Grand Conspiracy or Near Perfect Storm?

ManuFractured Housing, circa 2020 or before,

by dint of a Grand C o n s p i r a c y or Near Perfect Storm?

…oft whispered but rarely penned, till now…

OK, here it is! The grand c o n s p i r a c y or, if you prefer, ‘near perfect storm’, to regulatorily and financially ease HUD Code manufactured housing out of existence, out of the factory – built housing milieu altogether! This is not a novel intrigue or surprise economic event for the manufactured housing industry. Nor should said
c o n s p i r a c y, if indeed that’s what it is, be taken lightly because it’s been hinted at before. As’ The Near Perfect Storm Manifesto’ theorized recently; housing shipment – wise, we’re rapidly winding down to ‘zero HUD Code manufactured homes before the end of the present decade’! More on this dismal prediction later.

Disclaimer. This grand c o n s p i r a c y or ‘near perfect storm’ divulgence
was researched and penned using written and verbal communications with numerous and various manufactured housing industry business leaders and successful entrepreneurs. Intentionally, no interviews were conducted on
this timely and sensitive subject, with any elected or salaried leaders of the Manufactured Housing Association for Regulatory Reform (‘MHARR’) or Manufactured Housing Institute (‘MHI’)! GFA

From an historical perspective, manufactured housing’s grand
c o n s p i r a c y has been whispered since the late 1970s, coinciding with implementation of HUD’s infamous national, federally preemptive, performance – based building code circa 1976. Upon entering the manufactured housing business in 1978, it was ‘splained’ to me, that left unchallenged and unchecked, HUD’s design demands would price this affordable housing product right out of existence! Well, that didn’t happen. If anything, manufactured housing industry aficionados managed, to their credit, to make ‘lemonade out of a (regulatory) lemon’, by taking national housing market advantage of the federally preemptive nature of their unique factory – built housing product, to Sell More Homes! One might also view this beneficial switcheroo as the industry’s first inaccurate weather warning of an impending storm.

Next indicator of a grand c o n s p i r a c y, or ‘storm warning’? This from an industry veteran who participated in an early futile attempt to achieve housing equality: “You’re right about the c o n s p i r a c y; we learned it for sure when we lost ‘frame removal’ in the early nineties. Not sure we can stop it (c o n s p i r a c y), unless we’re an economic power to deal with – which we are not. So, probably the ax (sic) will fall, unless we move ourselves first, and become a part of traditionally supplied housing.” NB. The ‘frame removal’ defeat, along with the Hiler Amendment (The industry’s first legislative initiative to modernize the HUD Code) falling to internal political skullduggery, were motivating precursors to drafting and enacting federal legislation: the Manufactured Housing Improvement Act of 2000, a.k.a. ‘MHIA@2000’, designed and intended to give HUD Code manufactured housing a level playing field with traditional, site – built housing. More too on ‘MHIA@2000’, later.

Then there’ve been these perennial questions: Which has served manufactured housing better or worse; the watchdog (Some opine ‘junkyard dog’) tactics of ‘manufacturer only’ focused MHARR & its’ lone executive over several decades; or, repeated and ongoing attempts at regulatory – related consensus – building by MHI, representing all segments of the industry (Referred to, by MHARR, as ‘the aftermarket’) & its’ four different executives during the same period of time? And what overt and covert roles have either or both advocacy bodies played, and or continue to play, relating to grand c o n s p i r a c y maneuvering or stormy weather making? *1

Finally. Manufactured housing shipments, during the period 1978 thru 1998, remained stagnant at about 250,000 homes per year, never again coming close to the 575,940 shipped during pre – HUD Code 1972. And it wasn’t long after HUD Code housing’s mini – renasance in 1998, when 372,843 new homes were shipped, that chattel (personal property) financing all but disappeared, and grand c o n s p i r a c y talk resumed as ominous storm clouds gathered, all the while we worked (reselling) our way through hundreds of thousands of repossessed manufactured homes.

The first time manufactured housing c o n s p i r a c y appeared in print, that I’m aware of, occurred a couple years ago when Tennessee MHRetailer and landlease (nee manufactured home) community owner Dick Moore, in his business newsletter INDUSTRY PERSPECTIVES, floated the alleged connivance on everyone’s mind. And guess what? Besides relief that someone finally said and penned the ‘C’ word, there was near immediate response from one MHIndustry leader (manufacturer), intent on disabusing Dick of any possibility of such a radical notion! And frankly, he might have been successful to that end, if it didn’t turn out his overture was followed by not one, but two additional personal assurances from other executives within the same large firm. Hmm. The c o n s p i r a c y plot appeared to be thickening…

Be that as it may, what are indeed key factors apparently contributing to manufactured housing’s grand c o n s p i r a c y or ‘near perfect storm’ talk today? Not in any priority order, here’re some obvious and obscure indicators:

• Department of Housing & Urban Development (‘HUD’) now headed by a political appointee tapped from the real estate mortgage (Think conventional single and multihousing finance here versus chattel or personal property variety) side of the national housing scene. And HUD continues to stonewall, after ten years, Congress’ intent, in the ‘MHIA @ 2000’, to have a non – career appointee head the Manufactured Housing Consensus Committee (‘MHCC’), not a career bureaucrat! Now, for the first time in its’ history, the MHCC is devoid technical expertise from the aforementioned MHARR or MHI trade bodies! And there’s more that could be said of HUD’s role in this sorry scene….*2

• Trend analysis of the 39.2 percent decline in new home shipments, from 2008 thru 2009, when applied to years remaining until 2020, demonstrates only 215 HUD Code homes will be shipped that year! If so, the manufractured housing industry will be dead! Or, a similar declining trend analysis, among years 2007, 2008 & 2009, demonstrates, by year 2020, we’ll be shipping only 3,000 new homes. At that level, the manufractured housing industry might as well be dead! Get the point?

• There’re three laws ‘on the books’ that aren’t presently functioning as intended. One has to ask ‘Why’? Why no full implementation of MHIA@ 2000? Why no progress on Duty to Serve (private financing)! And why the perennial delaying tactics, effectively neutering FHA Title I, now a.k.a. ‘The $$$ Promise that isn’t & likely never will be!’ Grand c o n s p i r a c y anyone? Or, just another indicator of a ‘near perfect storm’?

• Then there’s the nearly 50 percent national manufactured housing market share; increased national political influence per presidential election of 2008; an effective cornering of remaining chattel (personal property) finance market; and, recent foray into realty mortgage (Think landlease, nee manufactured home, communities!) financing – all by one extended family of firms! The seminal question that begs asking: ‘Is all this Good or Terminal for the HUD Code manufactured housing industry as we have known it till today?’ *3

• Add to this, curious but quiet corporate memberships and past employment relationships, among various national homebuilder, real estate, and manufactured housing advocacy bodies, and one wonders where personal and business loyalty might end, before career legerdemain and or political skullduggery begins…

With all that said, what’re possible or probable consequences of manufactured housing’s grand c o n s p i r a c y or ‘near perfect storm’? Clear and murky at the same time; depending on how this potentially nefarious cabal or severe weather event plays out by year 2020 or before!

• HUD has long given the impression there’re other (public) housing avenues it’d prefer to focus on, than continue being the sole federal regulatory agency overseeing an entire business model. Ask yourself, ‘When was the first (and last) time you saw, heard or read of HUD overtly promoting manufactured housing as this nation’s unique homegrown brand of truly affordable, quality, energy efficient, green, transportable, non – subsidized housing?’ Possible end game here? ‘Ah, sweet relief for HUD!’ – and this aftermath of the Law of Unintended Consequences: ‘HUD – related bureaucrats face unemployment when manufactured housing factories close!’

• Certain homebuilder groups have long been a nemesis to factory – built housing, particularly when it comes to protecting highly paid union carpenters from market incursions by inexpensive industrialized housing and housing components. Balderdash you say? Don’t forget the lost off – frame battle of the early 90s cited earlier. The end game here? ‘Ah, no more ‘affordable’ manufactured housing competition. Let housing costs rise again, again, and again!’

• Realty specialists. Hey, I’m in the real estate business and know firsthand how little love is lost between that business model and affordable housing providers; those who deign to help common folk become homebuyers of inexpensive (up to 50% less cost per square foot than new conventional stick – built housing, not including land cost), attractive, comfortable, energy efficient, often factory – built housing! And since the U.S. Supreme Court recently opened the door to manufactured housing marketing access to local realty board Multilisting Services; well, here’s this end game: ‘Ah, there goes the competition on two fronts!’, when HUD Code manufractured housing disappears by Year 2020!

Any idea how ‘what’s left of the manufractured housing industry’ will look post grand
c o n s p i r a c y or after the ‘near perfect storm’ passes? Easy to envision four or more possibilities:

• Like the automobile industry at the turn of the 20th Century, further consolidation among today’s remaining home manufacturers will segue from several ‘dozen’ to maybe a few; specifically, one very large firm and a dozen regional, privately – owned, solid enterprises. They’ll continue to ‘ship’ (Don’t look for even these survivors to ‘keep score’ by tallying ‘home sales’) say, 40,000+/- HUD Code homes per year post 2020.

• Wholesale switch from HUD Code manufractured homes to modular homes

• Enter some sort of hybrid home; borrowing features from the HUD Code housing product, mating same with characteristics of other types of factory – built housing, as local or national building codes allow or demand. But no more HUD Code manufractured housing market stigma!

• And this, not – so – novel suggestion, by another 30 year industry veteran intent on surviving the grand c o n s p i r a c y or ‘near perfect storm’: “Assume the manufractured housing industry settles into two manufacturing segments, driven by available financing. Primarily, multisection product for land and home installation (conventional realty financing); and, singlesection product for siting in landlease communities, i.e. filling vacant rental homesites and upgrading older homes, using chattel (personal property) financing.” SR. (Lightly edited. GFA) But ‘Ah, there’s that perennial bugaboo: financing by type, availability, and volume.’

Any other positive hopes or thoughts for the future that have potential to Save Our Industry!? Sure. But you’ll have to read next week’s blog to learn what they are….

Well, there you have it. This is how manufactured housing’s grand
c o n s p i r a c y, or, if you prefer, ‘near perfect storm’ is viewed by numerous Free Enterprise businessmen and women from grassroots housing markets across this nation, active in all segments of the manufactured housing industry and landlease community real estate asset class. What can you do to comment on this sad state of affairs; maybe proffer an idea or two to ultimately ‘Save Our Industry!’ (‘SOI’)? We’d like to know! Respond to this blog via email, or phone the MHIndustry HOTLINE: (877) MFD – HSNG or 633-4764 or (317) 346-7156.

End Notes.

1. One industry observer opines: ‘Unfortunately, MHARR manufacturers care more about combating bureaucratic BS than saving the industry; (thus preventing) an entire industry (from) addressing its’ strategic future, because they cannot get past their anti – HUD/bureaucrat resentment.’

2. An industry observer, describing the department, suggests: Under performing bureaucrats are shipped to the MH office, the equivalent of HUD Siberia. If you were a power hungry bureaucrat in the department, would you want to be assigned to regulating house trailers? That’s how they see it. They do not believe in the real potential of manufactured housing’ (As quality, affordable, green, energy efficient, non – subsidized, transportable shelter alternative for American home buying citizens!).

3. A contrarian view or simple fact? ‘This firm’s execs go to work everyday, driven to beat the competition, and they are winning. This (firm) understands the retail customer, (while most) manufacturers do not. Manufacturers are competent at counting nails per home, not satisfaction per home.’

Important Reminder. This weekly Official MHIndustry & LLCommunity blog posting just tells only part of what you need to know to achieve a level of success during these difficult economic and business times. If not already a paid subscriber to the new Allen Letter professional journal, access the contacts listed in the previous paragraph today! With your $134.95 annual subscription, you’ll receive a Free copy of the 21st ALLEN REPORT (a.k.a. ‘Who’s Who Among Landlease Community Portfolio Owners/operators Throughout North America!’) – which alone sells for $250.00. March 2010 issue of the Allen Letter professional journal will include the ‘12th annual National Registry of Lenders and Brokers Specializing in the Origination of Acquisition & Refinance Landlease Community Realty Mortgages!’ April issue will include the ‘11th annual ‘Who Ya Gonna Call in 2010?’ directory of several dozen freelance consultants working nationwide in manufactured housing and the landlease community real estate asset class. No other manufactured housing industry trade publication provides more actionable, accurate, and timely business information, by writers active in the industry and LLCommunity asset class, than the new Allen Letter professional journal!

Postscript. If you plan to be in Massachusetts on March 25th, or Springfield, IL., on April 29th, join me at a no – host networking dinner, along with a dozen or more individuals registered to participate in the Manufactured Housing Manager professional property management training and certification class the next day. Not only will there be superb interpersonal networking opportunities at both evening events, but an Open Discussion of manufactured housing’s grand c o n s p i r a c y or ‘near perfect storm’! Don’t miss this firsthand opportunity to make your views and ideas known about this important period of our industry and asset class history! For details, phone (317) 346-7156. And, if you plan to attend the networking dinner, consider staying over and participating in the MHM class the next day? Only costs $250.00 per candidate. FYI! Additional no – host networking & Open Discussion dinner meetings are being planned in Florida, Indiana, Arizona & elsewhere. Read this weekly blog for details and specific locations, or call…

*****

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

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