NO MORE SOFTBALLS!
Chapter # 3 ‘The Manufactured Housing & Landlease Community Gantlet*1
Blogger’s Preliminary Notes.
- Haven’t read chapters # 1 & 2 of this unfolding, punishing tale? It’s highly recommended you access archived blogs at community-investor.com & read ‘Let’s Make History Together!’. It contains ‘The Near Perfect Storm Manifesto’ and premise toward which this and subsequent chapters are and will be focused. GFA
- Don’t overlook the End Notes to this week’s Blog. They contain pithy information rounding out points made throughout the body of the material.
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Echoing the premise of the widely read ‘Near Perfect Storm Manifesto’, yet another veteran business owner recently opined: “We need (as an industry & asset class) to wake up or die!”*2 So, what have other entrepreneurs and senior corporate executive peers been saying and penning these past few weeks?
One long experienced, hands – on, Chicago – based respondent put it this way:
- “We must get back to our roots of (housing) affordability, customer satisfaction, and quality of product and service! There are some landlease (nee manufactured home) community owners/operators doing VERY WELL these days because they routinely deliver core values and more, to their customers and residents.
- LLCommunity owners/operators MUST finance their own home sales and or have ‘skin in the game’ (via recourse), when it comes to marketing new homes on – site. There’s no financing White Knight coming to save us anytime soon!
- The model of how LLCommunities ‘work’, from several perspectives, must be rethought. The old days are gone, and the dinosaurs of the asset class (including me), must wake up to a new reality! Rent raises must be curtailed; massive capital infusions used to build and improve infrastructure to support new homes and site upgrades; and, a new breed of professional property managers is needed to better run our properties. The economic, political and social landscapes or our Business Model must change. (lightly edited. GFA)
While I generally agree with this colleague’s assessment of, and challenge to, our existent realty and home sales Business Model, let’s view the matter from a broader perspective:
- Yes, many veteran LLCommunity owners/operators are doing VERY WELL these days, frequently selling new and resale homes on – site, often engaging in one form or another of self – finance*3, using excess cash flow from the property proper, having paid down or retired their original or refinanced real estate mortgage. On the other hand, some veteran owners/operators have been greedy, raising site rent far above the traditional 3:1 ratio (apartment unit rent 3X LLCommunity site rent), resulting in severely declining physical and economic occupancy, and inability to pay operating expenses and mortgage payments.
- Some newer LLCommunity owners/operators are struggling to survive because they valued and acquired one or more properties based ‘on the (rent increases to) come’; and, being novices to the asset class, made costly errors in overstaffing. However, other new owners/operators are doing ‘Just fine, Thank You’, having paid NOI – supportable prices for their investments, then parlaying this with past successful income – producing property management experience.
This from a recently retired HUD Code & mod manufactured housing executive:
“I believe strongly we, the MHIndustry, have not just lost our way, we’ve lost our cheese!*4 After reading ‘The Near Perfect Storm Manifesto’ twice, I’ve come to the conclusion, we’ve really lost touch with OUR customer’s housing payment ability. I’m thinking maybe we should want OUT of our current Business Model, trade advocacy associations, and this government – controlled housing product altogether!”
“What if we build (this is the easy part) low cost, national code – compliant homes (IRC is a breeze to work in, and outlines every local housing market’s requirements), focusing attention on present resale market for site built homes of the 1950s, 60s, 70s, & 80s? Young, first time homebuyers are flocking to them with payments in hand.”
“The LLCommunity folk will have to start using long term leases, protecting the value of their residents’ homes; maybe implement home maintenance contracts; and probably offer other niceties as well.”
“We have the land, we have the communities, and all our factories can produce an inexpensive housing product. So, how ‘bout if we join the enemy – the NAHB*5, who likely helped put us where we are in Washington anyway, to enhance our collective power?”
Now there’s a stretch! Others ‘out there’ thinking along similar lines? If so, we need to hear from you right away. If not; OK, but your reasoning and ideas to Save Our Industry need to be heard and expressed as well. Think about it. What other forum do we have today, with the passing of the Manufactured Home Merchandiser and Modern Homes magazines? None really. If you don’t know why, ask me personally sometime….
Here’s a conundrum (‘a hard question or riddle’) of sorts. The numerous written and verbal responses to aforementioned manifesto and blog, i.e. Chapters # 1 & 2 of the MHousing & LLCommunity Gantlet, have been 100 percent positive in nature and content. Frankly, I didn’t expect such overwhelming agreement and support. So, I went in search of contrary points of view and perspective, and found a few. But while I encouraged written expression of their converse views, offering to protect the identities of those expressing opinions, the dissenters have remained pococurante. Go figure.
Where does all this leave us today? Frankly? On the national advocacy scene, ‘nigh lost and without a reliable, true compass!’ How so? Allow me to explain and recommend a course of personal and corporate action:
- Manufactured Housing Association for Regulatory Reform or MHARR, a.k.a. MHIndustry’s regulatory ‘watchdog’ in Washington, DC., has one membership classification: HUD Code housing manufacturers; oft referring collectively to other segments of the MHIndustry as being ‘the aftermarket’. While smallest of the two national advocacy bodies, it tenaciously fights what it views as regulatory – related, cost – increasing threats to the ‘affordability’ of factory – built housing. Danny Ghorbani @ (202) 783-4087.
- Manufactured Housing Institute or MHI, represents all segments (manufacturers, suppliers, retailers, lenders, and LLCommunities) of the MHIndustry & LLCommunity asset class. Given the heterogeneous nature of its members, its’ resources are spread thin on one hand; and, disagreements on policy (e.g. land use regulations) sometimes occur. Since 1996, MHI’s National Communities Council (‘NCC’) has ably met the national advocacy needs of LLCommunity owners/operators, though it’s presently without a senior executive. Thayer Long @ (703) 558-0678.
- At present, there’re a half dozen significant industry and asset class issues, serving as regulatory and self – imposed brickbats, playing active roles in the MHIndustry & LLCommunity Gantlet. While there’s disagreement between MHI & MHARR, as well as among industry segments, as to appropriate order of priority of these issues, they certainly include: severe present paucity of institutional realty mortgage and personal property (‘chattel’) financing for LLCommunities and homes respectively; the quiescent state of the Manufactured Housing Improvement Act of 2000, a.k.a. ‘MHIA@2000’, and its’ intended functionary, the Manufactured Housing Consensus Committee or MHCC, still sans the non – career administrator mandated by Congress a decade ago! And then there’re the issues of national ‘brand promotion’, as in HUD Code manufactured housing being the most affordable and desirable form of factory – built housing; and, IMAGE. You know, the ‘T’ thing, and how to best deal with it effectively. And the list goes on…
- Some recommended action steps. Get on MHARR’s email distribution list, read their position papers, and ask for another or supporting point of view from folk at MHI. For that matter, join and become a direct, dues – paying member of MHI, especially the NCC if you’re a LLCommunity owner/operator, and involve yourself in these ‘industry discussions’, particularly the upcoming quizzing of William Matchneer, Associate Deputy Assistant Secretary for Regulatory Affairs and Manufactured Housing, at MHI’s Winter meeting in Savannah, GA., on Tuesday, February 2nd ! Does all this sound daunting? Well, help is on the way…
- Probably with the February issue of the Allen Letter Professional Journal, you’ll meet the MHIndustry & LLCommunity savvy writer who’ll be parsing MHARR & MHI press releases, newsletters and articles, to pen accurate, centrist monthly columns – for YOU, describing what these two advocacy bodies are attempting to communicate regarding political and regulatory matters inside the Washington beltway. FYI; the anonymous columnist has decades of experience in MHousing, LLCommunities, and MHAssociation leadership, and is active in the MHBusiness today! If not already subscribing to ALPJ, phone (317) 346-7156 or subscribe online via community-investor.com You don’t want to miss this!
Well, now you know almost all there is to read and hear, today, about the MHIndustry & LLCommunity Gantlet that, in large measure, prevents us from coming anywhere near to realizing our affordable housing production and shipment potential (‘Think housing finance, regulatory environments, & historic lack of sensitivity to homebuyer needs and wants!’), and achieving Max ROI relative to the LLCommunity asset class (‘Think housing finance, unwillingness to adjust site rent to fit local economic conditions, & historic lack of professional property management on – site!’) investment. Do you get the idea, that to move upwards from this very nadir of historic MHousing production & shipments, we’re going to have to stop playing softball with those contributing to the confusion described in previous paragraphs, and commit to make some changes from both the top down and bottom up (That’s YOU and ME!)?
As always, we solicit your input by phone, email, FAX (317)346-7158 and letter: GFA c/o Box # 47024, Indianapolis, IN. 46247.
Postscript.
Last week’s Blog encouraged readers to attend Georgia Manufactured Housing Association’s second Super Symposium & Showcase of Homes in Forsyth, GA. Well, guess what? The Symposium was a complete SUCCESS. More than 120 MHIndustry & LLCommunity folk were in attendance, visiting five HUD Code and one Park Model home, along with a line of Bennett Building Systems storage sheds, for renting to LLCommunity residents! The S.A.F.E. Act of 2008 got worked over pretty well, and property owners/operators were challenged to ‘Really Get Communities READY Before Selling and Financing New and Resale Homes On – site! For more information, and copies of materials shared, contact Jamie Hammons @ (770) 980-6393. The initiator of the Super Symposium concept, now a popular national industry trend, James Keller of the IMHA/RVIC was honored at this seminal event! Where’s next Super Symposium? For sure, in Albany, New York, @ 30 & 31 March 2010. For information, contact Nancy Geer of the New York Housing Association @ (518) 867-3242. Tell her George Allen told you to call! And I hear a fourth Super Symposium & Showcase of Homes is in the planning stage in Indiana (317) 247-6256X12. How ‘bout your state? Every state MHAssociaiton should do this for their members, and it’s an effective means of recruiting new members! Also, there’s a HOW TO checklist being developed, describing steps to effecting one of these stellar events. Check with Jamie Hammons or Jim Keller.
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End Notes.
- Gantlet. “a form of punishment or hazing in which the victim (MHIndustry & LLCommunity asset class) runs between two lanes of people (e.g. politicians & regulators) and is struck by them (legislatively & regulatorily) in passing; a series of unpleasant things or events.” The New American Webster Handy College Dictionary.
- Premise. “Imagine No New HUD Code Homes Manufactured in Year 2020!” or, in other words: “The Not So Secret Scheme to Regulate and Politic HUD Code Manufactured Housing Out of Business by the Year 2020…” There it is. Someone finally said and wrote what many have been thinking since 2005.
- “Self – finance is ‘captive finance’ when third party collects payments and services chattel mortgage, and ‘buy here – pay here’ when LLCommunity does so.” From MHIndustry & LLCommunity Lexicon pocket card. For FREE copies of this and other training aids, call MHIndustry HOTLINE: (877)MFD-HSNG or 633-4764.
- Who Moved My Cheese by Dr. Spencer Johnson.
- National Association of Home Builders in general, the Building Systems Council (‘BSC’) in particular, at 1201 15th St., NW, Washington, DC. 20005.
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George Allen, Realtor®, CPM®, MHM
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024
Indianapolis, IN. 46247
(317)346-7156