Blog Posting # 789, Copyright 19 April 2024. EducateMHC
Know this! HUD-Code manufactured housing (‘MH”) is federally-regulated, performance-based, affordable-attainable, factory-built housing! (A.k.a. offsite construction_. And land lease communities (a.k.a. manufactured home communities & ‘mobile home parks’) comprise the commercial real estate (‘CRE’) component of MH! EducateMHC is the online advocate, official historian, trend tracker, and information resource for both business models. Access EducateMHC via (317) 881-3815; email: gfa7156@aol.com, & visit www.educatmhc.com to purchase Community Management in the Manufactured Housing Industry. And SWAN SONG is a history of land lease communities & official record of annual MH production totals since 1955; and my autobiography, From SmittyAlpha6 to MHMaven describes personal combat adventures in Vietnam as a USMC lieutenant, a 45 year entrepreneur business career in MH & community ownership, as well as non-fiction author and freelance management consultant.
George Allen, CPM®Emeritus, MHM®Master, is the only emeritus member of the Manufactured Housing Institute (“MI’), a founding board member of MHI’s National Communities Council (‘NCC’) division, an RV/MH Hall of Fam enshrinee, MHInsider magazine editor at large, & Allen Legacy columnist, Vietnam combat veteran & retired lieutenant colonel of U.S. Marines, and author/editor of 20 books & chapbooks on MH, communities, business management & prayer.
What follows here is the never-before-published narrative of my farewell presentation at the Final Networking Roundtable, in Nashville, TN., during August 2021. When I came across it recently, it occurred to me no one is compiling and sharing, in print and otherwise, this type State of the Industry information. And since some of the cited statistics have changed during the past 2 ½ years, I decided to edit and incorporate the narrative into this week’s blog posting for your reference and retention. I hope you print off this 789th blog posting and use it during the weeks, months, even years ahead. George Allen
Past, Present & Future Statistics & Trends
Among Land Lease Communities in the U.S.
Consolidation within manufactured housing & among land lease communities. This is the biggest perennial phenomenon to occur in these two segments during the past 50 years – ‘the large absorbing the small’! For example, there were 26 factory-built housing firms in 1977; today, mainly the Big Three C firms: Clayton Homes, Inc., Skyline Champion Corporation, & Cavco Industries, Inc. control 80+/- percent national market share of HUD-Code homes production.*1 And, in 1987 there were 25 (then) manufactured home community portfolios; and the 500+/- today have acquired 95+ percent of all institutional, investment grade land lease communities in the U.S. And, there’s also been ‘consolidation by attrition’, among independent (street) MHRetailers, since year 2000.
20 Year paradigm shift during years 2000 – 2020 continues. When the manufactured housing industry lost ‘easy access to chattel capital’ or ‘home-only loans’, at the turn of the century, manufactured housing sales moved from independent (street) MHRetailers to on-site, in-community home sales and financing.*2 Today? Between 2008 and 2023, in-community new home deliveries increased from 15 to 51 percent of annual production during those 15 years. Frustrations? Increasing frustration among community owners over radically increasing product pricing, lengthy waits for deliveries of homes (Due in large part to the pandemic), and slow warranty work. Future? Continued in-community marketing and sale of new homes or resurgence of ‘company stores’, etc.?
Evolving trade terminology. We’ve progressed from ‘mobile homes’ of the 1970s, to manufactured housing and communities of the 1980s & 90s, to land lease communities. Why? Seven types of shelter are now commonplace on rental homesites within many communities, e.g. ‘mobile homes’ (pre-1976), manufactured homes (post-1976), modular homes, park model RVs, RVs for a season, stick-built homes fabricated on site (only in Florida after hurricanes), and now ADUs or ‘accessory dwelling units’ such as Tiny Houses. Future terminology? Anyone’s guess, but maybe simply housing and housing communities, perhaps with signs out front announcing: ‘A wonderful housing discovery!’ Oh, and be alert to increasing presence of ‘offsite housing’ (a.k.a. all forms of factory-built housing) lingo.
National advocacy. Manufactured Housing Institute (‘MHI’) has represented all segments of the manufactured housing industry for decades; and, land lease communities, via its’ National Communities Council (‘NCC’) division since 1996.*3 Manufactured Housing Association for Regulatory Reform (‘MHARR’) has been doing similarly for independent, regional HUD-Code housing manufacturers since 1985. And the National Association of Manufactured Housing Community Owners (‘NAMHCO’) arrived on the scene in 2018-19, and Women Advancing Manufactured Housing (‘WAMH’) shortly thereafter. Going forward. Consolidation means fewer independent HUD-Code housing manufacturers and fewer sole proprietor owners of communities supporting state and national trade associations – though all firms continue to need representation and lobbying expertise as regulatory concerns persist, even increase in some instances. The associations that deal best with these challenges will prevail and grow in size and influence.
Operating performance standards. Circa 1990 there were no published performance standards describing (then) manufactured home community operations – only Income/Expense Analysis Reports data for conventional, garden style apartment communities, published by the Institute of Real Estate Management’s (‘IREM’) annual Income/Expense Analysis reports. The first Industry Standard Chart of Operating Accounts (‘ISCOA’), and characteristic Operating Expense Ratios (‘OERs’) were published in 1992, and have been updated annually since then, via the ALLEN REPORT.*4 In 1994, these OERs, along with occupancy and turnover percentages, and ‘two faces of ROI (‘return on & of investment) were used by would be community REITs (‘real estate investment trusts’) to entice Wall Street analysts to recommend buying stock in the real estate asset class.*5 Future standards? For starters, the increasingly popular practice of citing combined monthly site rent & PITI (principal, interest, taxes, insurance) payments when comparing to conventional home loan mortgage payments. Over time, expect to see most land lease community statistics, and trend identification, come from DATACOMP.
Improved & improving site rent collection. In 1970s, monthly site rent due date was the anniversary of one’s move into the ‘mobile home’ or manufactured home community, and rent was often collected in cash! No more. Today, every homeowner/site lessee (a.k.a. tenant, resident) has the same anniversary date and rent is paid via check, credit card, debit card, or other electronic transfer means. No more money laundering as in the day of Chicago mobsters, or with gun in hand as one of my maintenance men did until I caught him doing so.*6
Resident-owned communities or ROCs. Today, number more than 275 in 18 states in the ROC USA Network. And of course there are a large number of non-network affiliated ROCs in Florida and California. This is essentially a realty ownership transfer from for-profit to non-profit status, when homeowners/site lessees organize a homeowners association (‘HOA’) and, when their community is offered ‘for sale’, use the expertise and experience of a third party (e.g. ROC USA) to form a cooperative and secure real estate-secured financing to acquire the land lease community. The future? Bright for ROC USA, as the firm has raised capital to finance transactions, now providing their services in all states. Overall success of the ROC concept depends on continued, increased acceptance by sole proprietor property owners and homeowners/site lessees.
Raw land development into land lease (& RV) communities. In my opinion, this is a reemerging trend characteristic of land lease communities during decades past. For example; in early 1970s, when 575,940 new ‘mobile homes’ were built and shipped annually, thousands of new ‘mobile home parks’ were developed nationwide – but were stifled by legislation and implementation of the HUD-Code, and other negative influences shortly thereafter. During the 1990s, the industry and asset class experienced a renascence of sorts when housing production surged to 372,943+/- new HUD-Code homes in 1998.*7 Shortly thereafter, thanks to predatory lending practices and other missteps, the industry lost its’ theretofore ‘easy access to chattel capital’, bringing that short period of prosperity to an end.*8 And now, another 20 years later, we see the ‘land development trend’ reemerging in parts of the U.S., beginning with Sunbelt regions. The usual partnership in the past, between developers and housing manufacturers might be different this time. How so? Well, this time around, owners/operators of land lease communities have learned to buy new homes directly from factories, then market, sell, and often seller-finance them on-site. So, it will be interesting to see how this trend takes shape during months to come.
What hasn’t been accomplished to date? Without going into detail, these industry and realty asset class’ shortcomings are well known, and sad to say, not really ‘going anywhere’ these days.
- Responsibility for proper, safe & secure installation of HUD-Code homes
- ‘Affordable housing’; ill-defined & ballyhooed, but MH is ignored by HUD
- Little to no effort at MH image improvement & public acceptance
- Lack of even reasonable access to chattel capital home-only loans
- Valuation of manufactured homes is neither an art or a science
- Lack of two secondary markets re home sales & selling seasoned loans
- Continuation of NIMBY barriers in local housing markets re zoning, etc.
- Unknown national Economic Impact & Analysis (‘’EIA’) of MHIndustry!
Summary. There is much more that could – should be said, about past, present and future statistics and trends among land lease communities.*9 Suffice it to say however, ‘these are the stepping stones that bought us to where we are today’- and what still needs to be done! Now we have to decide who will lead and inform us going into the future.
End Notes.
- Likely to increase with Cavco’s acquisition of Commodore Industries, the ‘largest independent producer of manufactured homes’ in the U.S.
- According to MHI, 10,000+/- independent (street) MHRetailers went out of business at that time. By 2009, community owners realized they had to be masters of their own destiny relative to new home sales. That year they requested the Community Series Home design (WOW factors and enhance durability features). In 2016, the IMHA/RVIC (in IN) started the Two Days of Plant Tours & Home Sales Seminars, teaching community owners how to effectively sell new homes on-site; continues to this day.
- Of the 19 land lease community owners who met on 31 August 1993 to form the Industry Steering Committee predecessor to the NCC, only five remain active in the realty asset class today: Randy Rowe, Eugene Landy, Brian Fannon, CPM, Kamal Shouhayib and Ed Zeman; plus two – Eugene Landy & Brian Fannon, CPM, are RV/MH Hall of Fame enshrinees. For full story, read late Bruce Savage’s The First 20 Years, available for purchase via www.educatemhc.com
- Read Development, Marketing & Operation of Manufactured Home Communities, published by J. Wiley & Sons, New York, 1992. ISCOA & OERs were formulated while the author was on USMC active duty in Honduras during Desert Storm. Land lease community operating expense OER is 40 percent. And annual ALLEN REPORT is no longer available.
- This is important, because as long as ‘apartment operating performance data’ was used to value manufactured home communities, their higher OERs (55% due to high turnover, more ‘make ready’ expenses, & 24/7 marketing vs. 40% turnover among MHCommunities!) undervalued the latter property type.
- Read Double Deal, ‘The Inside Story of Murder, Unbridled Corruption, and the cop who was a mobster’, by Michael Corbitt with Sam Giancana.,Harper Collins, 2003. This book is in the stacks of the RV/MH Hall of Fame library in Elkhart, IN., as part of the George Allen Community Collection.
- This was also the brief time of land & home package popularity, a.k.a. ‘Big Box = Big Bucks’ era, when manufactured housing industry attempted to compete head to head with builders of traditional site-built homes. This didn’t work for several reasons, but mainly because independent (street) MHRetailers, while competent selling new manufactured homes, were not the contractors they needed to be to prepare homesites conveyed fee simple – in subdivisions and on scattered building sites.
- Read the short story, ‘Upside Down in a Mobile Home Park’, in SWAN SONG, PMN Publishing, 2017, page # 30, Figure G.
- Some of the old and new rules of thumb, formulae, and forms created and used along the way:
- 3:1 Rule for setting site rent; apartment rent is 3X that of site rent in the same local housing market. Today however, large portfolio rent increases are easing this rule to being 2:1
- New Rule of 72 for calculating capitalized income value of an average community; e.g. 200 sites X $200/month rent X 72 = $2,880,000. Key here is to calculate twice: once @ 100% occupancy, & once @ present occupancy.
- ‘Ah Ha! & Uh Oh!’ Worksheet for ‘estimating maximum recommended ‘affordable’ & ‘risky’ purchase prices for new & resale, privately-owned homes of any type, sited on realty owned fee simple with home, or on leased land’. Available only from www.educatemhc.com
- Professional property management via Certified Property Manager (‘CPM’) program at IREM; MHM via EducateMHC, & ACM via MHEI.
- Four Steps to selling/Financing New Homes On-site: Getting Ready, Buying Homes, Selling Homes, Financing Homes. Wallet card @ EducateMHC
- 6 Right Ps of Marketing (homes): Right Product, Right Place, Right Price, Right Promotion, Right People, Right Process. Wallet Card @ EducateMHC
- ABClassification Quality Grading System for land lease communities. Available only from EducateMHC (Replaces defunct Woodall System)
Only one textbook covers all the preceding material – and more. It’s Community Management in the Manufactured Housing Industry, described in the opening paragraph of this blog. GFA
George Allen, CPM, MHM