George Allen / EducateMHC Blog Mobile Home & Land Lease Community Advocate & Expert

December 4, 2011

Two New Trends; &, Watershed Year for MHAdvocacy?

Filed under: Uncategorized — George Allen @ 5:19 am

Two New Trends; & a Watershed Year for MHAdvocacy?

I.

Two New Trends to Watch….

The manufactured housing industry and its’ counterpart, the landlease community real estate asset class, have been awash in new tends and retread trends, for much of the past decade. Why? HUD Code annual shipment levels of new homes have slipped precipitously from 372,843 in 1998 to only 50,000+/- in 2008, 2009, 2010, and 2011; taking landlease (nee manufactured home) community occupancy, in part, along on the slide. These new and retread trends include, but are not limited to…

• Percentage of new multisection manufactured homes has decreased as volume of new singlesection manufactured homes has increased

• Percentage of land – and – home packages (i.e. manufactured homes installed on building sites conveyed fee simple) has decreased, and volume of landlease community infill homes has increased

• (Larger) Developer Series Homes characteristic of manufactured housing’s 1990s heyday, have been supplanted by smaller Community Series Homes or ‘CSH’, to support landlease community infill.

• Landlease community occupancy declines as ‘(home) deals of convenience’ are repossessed, and other residents’ lives suffer during the national economic slump

• Landlease community (property owner) self – finance methodologies of ‘buy here – pay here’ (circa 1970s) and ‘captive finance’ (circa 2000s), now supplemented with the lease – option alternative, and increasing presence of ‘rental units’ (both circa 1970s practices), as the S.A.F.E. Act and Dodd – Frank Bill underscore importance of chattel lender (LLCommunity owner) compliance with strict financial regulations.

• Manufactured home communities now called landlease communities, as two traditional housing types (e.g. pre – HUD Code ‘mobile homes’ & HUD Code manufactured homes) are joined on – site by increasing numbers of modular homes, park model RVs, ‘RVs for a season’, even stick – built homes designed and constructed to look like neighboring HUD Code homes.

Again, this is a partial list of contemporary trends that could be listed here, but you get the idea. So, what’s happening anew now? Two new trends to watch….

TREND # 1. Quiet tenant and social activism within, and on the perimeter of, the manufactured housing industry and landlease community real estate asset class.

Four trend indicators were described by Ms. Carla Burr on 29 November 2011 in Danville, VA., at a Hearing on the State of Manufactured Housing, before the Subcommittee on Insurance, Housing, and Community Opportunity, of the Financial Services Committee, House of Representatives (Congress), cited by her as being

“…promising signs to support affordable housing through manufactured housing.”:

• “The establishment of the Manufactured Home Owners Association of America (‘MHOAA’), of which I am a member. Nearly 20 state organizations exist representing community residents. The goal is to have all 50 states organized to become member states.”

• “The Corporation for Enterprise Development (‘CFED’) developed the Innovations in Manufactured Homes Initiative (‘I’M HOME’) to ensure families who purchase manufactured homes reap benefits from the homeownership experience that enable them to live safely, securely and affordably and to build wealth.”

• “Resident Owned Communities USA (‘ROC-USA®’) has put together the financing and the technical assistance to enable residents of communities to buy the land, and run the community cooperatively. If I could, I would buy my plot of land in a heartbeat! This would convert my home to real estate and my taxes would change from personal property to real property; the high lot rental would be eliminated, thereby putting more money in my pocket.”

• “Next Step ™ is building a national network of nonprofit affordable housing developers to replace pre – HUD Code manufactured homes with new ENERGY STAR manufactured homes through a partnership with my fellow panelist, Clayton Homes.”

STOP HERE, and reread that four part description of this ‘quiet tenant and social activism trend’ already affecting the manufactured housing industry and landlease community real estate asset class.

NOW ASK YOURSELF these questions:

• Has MOAA come to my local housing market yet? Are there aspects of my present landlease community operation that would attract this sort of activism cum landlord – tenant legislation? Are my rental homesite rates in sync with other multifamily rental properties in my local housing market? Do I know for sure? To find out, phone me via MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

• Should I be learning more about the CFED & ‘I’M HOME’ programs. What are my national and state advocacy bodies (i.e. Manufactured Housing Institute & its’ National Communities Council division, for starters) telling me about these; and are they opportunities or threats? Phone MHI @ (703) 558-0400 & NCC @ (703) 558-0666 to request information.. Not a direct, dues – paying member? Become one!

• Is tenant or resident ownership of my/our landlease community(ies) a viable and or desirable consideration at this time, or in the foreseeable future? To learn more about the ROC-USA program, contact MHI member Paul Bradley via (603) 856-0709.

• And, what is Next Step ™ all about? For the manufactured housing perspective on this subject, ask Kevin Clayton @ (865) 380-3000

Lest you think, for even one minute, that any of the preceding is wishy washy consumer posturing, read the following from Ms. Burr’s testimony at the Congressional hearing:

“I love my home. I just made a mistake when I moved into a manufactured housing community, or park. (While) about 2/3 of manufactured homes are placed on land owned or controlled by the home buyer, but (sic) 1/3 of the homes are placed on land leased. Nationwide, there are 50,000 (landlease) communities. Some are wonderful with respectful land owners who maintain high quality and keep prices affordable.”

HOWEVER

“Then there are communities like mine. Established in 1972, there are 499 homes in my (Virginia) community. Unfortunately, many of us feel trapped. We each spent tens of thousands of dollars to buy our homes, yet the lot rent has increased exorbitantly. Next year, my lot rent is going to be $919.00 a month. Seven years ago, the lot rent was about $400.00. We have no control over the lot rent. If we don’t want to pay it, one would expect we could pick up our homes and move, but that is out of the question. Moving my home would cost about $20,000. There is also simply nowhere to move. There are no (landlease) communities near me and I cannot afford to buy land.”

Pretty sobering picture of the near rapacious state some large income – producing properties have gotten themselves into of late.

But the bigger question is, ‘How does’ and or ‘how will’ this quiet tenant and social activism trend potentially affect your manufactured housing business and or landlease community operation? You owe it to yourself and your business interests to ponder….

TREND # 2. This is a two part complementary trend, where 1) ‘Park model’ production might spell manufactured housing survival in the short term, and factory – built housing industry success in the long term. And, 2) Is ‘RV park development and investment’ the landlease community business model of the future? Appears to be so, for now, in local housing markets where new oil/gas resources are being accessed and readied for market.

In the first instance, the following quotes are from a story titled ‘Cavco Industries Expands Reach to Industry Shows Across the U.S.’, in the December 2011 issue of Woodall’s Campground Management newspaper.

“…with its’ recent acquisition of Fleetwood Homes and Palm Harbor Homes, Cavco now has more production facilities than any other company in the park model business.”

“Combine multiple factory locations with Cavco’s increasing innovations in park model designs, which now include off – grid solar – power park models…and its’ easy to see how Cavco has managed to achieve at least modest sales growth at a time in which most companies continue to struggle with the recession.” For that matter, who isn’t building park models these days?

“…Cavco has derived much of its’ park model business from campgrounds…the company is also seeing renewed signs of interest from consumers who want to purchase a park model and have it set up in a campground for use as a weekend retreat or vacation cottage.”

What’s not pointed out in the article, for an obvious reason*1, among knowledgeable housing professionals, is that an increasing number of park models (a.k.a. ‘park model RVs’ mentioned earlier in this blog) are being sited in landlease communities as seasonal, and in many instances, year round housing. For that matter, in Sunbelt regions, entire landlease communities (a.k.a. RV parks) are comprised of park models and other types of recreational vehicles.

But now, for the first time outside Sunbelt regions, RV parks are being approved for land development in areas where oil/gas resources are being tapped in Canada and the U.S., to address our nation’s energy challenge, on the one hand; and, severe worker housing shortages on the other. It’s generally easier and cheaper to build high density (Given 400 square foot smaller size of ‘park model RVs,’ than much larger manufactured homes, CSH models notwithstanding) RV parks, than landlease communities characterized by five homes per acre.

Will this landlease (RV parks) community trend continue to grow, and more importantly, expand into other, non oil/gas resource areas? Too early to tell just yet. But some veterans in the MHBusiness already point out how ‘mobile homes’ of the 1960s were similar in size to today’s park model RVs – earning then, the ‘most affordable housing alternative’ sobriquet for the manufactured housing industry. Are today’s home buying consumers, however, ready to buy such small housing en masse. It’s highly doubtful. But the estimate remains; there’re 250,000+/- vacant rental homesites throughout the U.S. at this time, among the estimated 50,000+/- landlease communities. And frankly, the likely majority of this quarter million sites is functionally obsolete (i.e. too small a footprint, in size, to site today’s behemoth multisection manufactured homes, even many of the smaller, specially – designed singlesection Community Series Homes. SO, ‘park models’, ‘park model RVs’, ‘granny flats’, even ‘accessory dwelling units’ or ADUs (per HUD), irregardless of how one refers to them, represent a viable, contemporary factory – built housing alternative, despite the one aforementioned caveat.*1

End Note 1. Factory – built structures of 400 square feet in size, or smaller, not subject to the infamous HUD (building) Code.

***

II.

Year 2012; a Watershed Year for Manufactured Housing?

(Go ahead, look up ‘watershed’. What follows will make more sense to you)

No big pronouncement in the paragraphs to follow, simply a restatement of where we’ve been in terms of national industry advocacy, and what our two choices are to date, with a hint of one more choice to come.

A Congressional hearing takes place in late November, and there’s no salaried spokesperson or advocate present from the Manufactured Housing Institute. MHI’s annual meeting takes place in Phoenix, AZ., early this Fall. Since then, there’s been little communication to direct, dues – paying members by its’ National Communities Council division, including follow – up on matters discussed at said meeting. And during a recent conference call with state manufactured housing association executives, MHI’s chairman indicated there’s no rush to find a replacement for Thayer Long. That’s a brief summary of this industry observer’s ‘grassroots constituency view’ of national manufactured housing and landlease community advocacy to date. In other words, national advocacy choice # 1 = Maintain the status quo.

As YOU know, on 13 November 2011, this weekly blog posting proposed a Radical Change at the Manufactured Housing Institute. To wit, “Finally merge the Manufactured Housing Association for Regulatory Reform (a.k.a. MHARR) with MHI; yes indeed, and make Danny Ghorbani executive – in – charge of all home manufacturing/distribution matters, and yours truly, George Allen, executive – in – charge of all landlease community owner/operator affairs.!” That, in other words, is national advocacy choice # 2. Radical Change at the Manufactured Housing Institute.

Response to date? Same as we told you last week, dozens of telephone and emails (i.e. copies of original emails, sent to one or more of five leaders listed at the end of the 11/13/11 blog posting) expressing agreement and encouragement, from all segments of the manufactured housing industry and landlease community asset class – and one direct response from one of the those five ‘leaders’.

But that’s OK. Why? Two reasons. If and when MHIndustry business owners decide en masse they want to improve the manner by which their commercial interests are advocated in Washington, DC., it’ll happen! And, proposing a Radical Change at the Manufactured Housing Institute, for national consideration and discussion, sets the stage and opens the door to an Even More Radical Change not yet described. And when the time is right, that too will be pronounced!

***

George Allen, CPM®Emeritus & MHM®Master
Consultant to the Factory – built Industry &
The Landlease Community Real Estate Asset Class
Box # 47024, Indianapolis, IN. 46247
(317) 346-7156

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