Modular Briefs September/October 2003

Haven Homes Looks South
Haven Homes (Beech Creek, PA), known as the extreme modular company for its custom construction capabilities from its manufacturing facilities at its Beech Creek headquarters and in Bellafonte, PA, is looking south to expand its reach—specifically in South Carolina.

Steve Bassett, vice president with the 50-year-old company, is finalizing a deal in Jasper County. Bassett confirms the company has selected a new site for a new multi-million-dollar factory that will employ around 110 craftsmen once at full production. Initially the factory will employ around 60. “We plan on being up and operating by the first quarter of 2004. We will continue to concentrate on building high-end custom homes, as we have in Pennsylvania,” says Bassett.

MHTI Announces Schedule
The Modular Housing Training Institute (MHTI) at Penn College has announced the dates for the fall, winter and spring training classes for modular builders and installers. The two- day training program, one of the first in the U.S, covers four critical elements to the successful on-site completion of a modular home. This includes site and foundation preparation, scheduling, set and finish work needed for certification of occupancy.

A certificate of completion will be awarded to those participants who attend and complete examinations. The 16-hour training course is accredited with participants earning 1.6 CEUs or Continuing Education Units. Cost: $275 per person.

Manufacturers are encouraged to make use of these dates to train your staff, as well as independent builders and installers. Additionally, MHTI takes its course on the road to meet the needs of manufacturers interested in training their builder network. For details on dates or road sessions, call the MHTI at (570) 327-4768. The dates for classes are: Sept. 17-18, Oct. 15-16, Nov. 12-13, Dec. 3-4, Jan. 13-14, Feb. 4-5, Mar. 10-11, Mar. 31- Apr.1

Longtimers Honored At Penn Lyon
Penn Lyon Homes (Selinsgrove, PA), one of the nation’s foremost provider of modular structures, recently recognized five employees for 20 years or more of service. Penn Lyon employees honored included Roger Forry, production manager (21 years of service); Robert Kreider, foreman (22 years of service); Allen Henry, costing manager (22 years of service); Teri Shultz, receptionist/administrative assistant (21 years of service); Steve Johnson, head of receiving in plant II (20 years of service).

“It is your dedication, reliability and sincere desire to always give 110% that has helped position Penn Lyon Homes as a leader in the modular industry,â€? said Roger A. Lyons, president and chief executive officer at a ceremony for the longtime employees. “We are extremely grateful for your dedication to Penn Lyon Homes and to the modular industry.â€?

“People are the key to any organization,â€? stated David W. Reed, vice president. “We are very fortunate to have individuals like the five honored here today. We are proud of their accomplishment.â€?

Each of the honored employees received a letter of commendation along with a personalized watch engraved with their date of hire.

Penn Lyon Homes has provided distinctive and affordable quality homes and modular commercial buildings throughout the Northeast, and Mid-Atlantic States for more than 22 years.

Champion Named A Good Citizen
Business Ethics’ magazine recently named Champion Enterprises (Auburn Hills, MI), parent company of Genesis Homes, as one of the “100 Best Corporate Citizens of 2003.â€?

Using a social rating system compiled by KLD Research & Analytics in Boston, the list of the top 100 companies was drawn from the Russell 1000 (the 1,000 largest publicly traded companies). The aim of this annual project is to identify firms that excel at serving a variety of stakeholders based on social responsibility, responsive governance and corporate integrity.

Champion, the only homebuilder to be awarded a spot on this year’s 100 Best Corporate Citizens list, excelled in three areas: employee programs, customer service and environmental initiatives.

“We’re honored to be recognized by an impartial third-party,â€? says Roger Lasater, senior vice president of sales and marketing for Champion. “The programs and practices we have in place here at Champion are designed to serve, in the most responsible way, our employees, our customers, and other organizations and individuals with whom we come in contact.â€?

According to Business Ethics, the project rates companies based on how they interact with seven different stakeholder groups: investors, community, minorities and women, employees, environment, non-U.S. stakeholders and customers. In addition, it looks at recent media coverage on each firm, and reviews any pending lawsuits or regulatory problems, charitable contributions, and staff diversity, as well as other public information.

Deep In The Heart of Texas: A Modular Ruling
Using powers granted this year by the Texas Legislature, the town of Dickinson (population 18,500) has recently adopted an ordinance designed to limit where modular housing can be placed. The new ordinance has municipal officials from across Texas calling Dickinson City Hall to find out how this town plans to regulate location of modular homes within its limits, according to a July 26th article in the Houston Chronicle by Kevin Moran.

Until recently cities could regulate traditional mobile homes but not modular homes. Under the new Dickenson law, cities can require that modular homes equal the median value of all the homes within 500 feet of the lots on which the modular homes are to be placed. Cities also can require that the factory-built homes resemble other homes in a neighborhood and have similar landscaping.

“We’ve fielded dozens of requests for a copy of our ordinance,â€? says Keith Kiplinger, Dickinson’s housing official. “If the median value of the houses within 500 feet of where someone’s planning on placing a modular house is $150,000, you can’t put a $60,000 modular home there,â€? Kiplinger said. “You have to put in a $150,000 modular home.â€?

Modular Earnings Up For Palm Harbor
Palm Harbor Homes, the publicly traded parent company of Nationwide Custom Homes (Martinsville, VA) singled out its modular division in its first quarter 2004 report as continuing to gain momentum in the company’s report to shareholders June 27th.

“Our continued ability to deliver consistent results in this business cycle reflects our ability to fully leverage our assets and extend our value proposition,â€? says Larry Keener, president and chief executive officer of Palm Harbor Homes. “Notably, sales from our modular division, Nationwide Custom Homes, have continued to gain momentum and accounted for approximately 10% of our sales for the quarter. Our expansion into the growing modular housing market will allow us to significantly expand our customer base.â€?

Net sales for Palm Harbor for the first quarter of fiscal 2004 totaled $155.9 million compared with $138.5 million in the year-earlier period. Net income for the first quarter totaled $0.8 million, or $0.04 per share, compared with a net loss of $1.3 million, or $0.06 per share, a year ago.

“Our first quarter performance marks a solid start for Palm Harbor for fiscal 2004,â€? says Lee Posey, chairman of Palm Harbor Homes. “We are especially encouraged that our financial results for the quarter reflect both solid year-over-year and sequential quarterly earnings improvement during an extremel
y challenging period for our industry. More importantly, our ability to enhance our overall profitability and continue to gain market share tells us that we are doing the right things.

“Particularly gratifying are the tangible benefits of our strategic initiatives over the past year to build our capabilities and become a vertically integrated company. We are experiencing record levels of both customer satisfaction and customer referrals due to the exceptional quality and value that the Palm Harbor brand represents. We believe these factors will continue to enhance our leadership position and, ultimately, our shareholder value. We see the opportunities before us and remain confident that Palm Harbor has the right strategy, the right assets and above all, the proven ability to execute.â€?

Shop Project Goes Upscale
Ashtrays. Footstool. CD rack. Those used to be the standard shop project in high school. But a group of Fairfax, Virginia students built a multi million-dollar modular home for their shop project.

In an article July 10th by S. Mitra Kalita entitled The Ultimate Shop Project: A $1.3 Million Home, the Washington Post drew attention to the capabilities of modular technology when 60 students constructed a 6,500 sq.ft. modular home. Students spent two years learning how to construct staircases, hardwood floors and installing windows. Three dens, five fireplaces and seven bathrooms later, their lesson went on sale for more than a cool million: $1,325,000, to be exact.

The sprawling five-bedroom house — 6,500 square feet, counting the finished basement—on a cul-de-sac is the 16th built by students from seven schools through the county’s professional technical studies department. “Like Fairfax, other Washington area school systems offer such hands-on learning opportunities,â€? according to the article. “In Montgomery County, students at the Thomas Edison High School of Technology have built an entire block of 2,000-square-foot houses in Aspen Hill as part of the school’s career education program. On Saturday, a three-bedroom modular house built by students in Prince William County will be open for public inspection, eventually to be auctioned.

But this is the first time, as far as anyone can remember, that students may find their class work paying off in such a big way. Fairfax school officials say the house also exemplifies the new direction of vocational education.

“When you used to say vocational, it meant the kids who weren’t successful,â€? says Jeff McFarland, coordinator for trade and industrial education. “Now, from being a dumping ground, most of the kids are college-bound. They’re thinkers.â€?

The school district developed the program in partnership with the Foundation for Applied Technical Education Inc. Most of the 16 houses have been built on school-owned property in McLean across from the Spring Hill Recreation Center, and there is room for one more before the students and their tools move on to a property in Springfield.

Some of the profits from each house are used to pay for other vocational programs. The rest go to build the next house, and each house takes about two years.

Between hammering and nailing, students hear from speakers and take field trips to learn about trades within the industry. Professionals perform the more complex jobs, such as constructing the roof, installing electrical or granite countertops. But they are asked to explain the work as they do it.

PA Housing Official Boyer Retires
John Boyer, chief of the division of manufactured housing in the Pennsylvania Department of Community and Economic Development, retired in June. Prior to working in Pennsylvania state government, Boyer had a distinguished military career, including a tour as a helicopter pilot in Vietnam. We’re not sure which is more challenging—war or the niceties of state government.

Boyer was a unique blend of regulator and industry advocate and will be missed, says Steve Snyder, executive director of the Modular Building Systems Association. “It is rare when you have someone who is responsible to regulate an industry and is able to, at the same time, work to advance the industry. John has done that over the years,â€? Synder says.

“Often an adversarial relationship can develop between regulators and the industry they regulate. That has never been the case with John. Throughout his career as the regulator of the modular housing industry, John has always worked to advance and improve the image and market share for our homes.â€?

No word yet on who will be selected to replace him.

In other MBSA News:

Murray Elected as MBSA Southern VP
Recently members of the MBSA chose to expand their mission with the establishment of the Southern Regional Council. At the first meeting of the new Southern Region, members elected Bill Murray as their regional VP and to serve on the MBSA Executive Committee.

Among the issues on the agenda of the new council are sales tax issues in both North and South Carolina, esthetic requirements for on-frame and off-frame modular housing, 16’– wide transportation regulations in North Carolina, continued legislative efforts by the manufactured housing industry to change zoning laws in Virginia, as well as many of the issues we fight on a day to day basis in all the states. The Southern council will continue to meet periodically by conference call and in person as the work in the southern states continues. In addition, the Southern Regional Council is working on increasing membership from non-member manufacturers in the south who will benefit from the work we are doing, and from whom we would like to have their input and support.

NC Sales Tax, Appearance Legislation
The North Carolina Manufactured Housing Association has proposed legislation which will change the way the so-called on-frame modular home is taxed and also includes off-frame modular housing as well. The bill would also establish appearance requirements for modular housing, and require modular builders in the state to be licensed. The South Carolina association is working on similar legislation.

Legislators are attempting to address the issue of so called “on-frameâ€? modular homes that meet the building code but resemble traditional manufactured homes, with shallow roof pitches and other physical characteristics. In the State of South Carolina this legislative ball got rolling when a on-frame modular home was placed in a subdivision where a state senator lives. The senator is threatening to pass legislation outlawing all factory-built housing in residential zones, Snyder says..

The tax situation in both of these states has a lot to do with this problem. Currently, in both states, off frame modular housing is taxed on materials only. Manufactured housing is taxed at a rate of two percent of the invoice price up to a maximum of $300 per box. The problem is that the on-frame modular home is taxed at the same 2% rate as manufactured homes. As a result, there is a significant tax advantage to building the modular home on a frame.

It is hoped that by eliminating the tax difference, manufacturers who currently build on-frame modulars will begin to build modular homes without the frame. The legislation that was proposed would provide for a 2% tax (no $300 cap) on both on-frame and off frame modulars, thus eliminating the advantage of building a modular home on a metal frame. The bill would also establish appearance criteria on modular homes including:

(1) Roof pitch—For homes with a single predominant roofline, the pitch of the roof shall be no less than five feet rise for every 12 feet of run.

(2) Eave projections—The eave projections of the roof shall be no less than 10 inches, which may not include a gutter, around the perimeter of the home, unless the roof pitch is 8/12 or greate
r.

(3) Exterior Wall—The minimum height of the exterior wall shall be at least seven feet six inches for the first story.

(4) Siding and roofing materials—The materials and texture of the exterior materials shall be compatible in composition, appearance, and durability to the exterior materials commonly used in standard residential construction.

(5) Foundations—The home shall be designed to require foundation supports around the perimeter. This may be in the form of piers, pier and curtain wall, piling foundations, a perimeter wall or other approved perimeter supports.

The legislation provides for a waiver of the appearance requirements if a builder was developing a project involving “special designs;â€? for example a series of contemporary homes without the traditional roof pitches, etc. In addition, the bill in North Carolina would require modular builders to have a “dealer’s license.â€? Currently stick builders are required to be licensed in the state, but not modular builders.

In discussions with southern manufactures involved with the manufactured housing association, the North Carolina Department of revenue will not support a two percent tax on modular housing as they believe that will result in a revenue shortfall for the state. They are currently considering a two-point five percent tax.

New York Rejects Third Party Plan Review
The modular housing industry continues to struggle with lengthy delays in the plan approval process in New York, and it appears that the problem may be getting worse. Recently the New York Department of State (NYDOS) decided to review plans for commercial modular construction, as well as residential, doubling or tripling the workload for already overworked state employees.

In every other state, the modular industry uses an entire industry of third party plan review companies, while NYDOS has two or three people on staff doing plan review. The result has been extensive delays and lost business. Officials with the NYDOS continues to argue that the problem is completely the fault of the industry and is due to poor quality plan preparation, Snyder says. “At no time, over the past six years since this program was transferred to the NYDOS, has the state been willing to concede that even if manufacturers did a better job on the plans we submit, the state still does not have the manpower to do the plan review. Now, the state has increased their own workload by adding commercial modular construction,â€? Synder says.

The MBSA met with the Building Systems Council, and representatives from the New York Manufactured Housing Association, and the national Manufactured Housing Institute to discuss this problem. The MBSA has been considering the possibility of introducing a bill in the legislature to require the state to use third party plan reviewers. Plans to introduce legislation have been tabled for now as we work with these other associations on a collaborative effort.

Transportation Regulations Update
The MBSA has agreed to work with a group of manufactured housing associations in the northeastern states on a plan to draft and promote uniform regulations for the movement of oversized loads. The Northeastern Manufactured Housing Association, a group of state associations in the northeast, has hired a consultant who is in the process of preparing a survey and report on all the transportation regulations for each state in the region. Each association has assessed their members $2,000 each to cover the cost of the consultant. The MBSA has agreed to participate in the cost of this program and will be sending out information to our manufacturers as well.

The consultant will be working with state transportation officials, and an association of state transportation officials (yes, even state regulators have trade associations) towards the preparation of uniform regulations. The next phase will be preparing and introducing legislation or regulatory changes in each state to adopt uniform standards. Stay tuned for more information as it develops.

CT Stopping 16-Wides
Modular manufacturers are receiving citations for entering Connecticut with 16’-wides before midnight. To complicate matters, shipments of modular homes are required to be out of the state of New York by 3 p.m. With no place to park oversized loads on the New York State Thruway, the industry once again is faced with a no win situation. And the State of Connecticut is benefiting from this situation by pulling over modular loads, issuing them traffic tickets, requiring them to return to New York, park the loads and go through the lengthy permitting process for the same load to get it back through the Connecticut.

According to the MBSA, manufacturers are finding it virtually impossible to comply with the difference in state laws, and several companies have large homes they are unable to get into the state. Connecticut is the only state that requires oversized loads to travel at night. In addition, Connecticut will only issue four permits per night for the larger loads, and they require a police escort through the state. The only other situation like this is the City of New York, which requires oversized loads to move through the city at night when traffic is reduced. “We have written to the Connecticut Department of Transportation in the past, about the fact that their 16’-wide program is nearly unworkable, and the State refuses to consider changes in the program,â€? Snyder says.

Divisible Load Requirements Change Sought
Most states have regulations prohibiting manufacturers from shipping a load longer than 48 feet when the load could be divided into two smaller loads. This is what is known as the divisible load law. While most states have regulations prohibiting oversized divisible loads, they are not always enforced. However, some states are starting to become more diligent in their enforcement of this law and other states enforcing it sporadically. In either event, it creates problems for our industry in that we are unable to ship two connected boxes on one carrier to be separated on site and the law also prohibits the shipping of dormers or other small pieces if the overall length exceeds 48 feet.

While it would be possible to work on this problem with the individual states, this could be an insurmountable effort, and it is likely that most states would oppose any change in the law. At their spring board meeting, the MBSA met with the Building Systems Councils and representatives from the National Association of Homebuilders, Regulatory Affairs Department to discuss an effort to change the federal regulations to provide for an exclusion for the modular housing industry. There are currently exclusions for automobile and boat manufacturers and military equipment movers to allow divisible oversized loads.

A change to the federal regulations would then be applicable to all states and would eliminate the need to get a law change in every state where there is a problem. NAHB is in the process of doing some more research on this issue. The MBSA has agreed to work with NAHB and the BSC to fix this problem on a national level. There was also discussion about trying to introduce federal legislation to fix the problem as well. It would be possible to work on both a regulatory and a legislative solution at the same time.

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