Miss. Weighs Tax Break for Modular Homes to Speed Rebuilding

A group of Mississippi lawmakers last week quizzed some makers of modular homes about the quality and construction of their products.

But after hours of discussion, legislators left the Capitol without making recommendations on the policy proposal at hand — the governor’s plan to reduce the sales tax rate on modular homes to speed up the coast’s recovery from Hurricane Katrina.

The question-and-answer session came during a meeting of a special House of Representatives committee that’s studying Katrina recovery.

Modular houses are made in factories then shipped to home sites and erected on slabs. Because modulars are made to meet local building codes, they’re often allowed to be put in places where mobile homes are excluded from permanent placement.

Manufacturers said modulars can go up in a matter of days if local building crews are available.

Gov. Haley Barbour says boosting sales of modulars could help speed the coast’s recovery from Katrina, which destroyed tens of thousands of homes when it struck on Aug. 29, 2005.

Barbour wants lawmakers to cut the sales tax rate on modulars from 7 percent to 3 percent. Barbour said the change would shave $4,000 to $6,000 off the purchase price.

His tax proposal passed the Senate but died in the House Ways and Means Committee when the chairman didn’t bring it up for a vote during a special session last month. Barbour has said he’ll call legislators back for another special session before January to consider the modular tax change.

Ways and Means Chairman Percy Watson, D-Hattiesburg, also chairs the hurricane recovery committee. He said during the special session that he had been given too little information about the tax cut on modulars.

As legislators quizzed modular home makers about everything from plumbing to ceiling height, Watson smiled and said he was more impressed with the “genius” of the Senate in understanding the issue and passing a tax bill during the special session.

House Appropriations Chairman Johnny Stringer said there are several issues he wants to resolve, including questions about where the sales tax revenues from modular housing will go — to the cities where the houses are made or to the cities where they’re put up.

Joel Smith, president of Safeway Homes of Lexington, a modular home maker based in the Mississippi Delta, told lawmakers that cutting the sales tax rate would help boost sales, but reducing “inconsistencies” among home inspectors would help the industry more.

Smith said some inspectors will look fairly at modular homes, while others will not.

State Tax Commission officials said about 40 modular homes were sold in Mississippi in 2004, about 70 in 2005 and about 150 in the first six months of this year.

Fred Carl Jr., CEO of Greenwood-based Viking Range Corp., served last year on the Governor’s Commission on Recovery, Rebuilding and Renewal, the post-Katrina group that helped develop plans for south Mississippi communities.

Carl, a former architecture student at Mississippi State University, gave his alma mater $2.5 million in 2003 to endow the Small Town Center, now called the Carl Small Town Center, in the school of architecture.

Carl told lawmakers that he has been interested in modular housing for years as a way to provide affordable development.

After Katrina, “I immediately said modular is the only way the coast will be rebuilt in a timely manner,” Carl said Wednesday.

About 100,000 people are still living in government-issued travel trailers or mobile homes in south Mississippi, but those homes are temporary. Some residents are still trying to resolve their Katrina insurance claims so they can start rebuilding.

Carl said that over the past several months, he has spoken to modular home manufacturers in several states and has tried to persuade some to set up shop in Mississippi. He said there have been three deterrents — the sales tax rate, the rules and regulations in the state and the relative lack of understanding among consumers and builders about how modular homes are made.

Carl said most consumers, and even some builders, can see no difference between a modular home and a conventional home.

“When you walk in the house, unless you have a trained eye, you would never know the difference,” he said.