Does Evidence Matter?

Blog Posting # 592 @ 3 July 2020; Copyright 2020. Educatemhc.com

Perspective. ‘Land lease communities, previously manufactured home communities, and earlier, ‘mobile home parks’, comprise the real estate component of manufactured housing.’

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INTRODUCTION: Everyone associated with national manufactured housing advocacy (i.e. MHI & MHARR for starters), has already weighed-in with their respective responses to HUD’s PD&R Winter/Spring 2020 edition of Evidence Matters. MHI, as usual, was supportive and complimentary. MHARR, not so; rather describing the subject matter as ‘An Unequaled Opportunity about to Go to Waste’, considering HUD writers’ light treatment of regulatory barriers to all forms of factory-built housing, especially HUD-Code manufactured housing; and, home-only financing (a.k.a. personal property or chattel capital). With that said, what follows here, are a few of my observations, pro & con, relative to industry statistics, trade terminology, ADUs, ROCs, and CrossMod™, all covered therein.

Feature article begins (pp.4&5) with a well-penned, but still shaky, summary of HUD-Code manufactured housing statistics:

• In 2018, 37 percent of all new HUD-Code homes “…were placed in manufactured home communities (parks, courts, or subdivisions).” I was OK with this until reading the word ‘subdivision’ in a sentence/stat that historically relates to land lease communities. More on the terminology issue shortly.

• Most new homes (65%) were placed on piers (also known as blocks). Really?

• ‘Most new homes were placed outside manufactured home communities.”

• ‘The average sale price of a new manufactured home in 2018 was $78,500 ($52,400 for a single-piece home and $99,500 for a two-piece home.” OUCH! We stopped making ‘singlewide & doublewide’ differentiations decades ago; today preferring ‘single section & multi section’ manufactured homes. But ‘single-piece & two-piece’ homes? NOT. This obviously penned by a novice to manufactured housing.

Trade Terminology. Here we go again; referring to past editions of Evidence Matters, where/when manufactured housing trade terminology was ‘all over the place’. It still is! As you already read in the first bullet point, no fewer than four terms are used to describe this unique, income-producing property type! Which raises the question, ‘Why include subdivision in this list?’ It’s a different application of property rights – those conveyed fee simple, not leaseholds.

So what are other terminology shortfalls? Manufactured housing communities (p.10), manufactured communities, p.10, park (owners) p.10), manufactured home community (pp.5, 9, 11), and – what should have been used all along, land lease communities (p.10). Perhaps the next manufactured housing-focused edition of Evidence Matters will get this matter right!

Accessory Dwelling Units or ADUs. Yes, like Tiny Houses (though not mentioned in this piece), a mini-housing fad of the decade (2010-2020). Don’t misunderstand, I’m a fan – just would not, could not, ‘live’ in one of them (e.g. ‘How does one ‘make up one’s bed’ when two corners are pushed against two walls?’). But they’re a good ‘bait & switch’ housing sales ploy – as ‘many land lease community owners, selling new HUD-Code homes on-site, have learned’! My beef? No definition as to what constitutes an ADU! Presumably, and ADU has to be livable, but what size? Methinks, less than 400 square feet in size to exempt it from the HUD-Code. Would have been helpful to learn those details here.

Emphasis on ROCs or resident-owned communities. According to this article, only 2.4 percent of all land lease communities in the U.S. today are ROCs. And for them, that’s Great Progress! However, only critical mention of the other 97.6 percent of land lease communities. Why the extreme imbalance? Is there a political or societal axe to grind here? Plus, the ROC info was supplemented with no fewer than three attractive color photographs of said properties. And then there’s this intriguing sentence:

“Residents of these communities are able to keep their site fees below market rates, make health and safety improvements, engage with other community members, and enjoy other economic benefits such as being able to sell their homes more quickly and for higher prices.” P.11

When I checked the origin of the footnote documenting these glowing advantages, I learned it was simply an email message, not a formal study of any kind. HUD should do better than that.

CrossMod™. Don’t think the writer really knows what’s going on here with this new design of HUD-Code manufactured home. It is NOT a ‘financing vehicle’, but a housing product with features designed to appeal to manufactured housing’s underserved markets: millennials, retirees. Furthermore, it is a HUD-Code home designed for placement on scattered building sites conveyed fee simple. And both GSEs (Fannie Mae & Freddie Mac) have customized ‘financing vehicles’ to support the CrossMod™ concept.

Here’s a puzzle for you. Two stats were prominent in this article. 37 percent of all new homes in 2018 went into land lease communities; and, “…as many as 53 percent of new manufactured homeowners owned the land and might have been eligible for a mortgage but instead financed their home with a personal property loan.” Frankly, I don’t believe the latter figure is accurate and here’s why:

2008 = 96,555 new HUD-Code homes shipped X .37% = 35,725 new MHs into LLCommunities

2008 = 96,555 new HUD-Code home shipped X .53% = 51,174 new homes maybe mis-financed

Now, subtracting 35,725 from 96,555 (2018 shipment volume total) leaves 60,830 new MHs going elsewhere (outside LLCommunities), in turn leaving but 9,656 new MHs ‘properly financed’ onto private building sites in and out of subdivisions. These figures don’t feel right to me. In manufactured housing we do a better job with home financing than those numbers suggest. Think the providers of the 53% stat need to dig deeper….

My ‘rub’ with the staff of Evidence Matters, and by extension, some staff at HUD, is this: When researching and preparing an article like this, that’s going to explore HUD-Code manufactured housing and land lease communities, make it a point – in the near and interim future – to reach out and actually converse with capable, experienced industry and realty asset class professionals, who actually ‘make their living’ in these two closely-related fields of housing endeavor! Think how much more accurate, interesting, and useful the end product will be!

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