Musings on Eve of 27th annual Networking Roundtable

Blog # 501; Copyright @ 2 September 2018; community-investor.com

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

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INTRODUCTION: And here I thought this would be a brief blog posting. Was I ever wrong. Got to writing in a ‘stream of consciousness’ fashion – something generally foreign to this otherwise left brain (logic) guy; only to see musings pour, it seemed, from my pen (actually, the PC). Had to stop myself where I did, else you’d be reading until well after arriving at the 27th Networking Roundtable Wednesday afternoon.

If you’re reading this, and not present at the networking roundtable event this week, I feel sorry for you. Why? From the MHM class Wednesday, thru the Art of the Deal presentation by top notch RE brokers, onto three superb keynote offerings Thursday morning, there’s – frankly – nowhere else to be in the entire manufactured housing industry that’ll be more intellectually stimulating than this venue! Seriously.

At last count there’re 30+ speakers and panelists coming in from throughout the U.S. to share their knowledge and experiences with august land lease community owners.

Just this afternoon I met with Rick Roethke, head of Barrington Investments. Know what we talked about? The soon coming together of affordable housing supply siders, intent on cross pollinating public and private sector policy and funding sources and experiences, for the greater good of solving the affordable housing crisis in the U.S. today! How can you not want to be part of this conversation and actions going forward? Stay tuned here, during weeks ahead, for more information….I’m pumped! History is about to be made.

Musings on Eve of 27th Networking Roundtable

If products & services of Community Owners (7 part) Business Alliance, or COBA7, are important to owners/operators of land lease communities nationwide, why is sit so difficult to identify someone to step into the role of leadership: 1) ensuring distribution of the statistically valuable annual ALLEN REPORT beyond 30 years; 2) as well as updating & distributing a dozen other SSRDs; 3) continuation of one, if not both monthly newsletters, featuring community-related news & views, as well as HOW TO information; 4) & 5) gala interpersonal networking & deal-making opportunities; 6) professional property management training & certification via Manufactured Housing Manager program; and, 7) national advocacy, ombudsman & historian services when need be? are you that, as yet, unnamed successor?

Seems everyone talks about the affordable housing crisis afoot in the U.S. today, but few take definitive steps to address the situation with resources already close at hand, e.g. HUD is federal regulator of manufactured housing but does little to promote this type factory-built housing as one ready remedy for said crisis. Here our housing product costs, per square foot, are 50 percent less (not including underlying realty value) than traditional site-built housing, but do you hear or read of HUD ballyhooing this major advantage? No. But maybe HUD Secretary, Dr. Ben Carson will finally get that important message.

One faux trade journalist takes me to task for saying and writing what follows – because he fails to understand how I can be a member of one and fan of the other, but overtly critical of both at the same time. The Manufactured Housing Association for Regulatory Reform (‘MHARR’) and the Manufactured Housing Institute (‘MHI’) evidently satisfy their dominant HUD-Code housing manufacturer members, where lobbying and national advocacy – in their behalf – is concerned. However, it’s no secret at all, having two national trade entities in Washington, DC., representing the same ‘manufactured housing’ industry, seriously lessens their legislative influence and regulatory control clout. I’ve been in Washington meetings and seen it occur first hand. Unless MHAARR & MHI function in concert, where proposed legislation and regulatory overreach are concerned, legislators and regulators simply play one trade body off against the other. Doing so serves no one well at all. This has been going on since 1985 when MHARR was formed.

Has consolidation, among HUD-Code housing manufacturers and land lease community owners/operators, been good or not so good for the industry and realty asset class? Financial fortune-wise, for some if not many, has certainly been the case. In 1977 there were 25 ‘mobile home’ manufacturers, today we generally think of just the Big Three: Clayton Homes, Skyline Champion, & Cavco Industries, plus a few regional firms. A decade later, in 1987, we identified 25 portfolio owners/operators of (then) ‘mobile home’ parks; today – during 2018, we know of 500+/- property portfolios containing an average of 36 land lease communities apiece, with an average community size of 210 rental homesites. Consequences? Since 1994, three real estate investment trusts (‘REITs’), then five, and now, only three. Membership ranks of state MH associations have been decimated as portfolio ‘players’ generally do not encourage support of, or participation in, state and local matters, education, and lobbying.

New (HUD-Code) housing installation. Clearly, in my opinion, a ‘damned if you do (retrofit old rental homesites with expensive new concrete) and (potentially) damned if you don’t – and risk being found out by state or federal regulators – even if properly using the Frost Free Foundation system, originally approved by HUD for this application! This is no way to run a business – except ‘into the ground’!. And this is no way to hold the threat of government intervention (enforcement) over the heads of businessmen and women. What’s the answer? Right now, spend the money, or buy and fix up older manufactured homes to put on existing rental homesites to then sell or rent. Furthermore, HUD’s indecision risks stalling new HUD-Code housing shipment volume, preventing it from keeping pace with the need for new manufactured homes to replace old ‘mobile homes’ While we’ll likely ship more than 100,000 new HUD-Code homes by year (2018) end, it’s estimated the figure would have been closer to 125,000 new homes or higher.

Beware scammers! They’re already here, in the manufactured housing industry and among land lease communities nationwide! How so? In the later instance we have profiteer pitchmen actively soliciting outside naive investors with promises of inflated investment returns, using prospectus documents understating operating expenses and overstating potential income. And where housing is concerned, sad to say, one or more independent third party chattel capital lending firms are no longer checking business bonafides and reality of office locations (i.e. shadow offices, oft in states offering specific corporate identity, as well as legal protections), to ensure they’re not lending to Ponzi Scheme – like operators.

Stop picking on the post-production segment of the manufactured housing industry! The manufactured housing industry cannot ignore its’ post-production segments for decades, then when easy access to chattel capital disappears, as it did during the early 2000s, expect them to quickly rally and become capable, experienced, motivated national advocates for manufactured housing. That’s what these sectors thought their national association dues were going for all along. Yes, there’s ‘work to be done’ in this area, but not the way it’s being proposed from one quarter. In fact, I’ll go so far as to remind: ‘If you’re not part of the solution, you’re likely part of the problem!’ Point? Instead of chiding various folk to step forward and lead in ways unfamiliar to them, expand your bully pulpit and officially include them into your membership ranks, then lead them into effective national advocacy in favor of manufactured housing and land lease communities.

Yes, there’s an official definition of affordable housing out and about these days. If you’d like a copy of said document, just let me know. In the meantime, however, why do we continue as an industry, lenders, and realty asset class, to NOT include household utility costs (e.g. electricity, heat, water, sewer) in the Housing Expense Factor (‘HEF’) measure of affordable housing? In accords with some HUD programs, and most ‘housers’ I know, including this ‘up to’ 25 percent impact $ figure’, in calculating how much house one can afford to purchase or rent to pay (if an apartment dweller or homeowner/site lessee), takes the new home purchase from ‘risky’, over to being truly affordable! Think about it. And if you’d like a FREE copy of the weirdly-named but easily understandable – and convicting, ‘Ah Ha! & Uh Oh! Worksheet’, simply ask for it when you phone the Official MHIndustry HOTLINE; (877) MFD-HSNG or 633-4764. Wonder how many reading this have been, unintentionally, setting customers up for failure and not success?

While we’ve had a history-changing paradigm shift in place now, in the manufactured housing industry, since the turn of the century, but especially since our shipment nadir year of 2009 (Recall only 49,789 new homes shipped), I don’t see HUD-Code manufacturers embracing land lease community owners/operators, of all sizes, as their new housing market, replacing independent (street) MHRetailers. Sure, they enjoy selling bulk quantities of new HUD-Code homes to property portfolio firms, but what about sole proprietors of one or two smaller (i.e. less than 100 rental homesites apiece) communities? Yes, there’s some movement in the Midwest, where the IMHA/RVIC, every two years, trains these folk how to buy, sell & seller-finance new homes. But know what? We need more than that to happen! In 2009 , only 24 percent of aforementioned 49,789 new homes went into land lease communities. By year end 2015 that percentage had jumped to more than 40 percent of the 70,544 new homes shipped that year (That works out to be a jump from 11,949 to 28,218 units!) By rights, if HUD-Code housing manufacturers were aggressively selling to this new market, 50 percent of this year’s estimated 100,000 new homes shipped, or 50,000 would be so-destined. Is that happening? No. And even if it was, the shipment volume would still be insufficient to meet the immediate need to replace ‘mobile homes’ being taken out of service.

OK, it’s time to stop musing and get along to Greeting 200+/- land lease community owners/operators soon arriving at The Alexander Hotel in Indianapolis, IN. Know the closest held SECRET this year? The nature of the FREE gifts given to attendees every year; always valuable; always practical; always with a meaning. All will soon see…

GFA/cc

George Allen, CPM, MHM
COBA7, a division of GFA Management Inc., dba PMN Publishing
Box # 47024, Indianapolis, IN. 46247

(317) 346-7156 & gfa7156@aol.com

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