Archive for October 31st, 2015

HUD to Promote MH? ‘The Dragon Slayer!’& much more….

Saturday, October 31st, 2015

Blog # 372 Copyright 2015 COBA7® Worldwide Proprietary: community-investor.com

Perspective. ‘Land-lease-lifestyle communities, a.k.a. manufactured home communities and ‘mobile home parks’, comprise the real estate component of manufactured housing.’

This blog posting is the national advocacy voice, official ombudsman (press), research reporter, & online communication media for all LLLCommunities in North America!

To input this blog &/or affiliate with Community Owners (7 Part) Business Alliance®, a.k.a.COBA7®, use Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

COBA7® Motto = ‘U Support US & WE Serve U!’, & Goal of its’ print & online media = to ‘Not only inform & Opine, but transform & improve Business Model Performance!’

INTRODUCTION to Blog # 372. I) ‘HUD to go from OVERSIGHT to PROMOTION of manufactured housing?’ Don’t hold your breath. This topic touched nerves among blog floggers (readers) last week. Here’s a sampling of responses. II) Meet ‘The Dragon Slayer’! A tool for the small to mid-sized LLLCommunity owner/operator to make sense out of high rental homsite rates in nearby competing properties. III) Book review & offer of Chapbook of Prayer. IV) And finally, ‘Have YOU, as a LLLCommunity owner/operator wondered how and why you’re about to be $ victimized by federal installation legislation passed eight plus years ago, but only being implemented in 2016?’

I.

Recommended ‘HUD Segue from OVERSIGHT to
OVERT PROMOTION of Manufactured Housing’ Prompts Responses from MHIndustry Aficionados!

The following unsolicited responses to blog # 371 arrived within hours of its’ posting:

“Your blog is on point. However, it accepts the narrative, existing 35+ year (land-lease) communities have no issues with local governments or the NIMBY attitude.* Rent control and increasing (rental homesite) rent are the two biggest complaints for the ground owner business model. What is placed on that ground has not been a concern, though you’ve pounded on the table for communities ‘to sell more new homes’. Why would LLLCommunity owners change their easy collection of site rent, increase their costs starting a new house replacement business, change existing perceptions, even work on their image? It seems they like repos and putting lipstick on pigs, even though those are temporary fixes and not attractive to prospective homebuyers.” SL (edited. GFA)

REJOINDER. This particular blog focused solely on ‘regulation & promotion of manufactured housing’; not to plead the case for land-lease-lifestyle communities – as long as there’s an estimated 250,000 vacant rental homesites to be filled with new HUD-Code homes! It’s easy to imagine however, the boost in new home sales and sitings, if and when HUD overtly promotes factory-built housing (i.e. HUD-code manufactured housing) as the quality, transportable, energy efficient, non-subsidized, affordable housing choice it truly is!

“Very pointed and remarkably exciting review of low income housing and manufactured housing’s potential, George. The ‘factory – 1st time homebuyers & homes’, built from late 30s thru 70s, are being forgotten and ignored, but represent huge potential for HUD and state MHAssociations.” How? Two ways. Replacing 50 year old homes with new HUD-code homes; and, ‘rehabbing’ where practical, providing housing for “…workers whose jobs are now in Mexico and the Far East – as these fold do not have good-conditioned low cost housing.” NB (edited. GFA)

REJOINDER. Again, everywhere one looks, there’re opportunities to ‘provide & sell’, ‘buy & live in’ affordable factory-built housing of the HUD-Code manufactured housing variety! So, once again,

‘Why is it the 40 year federal building overseer of HUD-Code manufactured housing, usually so quick and forthcoming about various types of subsidized and ‘affordable housing’, has yet to step forward and overtly promote the very shelter product it regulates?

And that’s not all the responses received. One veteran LLLCommunity owner/operator, intrigued by housing purchase insights afforded by the popular ‘Ah Ha! & Uh Oh! Worksheet’, took the $36,000 & $51,000 AMI & AGI (Area Median Income per local housing market, & Annual Gross Income per prospective homebuyer/site lessee) examples cited within the blog, and created spread sheets demonstrating additional factors and perspectives (e.g. front & back end debt ratios) demonstrate ‘just how much house a buyer/site lessee can afford to purchase’! But more about that in a future blog posting at this website.

End Note.

* NIMBY = acronym ‘Not in my back yard!’ Used to describe anti-zoning and land planning changes in local housing markets. Also BANANA: ‘Build absolutely nothing anywhere near anybody’

II.

Meet ‘The Dragon Slayer’

While 2008 & 2009 were watershed years for HUD-Code manufactured housing producers & land-lease-lifestyle community owners, events from 1994 & ‘contemporary practice’ combined to destabilize many of our industry/asset class homeowners/site lessees. Here’s something to do to rectify the travesty….

But first, what’s a ‘watershed’ year? It’s a dividing or transitional point in time and circumstance. And here’re timely events and occurrences that changed our ‘double dual industry’ *1 for the next seven to eight years – and likely beyond:

• First National State of the Asset Class (‘NSAC’) caucus (of 100+ LLLCommunity owners/operators) convened in Tampa, FL. on 2/27/2008, ‘to shape their individual & collective future via vibrant association advocacy, skillful home & rental homesite marketing, improved value proposition & customer service for homebuyers & site lessees, and much more.” Quoted from ‘Much More Than Afterglow!’ More on this later…

• By year end 2008, new home shipment total dropped to 81,889 from 95,769

• Second NSAC caucus (of 100+ LLLCommunity folk & HUD-Code home manufacturers) convened in Elkhart, IN. on 2/27/2009, to figure out how to sell more new homes into LLLCommunities nationwide. Result? The Community Series Home, a.k.a. CSH Model, characterized by one or more WOW! Factors and a plethora of durability-enhancing features.

• By year end 2009, new home shipment total plummeted to 49,789, with only 25% of said homes going directly into land-lease-lifestyle communities; however, the infill percentage started rising, albeit slowly.

• All the while, from roughly 1998 thru 2010, LLLCommunity self-immolation (‘kill as a sacrificial victim) – some called it suicide, followed the real estate investment trust (‘REIT’) wave of the mid to late 1990s. To meet Wall Street analyst expectations of increasing dividends every quarter, some large property portfolio owners raised rental homesite rates frequently and greatly. Hence the aforementioned concern hinted at in the first bullet point: “Value Proposition. Ensure a fair interplay of housing product pricing, financing & value, with site rental and more….” – didn’t happen in widespread fashion! Initial consequence? Traditional 3:1 ratio Rule of Thumb (for estimating stabilized site rent rate in most local housing markets) morphed, among some large portfolio ‘players’, to a 2:1 ratio Rule of Thumb, e.g. 3BR2B conventional apartment rent = $900. THEN $300/month = target site rent. NOW = $450/month site rent. Continuing consequence? Transfer of value from homeowner’s home to the underlying realty for which rent was being paid each month by said homeowner. And, unfortunately, the pattern continues among some…

Now, meet the dragon slayer! First the perspective: From that of the competition, the (usually) smaller LLLCommunity owner/operator. While self-immolation by one’s competitor, in the same local housing market, might well provide a benefit (i.e. move-ins exiting REIT-owned communities), it becomes a bit of a ‘hat trick’ to know just where one should peg one’s rental homesite rate. Here’s a suggestion:

Multiply prevailing (too) high rental homesite rate X two & divide by three. For example:
$450/month X 2, divided by 3 = $300.00/month = rent in closer accords with application of the traditional 3:1 ratio Rule of Thumb. Is that all? No.

If/when possible, apply the 3:1 ratio Rule of Thumb as a cross check of one’s dragon slayer computation. For example; given conventional 3BR2B townhouse or conventional apartment rent at $900/month, the suggested rental homesite rate is $300/month. But suppose the targeted ‘high rent rate’ is $500/month? Dragon slayer methodology suggests stabilized rental homesite rent, in that local housing market, should be $333/month. Hmm. What to do? Simple. Peg one’s rental homesite rate somewhere between $300 & $333/month.

One important caution. This exercise can be challenging in Sunbelt regions.

So, what do you think? Is there a variant to this methodology that works for you? We’d certainly like to know.

III.

BOOK REVIEW & OFFER…

Chapbook of Prayer, George Allen, PMN Publishing, Indianapolis, IN.2015.

The first 200 copies of this slim 58 pages book arrived early September – in time for distribution at the Friday morning Prayer Meeting for Our Nation & Its’ Leaders, at the 24thInternational Networking Roundtable in San Diego, CA. The entire first printing inventory was gone four weeks later. A second printing arrived during October. Would you like a copy?

Here’s what Joyce Long had to say about the chapbook. “I just finished reading your Chapbook of Prayer. I think this book will change my life and help me to be more dependent upon God. Too often I try to do it all on my own, wearing myself out. The wisdom in this book will put me back on the right path. So, from the bottom of my heart and soul, I thank you for this timely gift in my life.” JL

So, what’s this all about? Well, a chapbook by definition, is a small book or ‘…compendium of fact, wit & advice’, according to George Plimpton, writing in The Writer’s Chapbook. In this instance, the focus is obviously on prayer; and I approach the subject from two perspectives. Part I is a “…collection of prayer truths…harvested since 1969, the year I returned home following a 13 month tour of combat…in the Republic of South Vietnam.” And, “Part II is the initial manifestation of a long held desire to provide a public platform, from which prayer warriors and intercessors share personal means of ‘getting quiet before their Lord’…” All three quotations are from the cover and Preface of Chapbook of Prayer.

So again, ‘Would you like a copy?’ If so , phone the Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764; email me, or request via GFA c/o Box # 47024, Indpls, IN. 46247. We’ll send you a FREE copy! Just be sure to provide a postal mailing address, as this is a bona fide book, not something you print off, online.

IV.

Have YOU, as a LLLCommunity Owner/operator,
Wondered…

Why is it you’ll likely be paying the lion share of on-site redevelopment costs (i.e. replacing perfectly good concrete runners & piers, not extending below the frost line, on rental homesites) pursuant to enforcement of Federal Installation Standards legislated in 2007, left dormant until this year, and to be implemented during year 2016?

Or aren’t you aware of this impending reality for LLLCommunity owners/operators?

It’s really quite the MH tale, going back to the aforementioned 2007 federal legislation; then the ‘maybe a silver bullet’ Frost Free Foundation® of 2010; those cloudy GAO interviews of HUD-Code home manufacturers – some say resulting in the 250% increase in HUD label fees (from $39 to $100) during late 2014; appointment of a new HUD manufactured housing program administrator – with an agenda; and soon, regulatory intrusions and fees, by and for HUD. And all that’s just part of the intriguing tale…

First hard question: ‘What financial support role will HUD-Code home manufacturers play in paying for beefed-up foundations now required on-site within LLLCommunities?’

Second question: ‘Where are we today, as land-lease-lifestyle community owners/operators, waiting for this other shoe to drop?’ Rumors and half-truths abound, e.g. What regulations apply to new homes only and not resale homes – or is it the other way around; or both or neither? Seriously. There’s that much confusion afoot already!

Sure would be considerate to have accurate and concise advance guidance make its’ way soon from HUD, via MHARR, MHI, & COBA7®, to the LLLCommunity folk and licensed installers all this is going to affect greatly in 2016. Is anyone out there listening?

And did you notice? The previous paragraphs have not answered the initial question:

‘Why is it land-lease-lifestyle communities (a.k.a. manufactured home communities) will be paying the lion share of redevelopment costs (Estimated @ $5,000/site), to replace perfectly good rental homesite concrete runners and piers that don’t extend below the frost line? Answer – in my opinion? Because LLLCommunities have no effective national advocacy body looking after their financial interests in this particular matter.

Furthermore, what have the dominating HUD-Code home manufacturer members of MHARR & MHI done to ensure this costly mandate doesn’t stifle the emerging – since 2009 – market (i.e. Sell new Community Series Homes onto 250,000+/- vacant rental homesites in 50,000+/- LLLCommunities nationwide!) that’s supplanted home sales to independent (street) MHRetailers – who lost their easy access to chattel capital at the turn of the century? Answer – in my opinion? NOTHING.

Near and interim consequences of this inaction (&, some say, behind the scenes ‘insider’ finagling)? Besides $-punishing LLLCommunities, we’ll likely experience continued record low shipment volume of new HUD-Code homes (i.e. Annual average of 55,146 new HUD-Code homes/year shipped during past six years!) by month and year; and frankly, ‘drive one more, if not final, nail into manufactured housing’s coffin!’ And we’re doing this to ourselves for what reason? Or another way of looking at the matter….

In the Marine Corps, we have a T-shirt that speaks to the potentially self-destructive consequences of the inaction and finagling hinted at in previous paragraphs. Pictured on the shirt front is a hand grenade with a Happy Face on it and this caption: ‘Once the pin is pulled, Mr. Grenade is no longer our friend!’ Anticipate an explosive year during 2016 and beyond?

***