current 
production and shipment levels and that HUD should adjust its budget 
and consider a fee increase based on more realistic payments to SAAs. 
The commenter also stated that a flaw in the federal law mandates that 
fees be based on shipment and production levels in effect in the year 
2000 but that production and shipments levels have declined 
significantly during the last 14 years. Some states have increased 
production and shipments since 2000 yet they continue to receive 
payments based on lower production levels in 2000. Most states, 
however, have shipments and production levels substantially lower than 
they were in 2000, yet these states continue to receive payments at the 
higher rate calculated according to production and shipments in 2000.
    Response: HUD will review the basis supporting the amount of fees 
paid to SAAs and the adequacy of funding to the approved SAAs.
    Comment: One commenter recommended that HUD consider withdrawing 
the proposed rule and develop a formula for establishing fees based on 
production. According to the commenter, the fee could be raised or 
lowered depending on the annual number of homes produced, perhaps over 
a two year cycle.
    Response: HUD does not have the legal authority to develop a 
formula to establish fees based on production. As already noted, the 
Act provides that the amount of the fee may only be modified ``as 
specifically authorized in advance of an annual appropriation'' and is 
tied, therefore to annual appropriations. As also discussed, the 
establishment of an appropriate fee also needs to take into 
consideration several factors, including but not limited to production 
levels, such as ongoing program operating expenses. HUD is moving 
forward with this rule since the fee increase is

[[Page 47376]]

required for HUD to carry out the Program's basic responsibilities 
under the Act.
    Comment: Both commenters objected to a comment made in HUD's FY 
2015 Congressional Justification that it is seeking authority to allow 
future fee modification to be implemented via notice, rather than 
rulemaking. One commenter stated that such authority would further 
erode the goal of the Manufactured Housing Improvement Act of 2000 to 
ensure accountability and transparency in the fee adjustment process, 
including a full opportunity for all stakeholders to participate in 
that process through the informal rulemaking requirements of the 
Administrative Procedure Act. The commenter also stated that the 
history of HUD's modifications to the program fee, and specifically the 
fact that HUD has not changed the fee since 2002, does not support the 
basis HUD identifies for such a provision; specifically, the need for 
HUD to make timely adjustments to the fee. The second commenter stated 
it is essential for the MHCC to review and comment on future fee 
increases and that it believes that HUD has the ability to expedite 
rulemaking if needed. Both commenters recommended that HUD discontinue 
efforts to seek this authority.
    Response: HUD appreciates the opportunity to clarify its position 
regarding seeking authority to modify the fee by notice. Based on the 
comments received, HUD has not decided whether to pursue efforts to 
seek the legal authority to modify the manufactured housing program fee 
by notice. Nevertheless, should HUD pursue such authority it has been 
and continues to be HUD's position that modifying the fee would require 
publishing a notice in the Federal Register announcing the proposed fee 
and providing a 30-day public comment period for the purpose of 
inviting comment. After consideration of the public comments received 
on the proposal, HUD would publish a final notice in the Federal 
Register announcing the modified fee, any other necessary information 
regarding payment of the fee, and provide at least a 30-day delayed 
effective date. In addition, prior to implementing this change, HUD 
would be required to publish a final rule revising Sec.  3284.5 to 
accommodate the authority to revise the fee by notice. HUD notes that 
such a procedure could be used to both increase and decrease the fee. 
Nevertheless, HUD believes that such a procedure is consistent with 
section 620 of the Act and, notwithstanding the description in HUD's 
Congressional Justification, is rulemaking under section 553 of the 
Administrative Procedure Act (5 U.S.C. 553). As stated, however, HUD 
has not decided whether to pursue this authority.

III. This Final Rule

    This final rule raises the amount of the fee to $100 per 
transportable unit. When HUD last modified the amount of the fee per 
transportable section in 2002 (67 FR 52832, August 13, 2002), HUD 
divided the annual projected number of manufactured housing 
transportable units (350,000) into the amount appropriated by Congress 
for the manufactured housing program for the fiscal year. (See 67 FR at 
52832.) As described in the May 2, 2014, proposed rule, HUD believes 
that a similar formula should form the basis of this revised fee. This 
approach is also consistent with the method and formula used to 
determine the monitoring inspection fee in Sec.  3282.307(e). In this 
regard, HUD has determined, based on the current projected production 
levels, that the number of manufactured housing transportable units 
will be approximately 100,000 sections. This is the average of the 
range of production levels discussed in the proposed rule. 
Additionally, as stated in HUD's 2015 budget justification, HUD has 
estimated that, at current production levels, approximately $10 million 
annually is required to administer the Manufactured Housing Program in 
a manner that fulfills HUD's statutory oversight responsibilities. This 
is consistent with HUD's budget requests for FY 2015 which stated that 
HUD would through rulemaking increase the fee to an amount of up to 
$100 per label.
    HUD recognizes that the Federal government is nearly through FY 
2014, and that application of a new fee may only apply to a limited 
portion of FY 2014, or may not be feasible until FY 2015. Nevertheless, 
the fee is important to sustain the program. The increase in fee 
implemented in this rule is one that HUD believes is appropriate for 
succeeding fiscal years barring subsequent appropriations that require 
further changes.

IV. Findings and Certifications

Impact on Small Entities

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.) 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements, unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
As discussed in the May 2, 2014, proposed rule, this final rule would 
not have a total economic impact of more than $6.1 million, which the 
maximum additional amount of fees that HUD has determined would be 
collected if the fee is raised to $100 per label.
    By annual appropriations acts, Congress requires HUD to collect 
fees from manufacturers of manufactured housing to ensure the annual 
appropriation that HUD provides in a given fiscal year. In addition to 
the authority to set label fees, the reports accompanying HUD's recent 
annual appropriations acts reflect strong Congressional encouragement 
for HUD to respond to the annual appropriations act authority to modify 
the label fees to obtain additional funding to support the manufactured 
housing program. The per-unit fee would remain as has always been the 
case to be proportional in its impact, with greater collections from 
larger manufacturers and less collections from smaller manufacturers.
    HUD has concluded, generally, that, as is often the case with 
increased fees placed on manufacturers of products used by consumers, 
the fee increase will be passed through to consumers, thereby 
minimizing the impact on manufacturers large and small. If the cost of 
the fee is passed on to the consumer, the purchase price of a 
manufactured home would increase, and placements of new manufactured 
homes would decrease slightly below currently forecasted levels. If 
manufacturers absorb the cost, however, the effect of the increase 
would result in lower profits for the manufacturers and sales would 
remain unchanged. In either scenario, this change in fee collections 
would represent a transfer to tax payers from manufacturers of 
manufactured housing or consumers purchasing new manufactured housing, 
since the increased fee collections will replace funds collected 
through federal tax collections.
    For these reasons, HUD submits that this rule will not have a 
significant economic impact on a substantial number of small entities.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for Federal agencies to 
assess the effects of their regulatory actions on State, local, and 
tribal governments and the private sector. This final rule does not 
impose any Federal mandates on any State, local, or tribal governments 
or the private sector within the meaning of the UMRA.

[[Page 47377]]

Environmental Impact

    This final rule involves a rate or cost determination and a related 
fiscal requirement that do not constitute a development decision 
affecting the physical condition of specific project areas or building 
sites. Accordingly, under 24 CFR 50.19(c)(6), this final rule is 
categorically excluded from environmental review under the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321).

Federalism Impact

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on State and local governments and 
is not required by statute, or preempts State law, unless the relevant 
requirements of section 6 of the Executive Order are met. This rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on State and local governments or preempt State 
law within the meaning of the Executive Order.

List of Subjects in 24 CFR Part 3284

    Consumer protection, Manufactured homes.

    Accordingly, for the reasons discussed in this preamble, HUD amends 
24 CFR part 3284 as follows:


1. The authority citation for 24 CFR part 3284 continues to read as 

    Authority: 42 U.S.C. 3535(d), 5419, and 5424.

2. Revise Sec.  3284.5 to read as follows:

Sec.  3284.5  Amount of fee.

    Each manufacturer, as defined in Sec.  3282.7 of this chapter, must 
pay a fee of $100 per transportable section of each manufactured 
housing unit that it manufactures under the requirements of part 3280 
of this chapter.

    Dated: August 8, 2014.
Carol J. Galante,
 Assistant Secretary for Housing--Federal Housing Commissioner.
[FR Doc. 2014-19173 Filed 8-12-14; 8:45 am]