Restore Affordability to Manufactured Housing, Lending, and
within Landlease (nee manufactured home) Communities
to Sell More Homes in 2012
‘Thank You, Thank You, Thank You!’
That’s how one of the letters, responding to last week’s blog posting: ‘Let’s Replace the GOLD RULE with the GOLDEN RULE in 2012!’ began. Here’s the rest of the message:
“For the first time in my long career in manufactured housing, I’ve finally read where someone (you) has put it all together, describing ‘really why’ our industry is in the slump dump it’s in today. ‘Let’s replace the Gold Rule with the Golden Rule in 2012’ just about says it all, in a polite but straightforward fashion. Thank You, Thank You, Thank You! But much more needs to be said….
Allow me to embellish. You were overly kind to the decreasing number of firms who build HUD Code manufactured homes. It’s they, and no one else, who’ve long articulated the pernicious goal, as you rightly state, of ‘BIGGER BOXES = BIGGER BUCKS’ for them! Specifically, they’ve routinely designed and build bigger, more homelike structures, according to their whim, but rarely reflecting what prospective homebuyers, in local housing markets, need or want. Proof of this? As an industry, we keep score, by counting new homes shipped, not new homes sold. And that bassakwards perspective persists to this day! Attend any regional MHShow and inventory the exhibited homes. The vast majority continues to be Developer Series Homes (i.e. large multisection and full – featured), designed for land – and – home package installation (Who’s buying ‘em? No one.); yet still ‘far too few’ Community Series Homes (i.e. smaller multisection, and modest singlesection, homes with durability – enhancing features) suitable for siting in landlease (nee manufactured home) communities! And look at the unit pricing? Still far too expensive to even come close to qualifying as truly affordable homes. Bottom line? HUD Code home manufacturers are, for the most part, bloating us out of business with their too large, too high – priced homes! Solution? Restore affordability, by designing, building and shipping one or more lines of smaller basic manufactured homes that sell for reasonable prices!
Then there’re the independent third party chattel (personal property) lenders. We won’t talk about the rampant chattel loan origination and underwriting abuses that routinely occurred during the peak of our industry’s last renascence, circa 1996 – 2000. No; simply look at the factoid you pointed out in last week’s blog posting: How, somewhere along the line, lenders made it easy for naïve prospective homebuyers, to ‘buy more house’ than they could and can realistically afford. How so? By supplanting 25+/-% of the widely – recognized 30% Housing Expense Factor or HEF, heretofore earmarked for paying just ‘household/utility expenses, not including telecom costs’; but now, with a fatter PITI (inclusive only of principal, interest, taxes, insurance) house payment. Bottom line? Homebuyers now oft in homes they can’t really afford, as they make monthly ‘household/utility expenses, not including telecom costs’ every month, throughout the term of their home mortgage, in addition to a PITI payment comprises the entire 30% HEF! Solution? Restore affordability by putting ‘household/utility expenses, not including telecom costs’ back into the original 30% HEF! It’s truly as simple as that!
Why haven’t I mentioned independent, ‘street’ MHRetailers (to use your term)? They’ve, for the most part, already run themselves ‘out of business’, by gulping the ‘land – and – home package’ – tainted elixir of the late 1990s, believing they could beat site – builders at their own game. Didn’t happen! Isn’t Happening! Unlikely to happen! To be sure, ‘only the strong few (have) survived’. In many cases, these being independent ‘street’ MHRetailers who own/operate landlease communities. The others? Some compete with on – site home sales in landlease communities, others are relearning how to sell new and resale manufactured homes into these income – producing properties. Bottom line? Irreparable damage has been effected throughout this segment of the manufactured housing industry. Solution? Restore affordability by selling more Community Series Homes, or CSH models, into landlease communities nationwide. After all, you did tell us there’s something like 250,000+/- vacant rental homesites out there, right?
Landlease community folk? Just answer these two questions. 1) Are ‘household/utility expenses, not including telecom costs’ included in the monthly house payment a homebuyer pays, as part of the 30% HEF; OR, is that estimated 25+/-% of said 30% HEF supplanted, enabling homebuyer to purchase ‘more home’ than they can truly afford? – while still having to pay extra each month for those non – PITI expenses? And, 2) are rental homesite rents truly ‘in sync’ with other multifamily rental properties in the same local housing market? Do you even know how to tell?*1 Bottom line. If your answer to both questions is ‘No’, then there’s little to no ‘value proposition’ for prospective and present day homeowner/site lessee residents in your landlease community! Solution? Restore affordability, by returning to an all – inclusive 30% HEF when calculating home mortgage loan payments; and, ensure your rental homesite rent is indeed ‘in sync’ with the local housing market.
As I wrote earlier George, ‘Thank You, Thank You, Thank You’, for making this perennial, pernicious matter, pervasive throughout the contemporary manufactured housing industry, public! Hopefully, as more and more brave and responsible businessmen and women, with ‘real skin in the manufactured housing game’, as business owners, become aware of these anti – housing affordability measures and consequences, they’ll embrace what you described in last week’s blog post as “…a timely, reputation – enhancing, industry – saving CHALLENGE”; in quick time, correcting these matters, to finally right the sinking manufactured housing cruise ship!” Your ‘friend in the MHBusiness’, MH Ronin, a pseudonym adopted by request.
(Preceding was edited for clarity & effect. GFA)
End Note.
1. To learn ‘How to Know’ a landlease community’s monthly rental homesite rate is truly ‘in sync’ with other forms of multihousing rental properties in the same local housing market; and, How to Use the Schraeder/Smith Rule and Schwep’s Rule of Thumb, to ensure a prospective homeowner’s combined mortgage and site rent payment is truly ‘in sync’ with fee simple realty mortgage payments, on similar – sized homes in the same local housing market, phone the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764 and request descriptions of the popular formulae. As one wag recently put it to some manufactured housing sales pros, attending a marketing seminar: “The time has indeed come, to ‘STOP flying by the seat of your pants!’” So, get these helpful formulae and start selling truly affordable housing ‘by the numbers’. GFA
***
George Allen, CPM®Emeritus, MHM®Master
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024, Indianapolis, IN. 46246. (317) 346-7156