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

‘Affordable Housing’, America’s Bugbear of Shelter Definition & Measures

How Do YOU Describe & Measure Affordable Housing & Housing Affordability?

First, the bugbear. Per Webster’s College Dictionary, bugbear is ‘a persistent problem or source of annoyance’. Throughout the U.S. housing market, bugbear is the absence of clear description, and resulting internecine confusion – due to lack of consensus regarding measures of affordable housing, that are ‘perennial problems and sources of annoyance’, among realty, shelter and housing finance aficionados!

Here’s a recent example from April 2010 issue of Multi-Housing News (p.11): Two companies “…have won the bid to develop the 900 – unit initial phase of Hunter’s Point South, a mixed – use affordable housing project that will leverage $2 billion in private investment. The development cost for the residences in the first phase is $360 million.” Stop! That’s $400,000.00 to develop each affordable housing unit! How so? ($360,000,000. divided by 900 units). Prompts one to speculate what the unit sale price or apartment rental rate will be for each affordable housing unit. And, affordable to whom?
Answer: Anyone who can afford a likely (un)affordable price tag or be subsidized!

At the opposite end of the affordable housing definition/description spectrum is this lightly edited gem, from the former chairman of a national realty trade body: “Affordable housing has become a politically correct euphemism for subsidized housing. While source of funding for (payment) shortfalls for an affordable housing property is not always specified, more than likely it is supplied by the taxpayer, one way or another.”

Several years ago, PMN Publishing researched, prepared and distributed the seminal booklet titled HOUSING AFFORDOGRAPHY; subtitled, ‘Study of Affordable Housing Formulae & Measures of Housing Affordability’, a.k.a.

• Housing’s ‘Anything you want it to be!’ Perennial Prevarication! Or,

• In the minds of many (then) recently displaced homeowners, ‘Housing’s dirty little secret!’

The gist of the booklet was comprised of four descriptions, and as many measures of, affordable housing perspective:

• The 30% Housing Expense Factor (‘HEF’) purist

• The Housing Opportunity Index (‘HOI’) devotee

• The Housing Wage (‘HW’) aficionado; and/or simply,

• One Who Believes, when a home buyer/mortgagor or apartment lessee commits to payments on a mortgage or lease; & a lender/mortgagee or apartment lessor underwrites a loan/mortgage or executes a lease, it’s affordable & that’s all there is to it! (Think back to the earlier $400,000.00 affordable housing example…)

The booklet, as popular and widely discussed as it was during its’ two year run in the realty and housing markets, is now out of print. But during the past year, a fifth measure has come to light, and is herewith added to the four descriptive measures:

• Income to Home Value Ratio (‘IHVR’)

A challenge to the reader. Take time to learn and understand the basics and nuances of these descriptions of affordable housing measures, and begin applying them to your workaday life and housing interests. And, as you happen upon additional descriptions and measures of affordable housing, please let us know via: GFA c/o Box # 47024, Indianapolis, IN. 46247.

I.

The 30% Housing Expense Factor or HEF

A safe, working definition. ‘Housing is affordable when no more than 30 percent of a household’s annual gross income (i.e. household can be one or more income producers living in the same singular housing unit) or AGI, is consumed by the sum total of annual PITI (Principal & Interest dollars paid on one’s home mortgage, real estate Taxes & homeowner’s Insurance premium dollars), plus annual utility expenses (water, sewer, heating fuel) for the housing unit, but not including telecommunications costs (e.g. telephone, cable TV & Internet access)’1 Note. This safe 30% HEF sometimes varies (e.g. 25%, 28%) among realty, shelter and housing finance practitioners.

An alternate, but riskier working definition, has the 30 percent HEF, of a household’s AGI, comprised of only PITI, but not including annual utility expenses & telecommunications costs. This, in effect, creates a ‘two sides of the same coin dilemma’: the safe, or more conservative, ‘loaded’ 30% HEF, described in the previous paragraph, versus a riskier ‘barebones’ 30% HEF! Can you see how the temptation to buy ‘more house than one can afford’ quickly appears, when one’s entire 30% HEF is comprised of just PITI, without including the usual household utility expenses – that still need to be paid, but outside the widely recognized 30% HEF limit? Hence, the riskier rental and or home buying perspective!

Here’s another challenge for you. From now on, when you hear or read of this ‘30% affordable housing factor’, ask yourself: ‘Are they describing or advocating the safe (i.e. ‘loaded’) 30% HEF, or the riskier (i.e. ‘barebones’) 30% HEF – & Why?’ Know what you’ll learn? The measure is rarely clarified; and when one asks, the realty, shelter or housing finance practitioner will generally not know or say. That’s one reason why ‘affordable housing’ continues to be the bugbear of the American shelter industry.

II.

The Housing Opportunity Index or HOI.

‘Housing Opportunity Index (‘HOI’), formerly known as the Housing Affordability Index or HAI. This oft quoted index links a lender and trade advocacy group, e.g. National Association of Home Builders or NAHB/Wells Fargo HOI, also National Association of Realtors or NAR/Wells Fargo HOI. Here’s how HOI is described on NAHB’s website:

In the U.S., an HOI is calculated quarterly by the NAHB, comparing
the Average Median Income (‘AMI’) in a locality with the median
home price. The index is stated as a percent of the population, with said
AMI, able to afford the median – priced house. For example, in
year 2000, a HOI of 81% of AMI households in Indianapolis (with an
AMI of $57,700 at the time) would be able to afford the median – priced
home of $122,000). In comparison, San Francisco, with an AMI of
$74,900 and median house price of $464,000 had a HOI of 10.3%.’2

Two important cautions. ‘NAHB assumes households can afford to spend 28 percent of their AGI on housing’ (Recall 30% HEF measure described earlier), but does NOT, in anything this realty writer has read, specify whether composition of the 28% HEF is ‘loaded’ or ‘barebones’ – hence the ‘first problem’ with the HOI: Does the unspecified HEF nuance favor the safer or riskier perspective?. A second possible flaw? To ‘work (these) numbers’, one needs to know the total number of homes sold in the targeted local housing market during the studied year, to calculate the percentage of citizenry ‘able to afford the median – priced home…’ This detail is rarely, if ever, provided. Case in point? This (April 2011) press release published in RISMedia’s REAL ESTATE magazine (p.7.):

Nationwide housing affordability, during the fourth quarter of 2010, rose to its’
highest level in 20 years…according to NAHB/Wells Fargo HOI data. The HOI
indicated 73.9% of all new and existing homes sold in the fourth quarter of 2010
were affordable to families earning the national median income of $64,400.”

See? Which HEF perspective is favored or built into the HOI; the safer or riskier perspective; and, how many homes ‘sold’ across the U.S., to compute the 73.9% HOI?
In this writer’s opinion, the HOI measure of housing affordability, as interesting and helpful as it may be, remains flawed as long as it’s a proprietary affordable housing measure sans HEF explanation and total home sale disclosure.

III.

The Housing Wage or HW

‘Housing Wage (‘HW”) methodology comes at affordable housing and housing affordability differently. Instead of first estimating value of a home or lease, then calculating how much AGI is required to afford same; HW methodology calculates the amount a person working fulltime must earn to afford, for example, a two – bedroom apartment, in a given local housing market, without paying more than 30% of AGI in rent.’ 3

An example: If a 2BR2B apartment rents for $900/month and represents
30% HEF (usually ‘barebones’), mathematical extrapolation calculates
AGI to be $36,000., which,, when divided by 12 months, and in turn, 172 work
hours/month (40 hrs. X 4.3 weeks/month) = $17.44/hour is the HW required to
afford this 2BR2B apartment in this local housing market. But note, utility
expenses, unless included in the monthly rent rate, will still need to be paid.

Furthermore, it’s common to see results of HW analysis expressed in terms of ‘How many times the minimum wage’, the wage or salary – earner must make to afford, for example, a two – bedroom apartment. In the above example this would be, using 2009 Federal Minimum Wage of $7.25/hour, a factor of 2.4. Therefore, in this local housing market, one must earn 2.4 times minimum wage, in this instance, of $7.25 = $17.40/hour, to afford the aforementioned $900.00/month 2BR2B apartment.

IV.

Workforce Housing or WFH

Workforce Housing (‘WFH’) is generally defined as being homes and apartments for nurses, firefighters, policemen and teachers making between 60 and 120% of a local housing market’s (i.e. usually affluent communities where they work) Area Median Income or AMI. How to calculate this range in workforce housing salaries and wages?

1. Go to zipskinny.com to ascertain the AMI for the targeted local housing market.
2. Calculate the 60 & 120% range figures.
3. Multiply the two ’60 & 120% dollar range figures’ by 30% HEF.
4. Divide these two totals by 12 months, to estimate monthly rent or mortgage payment required of this targeted workforce, to be able to afford to live in said local housing market.

For example. Given $63,800 AMI X 60% = $38,280; and $63,800 AMI X 120% = $76,560, or a wage/salary range of $38,280 to $76,560/year for workforce to be able to buy or rent affordable housing in this local housing market. Again, 30% HEF is usually calculated from the ‘barebones’ perspective, encouraging the tendency to ‘buy more house or rent more apartment’ than might be prudent, as utility expenses will still (maybe not, in the case of apartments) need to be paid ‘outside’ the 30% HEF allowance.

What HW does, is demonstrate to targeted workforce, their municipal employers, land planners, and local zoning boards, what salaries/wages need to be, to enable nurses, firefighters, policemen and teachers to live in the local housing markets where they work!

V.

The Income to Home Value Ratio or IHVR..

Simply, this ratio achieves traction when a housing market’s median home value (e.g. US in 2010 = $172,134) is divided by its’ AMI (e.g. US in 2010 = $63,800) for same time period, in same housing market; in this case, resulting in a 2.7 IHVR.

In other words, households earning the U.S. AMI of $63,800 would have to purchase a home costing nearly three times their AGI, to own a median U.S. home valued at $172,134. Sound extravagant? Not when considering some local housing markets are still at 7 IHVR, requiring households to spend more than seven times their AGI to own a median priced home in their local housing market.

VI.

One Who Simply Believes that…

“Ownership housing is affordable if the price is right.” Shelterforce, Fall 2007.

Summary. “…the perspectives on affordable housing and housing affordability are as broad and imprecise as the perspectives and measures described in this brief review. In the final analysis, if there is no consensus or agreement, on a common definition or description of affordable housing and housing affordability, let alone practical and easy – to – use formulae, relative to the subject; then there’ll be few Ah Ha! home buying and renting experiences; and the final ‘One Who simply Believes…’ perspective, will remain as appropriate as any other definition and measure of this too variegated subject!” 4

VII.

What say YOU?

Is there a practical, affordable housing definition and or description, as well as additional measures thereof, with which you’re familiar, that has not been covered in the previous paragraphs? If so, please communicate it/them to us, for possible inclusion in a new edition of HOUSING AFFORDOGRAPHY, at some point in the future. Use either the postal mailing address provided earlier in this bugbear expose’, or via the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764 or (317) 346-7156.

*****
Another subject altogether: ‘Update to Rankings in the 22nd annual ALLEN REPORT’

Turn to page # 18 in your copy of the 22nd annual ALLEN REPORT. Soon after the compilation of ‘# rental homesites owned/fee – managed’ data was complete, and landlease (nee manufactured home) community portfolio owners/operators ranked, American Land Lease in FL. (a.k.a. Green Courte Partners in IL.), listed as #9 on this year’s list, acquired six LLCommunities, containing 1,850 rental homesites, from CRF Communities (#24). Had this acquisition consummated a month earlier, and these two new totals been included in the above – referenced compilation, American Land Lease would likely have been ranked as #7 in the 22nd annual ALLEN REPORT.

Turn to page # 19 in your copy of the 22nd annual ALLEN REPORT. A month after publication of this year’s ALLEN REPORT, we learned there had been a significant reporting error in the property portfolio numbers for J & H Asset Property Management, in CA. Their correct portfolio numbers are 69 LLCommunities and 10,520 rental homesites fee – managed. This correction constructively moves them up in ranking from #70 to #14; an adjustment that’ll be effected in the next edition of the ALLEN REPORT.

Do YOU have your copy of the 22nd annual ALLEN REPORT? Well, our inventory is down to the last few dozen copies of this seminal statistical compendium. And we’re making this very special offer through to the end of May 2011:

For a total of $250.00, we’ll send you the 22nd annual ALLEN REPORT (cover price is $450.00), a one year paid subscription to the Allen Letter professional journal (12 monthly issues, usually for $134.95), and – as long as they last – a copy of the Manufactured Housing $$$ Primer, the first and only book ever published on the subject of chattel (personal property) finance as it applies to the manufactured housing industry (usually $29.95 postpaid). And postage/handling charges are included in the aforementioned $250.00. This Special Offer is not available on our website, but must be ordered by phoning the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764, or (317) 346-7156.
*****
End Notes:

1. HOUSING AFFORDOGRAPHY, George Allen, PMN Publishing, Indianapolis, IN., June 2008., p. 13
2. Ibid., p.19 (revised)
3. Ibid., p.23 (revised)
4. Ibid., p.31 (revised)

Your Response to ‘CONSPIRACY THEORISTS, GATHER YE ROUND!’

&

State of the Manufactured Housing Industry & Landlease Communities….

I.

Your response to ‘Conspiracy Theorists, Gather Ye Round!’ last week was overwhelmingly positive. The sole area of disagreement related to my contra view of our industry’s largest advocacy body’s desire to

“Eliminate unrealistic methods for appraisal (of) manufactured housing. Site – built oriented appraisal requirements have little applicability to manufactured housing and ultimately penalize manufactured homeowners.”

And those few rejoinders came entirely from chattel finance lenders and service firms. Hmm. Such single source response prompts one to ponder, ‘Why?’ There’ll be more views and verbiage on this controversial topic in a future blog posting. Want to input?

On the other hand, here’re remarks from blog floggers (readers) supportive of conspiracy perspectives offered:

• “GOOD JOB! Needed to be said. But will anyone listen? Now that’d be a FIRST, sadly enough. Will our ‘mystery leader’ step up? Keep up the good fight.” JK

• “KUDOS! This takes courage. I’d love to be part of such a conclave, should it occur. Please keep me posted, and best wishes in this effort.” TK

• “Let me tell you…nicely written. Am ready to step up and speak my mind. I’d love to take this job on, but my resources are limited. Let me know more.” JD

• “Good post George. You’ll get flack over some of those comments. Trouble with conference participation, is those who should participate, won’t do so.” SR

• “Here, Here, George! Well crafted and said, sir.” N

So, where do we go from here? That’s up to YOU, and the unnamed ‘charismatic, respected, well known, successful businessman or woman’ to whom last week’s blog post was directed. I know more than one individual, meeting that leadership description, read last week’s blog posting. So now we wait…Perhaps YOU need to encourage them to step forward.

Did YOU, as a member of the Manufactured Housing Institute, contact Thayer Long, or the institute’s chairman, Joe Stegmeyer? If not; why not? Furthermore, did YOU, as a member of the Manufactured Housing Association for Regulatory Reform, contact Danny Ghorbani, or the association’s new chairman, John Bostick? If not; why not? I can do no more, for YOU and our industry and realty asset class, than identify the collective, critical, and timely challenges and opportunities in play, then suggest corrective measures and alternative. It’s up to YOU to initiate and support appropriate action. If YOU have done so, good for YOU! If not; for the third time, why not? Or are YOU content, to simply sit back and continue to complain about how difficult and unfair the present national business climate is for our type factory – built housing? If so, shame – shame on YOU!

II.

State of the Manufactured Housing Industry & Landlease Community Asset Class

a.k.a.

‘An Industry in Search of the Wisdom of Solomon & Needing the Courage of a David!’

Let’s begin with HUD Code housing shipments for the past three years. All right there, at only 50,000+/- per year! That’s down down down, from the 372,843 renascence high in 1998. Year 2011? Just another 50,000+/- shipment year, unless there’re new sources of third party chattel finance.

Did you know? Clayton Homes has garnered a 48 percent national housing market share, where HUD Code manufactured homes are concerned. And that Cavco recently bought Palm Harbor out of bankruptcy, just as it did Fleetwood a year earlier.

Trends. More new homes being sold into landlease (nee manufactured home) communities. Why? Fewer ‘repos’ & ‘resale’ homes available for purchase and installation on – site; so, some LLCommunity portfolio owners/operators now routinely buy several new HUD Code homes at a time, at a discount, to market and sell on – site ‘at cost’ or various profit margins, depending on the nature of the local housing market in which the property is located. Homes designed for LLCommunity in – fill are now known as Community Series Homes or CSH – often singlesection, with front load porches, or small multisection homes. And CSH models are marketed to income – producing property owners, by Business Development Managers (‘BDM’) employed by the HUD Code home manufacturers.

Finance. The ‘Big Four + One’ group of chattel lenders is still active in the MHIndustry, but not originating and underwriting many chattel loans on new and resale manufactured homes. These firms are 21st Mortgage Corporation, Triad Financial Services, CU Factory – built Housing, U.S. Bank – Manufactured Housing Finance; and, Vanderbilt Mortgage and Finance, Inc., Clayton Homes’ in – house lender.*1

Then there’s the landlease community real estate asset class. While reasons very, for the segue from ‘manufactured home’ to ‘landlease’ community trade terminology, it won’t hurt to review the matter here. Unlike years between 1976 and roughly 2006, when this income – producing property type only sited ‘mobile homes’ (pre – 1976 vintage) and ‘manufactured homes’ (post – 1976 vintage); contemporary LLCommunities, depending on the nature of local housing markets, now also site modular homes; ‘park model’ RVs, a.k.a. ‘granny flats’; transient ‘RVs for a season’; even stick – built homes constructed on – site (in Florida) to look like HUD Code manufactured homes. It simply makes sense to apply a label that better describes the presence of as many as six different types of housing to be found on – site; hence landlease community, or LLCommunity, for short.

Some salient ‘stats’ from the 22nd annual ALLEN REPORT*2:

• There’re approximately 50,000+/- landlease communities in the U.S., and 500+/- portfolio owners/operators (i.e. each owns and or fee manages a minimum of five such properties or 500+ rental homesites)

• Average LLCommunity portfolio size during 2010 = 24 LLCommunities

• Average property size during 2010 = 222 rental homesites

• Most LLCommunity owners/operators are domiciled in CA, MI, IL, & FL.

• National Average Physical Occupancy during 2010 = 89.2 percent.

• National Average Operating Expense Ratio during 2010 = 41.8 percent, compared to the Allen Model @ 40 percent OER.

• Estimated value of self – finance ‘contract sale’ paper held among 500+/- portfolio owners/operators during 2009 = $3 ½ billion; 2010 = $5 ¼ billion; and estimate for 2011 = $5 ½ + billion.

• No new construction of LLCommunities reported during 2010.

• Professional property management in LLCommunities: 13 Certified Property Managers® reported, as well as 37 Accredited Community Managers®, and 171 Manufactured Housing Managers. Are all your property managers certified?

Trends. Consolidation of LLCommunities into portfolios slowed to a crawl during 2010, given the difficulty in obtaining realty financing, but likely to resume during 2011. Read the 13th National Lenders’ Registry for details, and a list of 18 realty loan originators.*3 Maybe see self – finance (i.e. ‘buy here – pay here’ & ‘captive finance’ methodologies) slow during 2011, as more portfolio owners/operators switch to carefully crafted Lease Option programs on – site. Look for one or two new REITs (real estate investment trusts) to be formed, as they initiate IPOs (initial public offerings – of stock) during late 2011 and early 2012. At least for the time being, ‘park closures’ are not the hot item they were, mainly due to constraints on development financing. More and more ROCs (resident – owned communities) are appearing outside Florida and New England.

A ‘Hot Button’ Trend. Watch as more and more LLCommunities drop any mention of ‘manufactured’ from print and online advertising of homes and properties! At least one HUD Code home manufacturer, Skyline Corporation, has done likewise. Some LLCommunity portfolios are even rebranding, introducing new contemporary housing – like websites! One wag has already identified this evolving (‘Nix manufactured from housing’) phenomenon, as the default National Image Improvement Campaign the manufactured housing industry wasn’t able plan, fund, and effect during the past several years.

Announcements. Have you met Lisa Brechtel yet? She’s the new MHI executive who heads the National Communities Council (‘NCC’) division. Her direct phone number is (703) 558-0666. If you haven’t done so already, contact her for information about attending the annual NCC Forum on 26 April, and the Manufactured Housing Congress on 27 & 28 April, both in Las Vegas.

In case you weren’t aware, the seminar ‘How To Estimate Affordable & Risky Price Points on New & Resale Manufactured Homes In & Outside Landlease Communities’, that was so popular at the Super Symposium II in Albany, NY., last month, will be repeated on Thursday, April 28th, at the MHCongress in Las Vegas. If YOU market and sell new & resale homes, and don’t know how to use AMI (Area Median Income per postal zip code) and or AGI (Annual Gross Income of a homebuying individual or household) to estimate ‘affordable’ &/or ‘risky’ price points (Really need to know both, to help customer make up their mind!) in any local housing market in the U.S., YOU owe it to yourself to be present for this rare opportunity to learn How To Do So, and receive the FREE ‘Ah Ha! & Uh Oh! Formulae Worksheet’! To register, phone Lisa Brechtel @ (703) 558-0666.

Some thoughts on the future of HUD Code manufactured housing and the landlease community real estate asset class.

For many, active in the MHIndustry & LLCommunity asset class, Randy Rowe’s Five Point Plan to facilitate a shipment rebound, anytime in the near future, will require:

• Better manufacturer home warranties, customer service, and responsibility for home installation..

• More chattel financing sources than we have at this time

• Ensure economic security of homebuyers/site lessees

• Multiple listing services and other features of a secondary market for manufactured home sales

• A national marketing (image improvement) program of some sort

Randy introduced this Five Step Plan at the 19th International Networking Roundtable in Phoenix, during Fall 2010; and, David Lentz of American Land Lease, presented it at Super Symposium II in Albany, New York, earlier this month. FYI: This year’s Roundtable is tentatively scheduled for 14 – 16 September. *4

So, where does all this leave us today? A lot depends on your reaction and response to the Great and Greater Conspiracy challenges described in last week’s blog posting. Perhaps YOU should go back and read it again, to be inspired and motivated to do your part in returning the HUD Code manufactured housing industry to good economic health!

As opined at the beginning of this State of the MHIndustry & LLCommunity asset class, we are indeed an ‘Industry in Search of the Wisdom of Solomon & Needing the Courage of a David!’ What we await now, is for one or more industry leaders, replete with Solomonesque Wisdom & Davidic Courage, to step forward and free us from the bondage of ‘This is the way we’ve always designed, built, shipped, then sold, and sometimes serviced, manufactured homes’, to renewed Free Enterprise Success as builders of the most affordable, energy efficient, quality sufficient homes in the U.S.!

***

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

End Notes.

1. This information taken from the Manufactured Housing $$$ Primer, available from PMN Publishing for $29.95 postpaid. Phone (317) 346-7156.
2. 22nd annual ALLEN REPORT available for $250.00 (includes a one year subscription to the Allen Letter professional journal) by phoning: see # 1 above.
3. 13th National Lenders Registry (realty & chattel) available FREE by phoning #1.
4. For an invitation to attend this annual seminal event for LLCommunity folk, see # 1 above

CONSPIRACY THEORISTS, GATHER YE AROUND!

Great & Greater Conspiracies; State of MHIndustry & LLCommunity Asset Class

Let’s get something straight, right up front! Portions of what I pen here will anger a few individuals, but confirm the beliefs of many others. And it’s this type industry news reporting & opinion sharing, that’s prompted a scant number of salaried corporate & trade association executives – but interestingly – not sole proprietors & business owners, to get upset & holler, ‘Harm to the industry!’ Well, I think not. After 60 years of manufactured housing industry history; during 30 of which, I’ve been invested in as a landlease community owner & industry consultant, it’s high time we revisit our roots as affordable housing, seek new ways to rejuvenate our housing product, the way we market it, how we treat our customers, & much more! Frankly; if I don’t speak out, I seriously doubt anyone else will, and our industry will continue to suffer on, maybe even die, in silence! GFA

I.

The Great Conspiracy isn’t a conspiracy at all! It’s the well known but embarrassing phenomenon of self – immolation (Webster: as in ‘killing oneself – or industry – as a sacrificial victim’). In the case of manufactured housing, this self – defeating state of affairs is characterized by ‘resistance to change’ (e.g. Like automobile plants, we count our ‘shipments’, not homes ‘sold’, & cling to vestigial trade lingo like it’s Biblical writ); greed (e.g. Think, ‘Bigger boxes = bigger bucks!’); and, frequent lack of product (installation) responsibility (warranty) once the house leaves the factory (e.g. Remember ‘DAR’? It’s the industry’s continuing mantra, in some circles, as in ‘Drop (that house) And Run!’). And there’s more. How ‘bout cyclic short term abuses of chattel and realty finance sources, followed by reaping self – sacrificial long term consequences of going without (e.g. Only 50,000+/- new HUD Code homes ‘shipped’ during years 2008, 2009 & 2010)? Of course, there’s also the perennial, not – so – private, lobbying – defeating, internecine squabbling between our national advocacy trade bodies inside the Washington, DC beltway. Will it ever end? Plus, landlease (nee manufactured home) communities are not without blame! Too many still deserve to be viewed as nothing more than ‘trailer parks’, awash with negative societal mores and perpetuating a very poor public image of an otherwise desirable, affordable lifestyle. And in the same breath, do we dare mention the nefarious (in some eyes) or business risk – mitigating (in other eyes) practice of ‘churning’ our (property owner) self – financed homeowner/rental homesite lessees? And the list goes on….

Is there a solution? I believe there is. But we need a charismatic, respected, well known, successful businessman or woman leader, to step forth and publicly announce, ‘The HUD Code manufactured housing industry is at an impasse! And if we’re to move forward together, and profitably, during the next decade, we’ve simply got to Get Our Act Together, the sooner the better!’ Building on that proverbial line in the sand, this leader (We do have at least one, that I can know of, in this industry – but will he/she heed this call?) and cohorts, might consider following the twice set precedent of 2/27/2008 in Tampa, FL., & 2/27/2009 in Elkhart, IN., at two National State of the Asset Class (‘NSAC’) caucuses, by now calling for a two day Open Strategic Planning Meeting of businessmen and women ‘with skin in the game (of their respective companies and associations)’, committed to participate in this historic event at their own expense! Maybe require advance preparation on the part of everyone attending. For example; early on, submit a short (500 words or less) letter, describing ‘why’ they’re participating, and ‘what’ they’d like to see accomplished. Once responses have been collected, prepare and distribute a preliminary packet of information, containing industry benchmark statistics and brief summary of aforesaid input. Furthermore, such an event – to be effective – must be a joint effort between members of the Manufactured Housing Association for Regulatory Reform (‘MHARR’) & Manufactured Housing Institute (‘MHI’), Open to non – member business owners who wish to attend! Ultimately, however, proceedings should be planned and guided, under the authority of an independent third party strategic planning meeting specialist, for event results to be accepted industry wide.

Are YOU one of the charismatic, respected, well known, successful businessmen and women leaders about whom I write and challenge in the foregoing paragraphs? Probably. This particular blog posting is being sent to those who fit the multifaceted description. Now ‘the ball is in your court’. Your response?

The Greater Conspiracy is more difficult to pin down with specifics. In a big nutshell, it’s generally described (Have no doubts about the fact the Greater Conspiracy exists, as it’s a matter of discussion, within industry gatherings, from coast to coast, or I wouldn’t be wasting blog space here!) as quiet collusion among some industry executives (i.e. Grass maybe perceived as being greener on the other side of the ____ fence); our competitors for national housing share (i.e. Not enough business to keep stick builders & factory – built aficionados employed over the long haul!); even regulators of our unique housing product type (i.e. We didn’t ask for this added work in the first place!). Some of the symptoms are difficult to pigeonhole, as to whether part of the aforementioned Great Conspiracy or a Greater Conspiracy. So, let’s begin with one recent example.

When MHIndustry & LLCommunity businessmen and women converged on Washington, DC. recently, they were given prepared ‘talking points’ to use when meeting with their respective members of Congress, relative to changing pending Dodd-Frank legislation. One recommendation read:

“Eliminate unrealistic methods for appraisal (of) manufactured housing. Site – built oriented appraisal requirements have little applicability to manufactured housing and ultimately penalize manufactured homeowners.”

Who suggested that wording? NOTHING COULD BE FURTHER FROM THE TRUTH.

It’s the continued use of traditional ‘(depreciating) book value’ methodology that seriously harms manufactured home owners when selling their homes! Site – built housing’s ‘market comparable’ appraisal methods are clearly applicable to manufactured housing, especially those sited on realty owned fee simple! So, who’s at fault here, for perpetuating this just quoted mistruth? ‘The industry’ – who penned it (i.e. As another apt example of self – immolation, per the Great Conspiracy just described), and or the ‘GSE’s’ (Government Sponsored Enterprises) who, year after year, opt for ‘the easy way out’, by endorsing ‘depreciating book valuation’ methodology to estimate the value of HUD Code manufactured housing – as part of this Greater Conspiracy, to eventually do away with our industry?

Furthermore, and in other arenas, who are/were major dissenters, when (past) attempts were effected to improve design and serviceability of HUD Code manufactured homes? Think’ removal of frames’ from beneath HUD Code homes, as but one example. Then there’re site – builder trade associations, afraid of lower – priced, factory – built competition taking (more) work from their carpenters. And who, until a recent U.S. Supreme Court decision declared ‘black balling’ of HUD Code manufactured housing from (home sale) multi – list systems across the country as being illegal, has effectively derailed the creation and nurturing of a functional secondary market for the listing and resale of manufactured housing product? It’s one more reason we see so few licensed real estate salespersons and brokers pursuing listings within and outside landlease communities.

Know the clearest indicator of a Greater Conspiracy? In my opinion, it’s HUD’s abject failure to fully and properly implement key reform provisions of the Manufactured Housing Improvement Act of 2000 (‘MHIA@2000’)! Here we are, nearly 11 ½ years after passage of the Act, and HUD has all but neutered the federal regulation, without complying with relevant provisions within the Act; has diminished and ignored the enhanced federal preemption of MHIA@2000; has failed to appoint a non – career program administrator, per HUDs whim; has utilized the same federal contractor (Albeit under different entity names), for more than three decades (i.e. Talk about job security, at our industry’s expense!); and, has re – codified two new MHIA@2000 programs – installation and dispute resolution – in the process, rendering them non – preemptive, and outside the authority of MHIA@2000’s Manufactured Housing Consensus Committee (‘MHCC’). Are you angry yet?

What to do about the Greater Conspiracy? Frankly, I don’t think there’s much we can do at this point in time, except…. If we have folk within our industry, who have divided loyalties to our competitors and regulators, then they need to be confronted. But beyond that, the immediate, timely and strategic challenge, as described earlier, is to call for a national meeting of truly concerned businessmen and women, willing to invest their personal and corporate resources to be an integral part of a national plan to rejuvenate, and reposition – if necessary, HUD Code manufactured housing! Are YOU one of those (hopefully) many individuals? If so, here’re several things you can do TODAY:

• Make your views, on this matter, & personal availability known, to Joe Stegmeyer, chairman of MHI, via Thayer Long @ (703) 558-0678.

• Make your views, on this matter, & personal availability known, to John Bostick, chairman of MHARR, via Danny Ghorbani @ (202) 783-4087.

• Make your views, on this matter, & personal availability known, to me, via the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764 or gfa7156@aol.com

• Or, if you’d prefer to make your views known directly to either of the above board chairmen, let me know….

Continue to faithfully read this weekly blog posting for progress in combating the Great & Greater Conspiracies affecting the HUD Code manufactured housing industry.

DISCLAIMER. I am not one of the charismatic, respected, well known, successful business leaders of which I write in the previous paragraphs!

As I’ve said time and again, of late, I’m attempting to retire, but would be pleased to see the manufactured housing industry and landlease community real estate asset class rejuvenated, and at least on its’ way back, to a new renascence, like we enjoyed in 1998; but this time, without abusing our customers and financial resources. GFA

II.

I know I promised a State of the MHIndustry & LLCommunity Asset Class this week. Well, it’s prepared, but requires the entire blog space; so once again, will not be included here. Perhaps I’ll have to effect a special posting somewhere along the line.

III.

If you’re reading this blog posting every week, but are not yet a paid subscriber of the Allen Letter professional journal, please consider doing so now. What are you missing? April’s issue is headlined by ‘Something Old, Something New, Something Borrowed, Something Blue’ – describing four measures for successfully filling vacant rental homesites in landlease communities! For the first time, there’s (national) political commentary for your reading curiosity. Also, the only MH & LLCommunity ‘stock watch’ published anywhere in the industry/asset class, along with major rate indices for LLCommunity loans. And you’ve just gotta see Troy & Cheryl Brost’s ‘love letter’ to their friends in the MHIndustry. Let me ask you this: ‘Where else in the MHIndustry & LLCommunity asset class will you find 1) 13th annual National Registry of LLCommunity & Chattel Lenders; 2) 12th annual ‘Who Ya Gonna Call During 2011?’ list of freelance consultants; and 3) First published definitive description of Lease – Options, in the LLCommunity? Answer? Nowhere! And did I mention book reviews of LLCommunity owner Chuck Irion’s Roadkill Cooking for Campers and Autograph Hell; plus, Glen Beck’s The Overton Window (Read this and you’ll not look at national events & trends the same, ever again.). To subscribe, phone (317) 346-7156 or via this website.

***

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

Pithy SALMAGUNDI or just some more POTPOURRI?

Piggish?, Half Loaf trumps No Loaf, ‘MHParty of the Year!’, More on Rebranding, Super Symposium II Precis’, & Era Ends as Greentree is Sold!

I.

What a week it was! Nearly 150 convened and confabulated in Albany, NY., at Nancy Geer’s Superb Super Symposium II – including REIT firm, UMH Properties’ corporate staff and regional property managers, especially Eugene & Sam Landy, & Christine Lindsey, MHM. Know what? This was also, the only manufactured housing/landlease community gathering to date, during which industry/asset class’ chattel (personal property) freelance finance/service experts, Dick Ernst (972/503-3201) & Ken Rishel (217/971-3968 enjoyed ample time and audience to fully ‘splain’ in vogue ‘buy here – pay here’ & ‘captive finance’ self-finance methodologies, from their perspectives! And now,’ Lease – Option’ appears on the scene. Too bad YOU missed it.

Icing on this cake, was meeting and listening to new National Communities Council (‘NCC’) exec Lisa Brechtel, describe the focus and scope of her work, in our behalf, in Washington, DC: (703) 558-0666. Other notables present at this educational soiree’? Terry Decio of Skyline Corp., David Lentz of American Land Lease, Dr. David Funk of Cornell University, Kian Wagner of Green Courte Partners, Jim Freyer of Haylor, Freyer & Coon, Robin Pfeil of Triton Valley Estates, and the DeMarco Brothers of Security Mortgage. If you’d like a FREE copy of the material I presented at this event, including the ‘Ah Ha! & Uh Oh!’ worksheet – for calculating ‘affordable’ & ‘risky’ price points of new & resale homes sited in & outside LLCommunities, phone the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764, and request it.

II.

If you’re a bona fide real estate investor, do you agree or disagree with this ‘one of six’ recommendations for making the most of the recession, recently published in the March/April 2011 issue of URBAN LAND magazine: “Be realistic about the hurdle rate. Writing in January 2010 for National Real Estate Investor, Ethan Penner, executive managing director & president of CBRE Capital Partners, noted, “The desire to get a real estate return in the high teens or 20 percent is piggish.” Penner’s thesis (suggests) an appropriate return expectation for real estate should be around 10 percent.” True or false? Whadaya think? Wonder if he owns investment real estate (i.e. ‘has any real skin in the game’, as they say) or simply sells it; and such a statement helps keep client expectations in check. I’ve long been taught ‘Profit is the reward for taking risk.’ So, it stands to reason, willingness to take big risk opens the door to big profits, just as taking big risks leaves one vulnerable to big failure as well. Any commentary out there?

III.

Consider marking 1 August 2011 on your MHIndustry & LLCommunity asset class planning calendar. Why? There’re whisperings of a ‘MHParty of the Year!’ that day in Elkhart, IN., at or near the RV/MH Heritage Foundation’s Hall of Fame, Museum, and Library. Details likely to follow during weeks ahead. And, if you’ve never visited the excellent facility, then this could be a double – barrel treat!

IV.

‘Half a loaf is better than no loaf!’ That’s the reaction evoked by the following quote, again – from March/April 2011 issue of URBAN LAND magazine, describing ‘affordable housing’:

“Housing is considered affordable if 30 percent or less of a household’s income is dedicated to paying the rent or a mortgage.” Cited in ‘Affordable Housing’s New Profile’, p.116.

First off; ‘Thank You’, Dan Withee & Ricky de la Rosa, co-authors of this piece, for describing up front, the perspective from which you write!’ The Housing Expense Factor or HEF, is one of four measures of housing affordability documented in HOUSING AFFORDOGRAPHY, published in June 2008.*1 BUT, here’s ‘the other half that loaf’: What’s included in the referenced mortgage payment? Barebones, being just principle & interest (‘PI’); or Loaded, including principle, interest, taxes, insurance, and household utility, but not telecommunications expenses? Which is it? Makes a whale of a difference to the mortgagor & mortgagee, as to ‘how much house is purchased’ & ‘how much risk is incurred’. For example, a barebones HEF = more house & more risk, while a loaded HEF = less house & less risk; hence, more affordable! Why? Taxes, insurance, and household utility bills still have to be paid; and it’s easier to do, when they’re included within the HEF; more difficult when paid outside the HEF!

Perhaps the day will come when international and national real estate – related trade bodies like ULI, NAR, NAHB, MBA, and others, will finally and once and for all, identify which of the four measures of housing affordability they ascribe to, then explain the ‘dollars, cents & percentage’ parameters being used to ‘make their case’, relative to the ‘affordable housing’ perspective they’re espousing in trade publication features and books. When that day finally (if ever) arrives, we – the affordable housing practitioners & providers – will have been given ‘the entire loaf’ with which to plan and work, not half a loaf or less, as is the sad case today!

V.

Rebranding? You bet! In landlease (nee manufactured home) community circles, think ‘the original Hometown America’ of a decade ago, and American Land Lease’s new Solstice (adult living) & Clearview (family living) brands of today. Then there’s Chuck Fanaro’s iconic SaddleBrook Farms outside Chicago; Rob Tunnell’s luxurious Baywood in Delaware; Doug Daniel’s showcase communities in Springfield, IL.; Troy and Cheryl Brost’s beautiful SongBrook in Eugene; even Skyline Corporation’s intentional segue away from ‘manufactured housing’ to ‘factory – built housing’ terminology, in all its’ advertising! Yes, there’s a new wave a – building & a – flowing, from coast to coast. Are YOU an integral part of it yet? Send me your examples and observed evidences of rebranding throughout the MHIndustry & LLCommunity asset class! Mail to GFA c/o Box # 47024, Indpls, IN. 46247 or via gfa7156@aol.com

It was suggested privately, during last week’s Super Symposium II; that at MHI’s annual meeting this Fall in Phoenix, salaried and elected leaders of this body politic, should trek into the desert, dig a deep hole, and drop in a plaque with the words ‘manufactured housing’ printed on it. When the hole is covered over, return from the desert, carrying a similarly – sized plaque, with the word ‘housing’ or words ‘factory – built housing’ printed on it, symbolically marking the end of manufactured housing as our industry’s everyday, much – abused moniker, rebranding as factory – built housing going forward! What do YOU think of the idea? Tell Thayer Long @ (703) 558-0678.

VI.

Loan servicer Green Tree to be sold! According to the StarTribune, ‘Walter Investment Management Corp., announced it has reached a deal to acquire Green Tree for $1.065 billion. The once – troubled Green Tree started out servicing loans on manufactured housing, but that sector now makes up just 36 percent of its’ business. The firm has a $37 billion portfolio composed of 745,000 residential home improvement and home equity loans, manufactured housing loans, and consumer installment loans.” This marks the closing of one sorry chapter in manufactured housing history.

VII.

State of the MHIndustry & LLCommunity Asset Class. Just occurred to me, you probably haven’t had anyone describe the present state of our industry and income – producing property type, to you, this year. While I’ve run out of space to do the subject justice in this week’s blog posting, perhaps I’ll share it with you next Sunday – assuming, of course, there’s not some ‘breaking news’ I need to get to you in lieu of such an overview. Here’re some tantalizing tidbits contained therein: new home shipment volume for 2010; Clayton Homes’ approximate national market share; average property portfolio size during 2010; national average physical occupancy & OER during 2010; and, Randy Rowe’s Five Point Plan to Save the MHIndustry! This latter ‘plan’ was first espoused at the 19th annual International Networking Roundtable during Fall 2010, but was renewed, with vigor, by David Lentz, during his presentation at the aforementioned Super Symposium II in Albany this past week. So ‘the plan’ is alive and well to many of us!

VIII.

A minor but important shift in trade terminology. Increasingly, I see association execs, trade publications, and property owners/operators adopting and using the’ landlease community’ label for our unique real estate asset class. That’s great! But there’s a minor tweak yet to be made, and it’s this: ‘landlease community’, when the two words land & lease are combined, rightly narrows the focus relative to this homeowner/site lessee lifestyle. However, when the two words remain separated, as in ‘land lease community’, we run the very real risk of being ‘cornfused’ with other types of ‘land leased realty’. Do we want that? I think not. Landlease Community has given us a needed and timely panacea to recreate, to rebrand ourselves, featuring superb curb appeal, resident – friendly environs, and intrinsic home value. Let others continue to operate using lesser, vestigial word descriptions. Just let’s not confuse ourselves, and our residents, as to the ‘really right label’ for this new multifamily rental property reality! Agreed?

***
End Note.

1. Measures of housing affordability: Housing Expense Factor (‘HEF’), Housing Opportunity Index (‘HOI’), Housing Wage (‘HW’), & ‘One Who Believes’…

SPECIAL ANNOUNCEMENT. Copies of the 22nd annual ALLEN REPORT continue to be available for purchase. The $450.00 cover price has been discounted to $250.00. And as an added bonus, if you purchase the report, for this latter amount, we’ll include a complementary annual subscription to the Allen Letter professional journal, a savings of $134.95. As the number of print MHPublications has dwindled, the newsletter’s subscriber base has continued to grow month after month. To place your order, phone, (317) 346-7156, or the aforementioned MHIndustry HOTLINE.

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

Time to Hunker Down!

• MHFinance. Yet another paradigm shift in the way we do $$$?

• Your response to last week’s posting regarding muzzling this blog…

• New Day a – Coming? Dissolution of GFA Management, Inc., dba PMN Publishing.

I.

MHFinance. Yet another paradigm shift in the way we do $$$? Here’s an Executive Summary of sorts: ‘The days of third party chattel (personal property) finance for HUD Code manufactured housing – particularly homes in, or going into, landlease (nee manufactured home) communities, are all but gone; Yes, LLCommunity owner self – finance works for the few, but is ify for everyone else – Thanks to federal S.A.F.E. Act & other pending regulatory legislation. Today’s new and resale home transactions trend to be cash deals; leased homes (apartments) on – site; rejuvenated, modified lease – option arrangements; maybe even a True Lease alternative.’

Anyone active in the HUD Code manufactured housing (‘MH’) business since the turn of the century, knows of the industry’s financial self – emasculation (i.e. Turning homebuyers ‘upside down’, by dint of predatory lending practices) during its’ too brief renascence before and after 1998, a year when we shipped 372,843 new homes. Subsequently and consequently, we suffered more than 250,000 repossessed (manufactured) homes; saw LLCommunity occupancy plunge at least 10 percent, from an historic high national average of 95 percent; and rarely saw MH chattel loans securitized and sold on the secondary market – slowing our source of new capital for subsequent home sales. That situation has remained unchanged for a decade, and few see any possibility of improvement in the near or even foreseeable future.

LLCommunity owner self – finance of on – site home sale transactions has been around since the emergence of this unique, income – producing property type 60 years ago. It’s just taken different forms, and has been practiced to varying degree, over the decades, in response to infill needs, local housing market conditions, national economy, and availability of third party finance from local banks and credit companies. Self – finance hit its’ stride during the past ten years, as it’s somewhat filled the post renascence chattel finance gap described in the previous paragraph. In the Manufactured Housing $$$ Primer, published by PMN Publishing during 2010, the two most common, self – finance methodologies are defined as:

• ‘buy here – pay here’. A chattel finance or mortgage process that occurs on – site in LLCommunities when the property owner/operator collects mortgage payments from homeowners, and services said mortgages.

• ‘captive finance’. A chattel finance or mortgage process that occurs on – site in LLCommunities when a third party collects mortgage payments from homeowners, and services said mortgage in behalf of the property owner/operator.

As finance – related federal cum state legislation, and new bureaucratic watchdogs, are added to enhance regulatory oversight of consumer lending practices, both methodologies come under increased scrutiny, making the first alternative costly and treacherous; the second one, only slightly less so. For statistical data relative to estimated billions of dollars of ‘contract sale paper’, held among the 500+/- known portfolio owners/operators of LLCommunities, read the 22nd annual ALLEN REPORT. *1 This brings us to the third and latest paradigm shift in ‘the way we do $$$.’

Sunbelt regions have long experienced, and oft benefited from, periodic plethora of cash transactions, when marketing and selling new and resale homes on – site in LLCommunities. And in some blue collar local housing markets, as well as near military bases, even adjacent to college campuses, the availability of ‘manufactured homes (weekly or monthly pay) rentals’ in LLCommunities, has long been a symbiotic relationship for landlords and tenants. And now, partly in reaction to ‘enhanced regulatory oversight’ mentioned in the previous paragraph, LLCommunity portfolio owners/operators, large and small, have rejuvenated a rewritten Lease – Option (‘LO’) alternative that generally skirts the federal S.A.F.E. Act (‘Safe And Fair Enforcement’ of Mortgage Licensure), and state implementation thereof. Description of this LO program? Read details in the April or May issue of the Allen Letter professional journal.*1 And then there’s True Lease – which gives us something further, along this line, to cover in a future blog posting.

With all that said, where’s your future lie, as a HUD Code manufactured housing aficionado (e.g. manufacturer and MHRetailers) and or landlease community owner/operator, relative to the marketing and financing of new and resale home transactions on – site per this property type? In the first instance, manufacturers need – no, must, sell more new homes to survive, and eventually reverse, this nigh 15 year malaise (i.e. During last three years we’ve shipped only 50,000+/- new HUD Code homes per year!). How to improve on this? In part, continue to design and aggressively market Community Series Homes (‘CSH’) – usually singlesection models with front end porches or small multisection homes, to LLCommunity owners/operators. How to do this? Via nearly three dozen (should be four to five dozen in number!) Business Development Managers (‘BDM’), named and tasked with ‘walking and talking LLCommunityese’ from coast to coast. For information about CSH, contact Don Westphal via (248) 651-5518. And, for a copy of the latest BDM list, see end note # 1.

Now, how ‘bout the LLCommunity owner/operator? To begin with, these properties have to be READY in which to sell and finance new and resale homes. Most are not! Begin with attractive Curb Appeal (i.e. ‘How the property looks and smells, so to speak, to the casual passerby’); Ensure ‘good resident relations’ to Ensure ‘more resident referrals’, to Ensure ‘ maximum resident retention’; Practice professional property management (Are all your on – site managers trained and certified as Accredited Community Managers® or Manufactured Housing Managers? If not, they should be!); and, just as important as the first three readiness conditions, be sure managers and sales staff KNOW HOW to calculate ‘affordable’ and ‘risky’ Price Points for new and resale homes in their local housing market, using AMI (Area Median Income) for the local housing market, and AGI (Average Gross Income) of the individual or family buying the home. *2

Finally; when the property is truly READY, follow the lead of the too few forward – looking portfolio owners/operators, who’re aggressively marketing new and resale homes and properties, effectively using euphemisms (Reread last week’s blog) to position their product and lifestyle right amongst the best of the best alternatives in site – built housing, in and outside Sunbelt regions! *3

Your considered opinion and practical feedback on this timely $$$ description and industry/asset class recovery prescription?

II

Your response to last week’s posting, regarding muzzling this blog. Here’s a sampling of written responses, lightly edited, from blog floggers (readers) like you. There wasn’t a single response suggesting agreement with muzzling this blog!

“Good stuff. Personally, I do not like muzzles on anyone or anyone’s perspective, but especially not on someone who loves the industry and wants it to flourish. At the end of the day, whether we agree or not, we always have to answer the tough question, paraphrasing John Stuart Mill: ‘Either we find a better way of doing things or we confirm and thereby strengthen the current way.’ “ TC

“It sounds like you’ve hit on some ‘soft spots’ on the underbelly of the (our industry’s) beast, now the beast is pissed and trying to bite back. Good job. This is what journalism is all about, isn’t it?” JK

“I would hardly characterize your blog as doing ‘more harm than good’. To the contrary, it’s a timely, refreshing, candid source of valuable industry information that never comes across, to me, as negative, or in any other way intended to hurt our chances for an industry recovery. To me, it’s quite the opposite – you may point out where our weaknesses are, or where leadership is lacking, but you always do it in a way that motivates me, and others, to implement change and become more involved in the restructuring, and ultimately – the revival of the manufactured housing industry. Keep up the good work.” GH

“Wow, George. You are hitting the target! This straight talk is what the industry needs. Will it matter? Fall on deaf ears? Many of these folk (as you call them) are in a similar denial as Gadaffe is over in Lybia. None are mean – spirited, just still worshipping false gods of ‘how things used to be.’ “ MP

Hey, Thanks for the strong positive response to the unexplained ‘Attempts to muzzle this blog’ subtitle in last week’s blog posting. I, and hopefully many of you, feel empowered anew! GFA

III.

New day a – coming? Dissolution of GFA Management, Inc., dba PMN Publishing.
Maybe some details next week, or the week or two thereafter. Will tell you this, however; some of what I’ve been doing these past several decades will likely be used to enhance LLCommunity owners/operators presence on the national scene; others seek to improve statistical research and reporting, relative to the asset class; yet others, are desirous to improve professional property management training and certification; and, last but not least, a new initiative might be on the offing, to unite and serve small LLCommunity owners/operators nationwide! Bottom line? I’m cautiously optimistic my plans to at least semi – retire by the end of 2011, are realistic and achievable. What will I be doing in 2012? Stay tuned….

IV.

Tomorrow I fly to Albany, NY., to participate in the New York Housing Association’s Super Symposium II. Sure hope to see and talk with many of you there. As I’ve written here before, this is the strongest lineup of presenters I’ve seen, in the MHIndustry & LLCommunity asset class, in a long time. How can you not be present? To register, phone (518) 867-3242. Tell Nancy, ‘George sent me!’ See YOU there!

V.

Potpourri. ‘Thanks’ to the many of you who’ve sent your ‘Congrats!’ this past week. Means a very great deal to me. Maybe we’ll be together the evening of 1 August 2011 at the RV/MH Heritage Foundation’s Hall of Fame Induction Banquet in Elkhart, IN. For details, phone (574) 293-2344 and talk to Al Hesselbart.

And watch for an exciting story to soon come out of Maine! Talked with Karen Brown – Mohr this week, and is she ever ‘pumped’ about her association’s recently completed, day long strategic planning, brainstorming event. Can hardly wait to write about it! Are YOU planning a similar ‘take control of your future’ event? If so, invite me to participate as a provocateur, scribe, and historian.

Are YOU reading, Factory Built Bulletin? Quite a few ‘industry insiders’ do. For $5.00/year, receive this periodic ‘source of factory – built housing information’ (for homeowners), published since 2003. I do. Phone (866) 764-5505 to subscribe.

*****
End Notes.

1. To order the 22nd annual ALLEN REPORT (Ask for special pricing); and or the Manufactured Housing $$$ Primer, only $29.95 postpaid, phone (317) 346-7156

2. For ACM® information, phone Lisa Brechtel @ NCC: (703) 558-0666. For MHM class information; and to order a FREE copy of the ‘Ah Ha! & Uh Oh! Worksheet’ for calculating new and resale home price points, phone the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

3. Here’s a tip to know whether your property and staff is truly READY to go! Be sure the Five ‘Ps of Marketing’ are in place and positioned, e.g. Place (location); Price (housing prices & site rent in sync with local housing market); Promotion (measure the volume and conversion rates of phone calls to on – site visits to approved applications); Product (Homes & property ready to SHOW now?); and, in this observer’s opinion, People (Is your on – site staff trained and motivated to effectively sell homes and lease homesites?). How to really know all this is coming together ‘rightly’? Have the property(ies) Mystery Shopped, by telephone and via unscheduled on – site visits, by anonymous, experienced professional ‘shoppers’! For information, call the MHIndustry HOTLINE.

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

Will Euphemisms Save the Manufactured Housing Industry
&
Landlease Community Lifestyle?

• Wordplay. Euphemisms increasingly used as marketing smokescreen

• National Communities Council. Bully pulpit at fork in the road?

• Attempts to muzzle this blog….

I.

Wordplay. Euphemisms increasing being used as a marketing smokescreen of sorts.

‘Euphemism’ According to The New American Webster Handy College Dictionary, is “…the use of a mild word in place of a plainer but possibly offensive one.”
Will liberal use of euphemisms SAVE the manufactured housing industry and landlease (nee manufactured home) community lifestyle? In the former instance, from continuing to crawl along at its’ past three years 50,000 ‘annual home shipment’ pace. And, in the latter case, heading off declining physical occupancy of rental homesites? Too early to tell; but let’s take a look at some of the euphemisms ‘in play’ in print and online advertising today.

Last week’s blog posting ended with this teaser: “There’s a whole new privately conceived, funded and implemented national manufactured housing product and image marketing strategy already in play, regarding the smart positioning and advertising of an entire retirement landlease community property portfolio!’ The strategy referred to is the liberal use of euphemisms to describe manufactured housing and landlease communities (‘LLCommunities’). Well, since last week’s posting, I’ve learned of at least three additional landlease community portfolios ‘doing the very same thing’! And we’re not talking about properties just located in Sunbelt regions either. During the past month, I’ve spotted and visited euphemistically – enhanced in a Middle Atlantic state, the upper Midwest, and elsewhere.

In the current issue of one national magazine catering to retirees, euphemisms were used to describe ‘manufactured housing per se, in LLCommunity environs’ this way: “…carefree retirement living, wonderful homes, fantastic amenities, professional community management, and friendly neighborhoods.” Nary a mention of manufactured housing or LLCommunity in the mix! And know what? That’s perfectly fine! New HUD Code manufactured housing product is akin to site – built housing in just about every way except for genuine brick/stone veneers and prevalence of two story models. Similarly with LLCommunities. Today’s properties are oft indistinguishable from subdivisions, except for the presence of ‘professional management’ (Frankly, I take umbrage with firms who advertise such, but whose managers – from top to bottom, are sans commonly – recognized “PM’ credentials to that end: CPM®, ACM®, MHM, etc.), and indicators of leases and home site rental rates.

Are there other euphemisms in play these days? You bet.

Relative to LLCommunities? All the following end with the word ‘community’ and are listed in order of declining frequency of use: retirement community, life – care, rental retirement, residential, resort – style living, campus – style, certified retirement, senior, Mediterranean village –style gated, accredited, garden neighborhood, country club – style, full service – retirement, luxury retirement, senior living, gated, & waterfront retirement – living.

Relative to manufactured homes? Again, listed in order of declining frequency of use: cottages, villas, garden homes, single – family homes, wonderful homes, residential living homes, patio homes, ranch homes, town homes, duplex homes, free – standing homes, single story accommodations, & garden villas.

Even ran across a euphemism for what we commonly refer to as ‘rental homesites’ (nee lots, spaces, stalls). How ‘bout ‘homesites for investment’. Nope, not talking about being conveyed fee simple here.

Don’t know about you, but I surely hope this strategy works! The recent call for a National Image Improvement Campaign certainly hasn’t. Anyway, the concept is simply to remove the ‘manufactured’ label from our quality housing product; and, while ‘landlease’ clearly describes our type income – producing property, the use of consumer – friendly euphemisms helps here too. But the ‘catch’, the caveat! To effect such a forward – thinking strategy, senior management must be marketing and selling the best housing product possible, at truly affordable prices; and, the host property must be deserving of the new moniker used to market it! This latter point harkens to the earlier parenthetical criticism of our asset class’ general lack of professional property management training and certification, and our avoidance of regularly using ‘capable, experienced, motivated’ third party professional Mystery Shoppers to take ‘hard looks’ at what and how we’re marketing and selling, by telephone, online, and in person, now using consumer – friendly, or should we say housing and property – enhancing, euphemisms!

By the way, there’s more to this strategy than simply using euphemisms. It might well involve completely altering a firm’s identity and more. But we’ll talk about this, and other measures, in a future posting….

II.

Manufactured Housing Institute’s (‘MHI’) National Communities Council (‘NCC’) division. Bully pulpit at a fork in the road?

I got two things out of last week’s meeting (3/14/2011) of MHI’s National Communities Council division. 1) Numbers tell a compelling story, and 2) there might well be a way around the infamous S.A.F.E. Act for landlease (nee manufactured home) community owners/operators!

In the first instance, here’re the hard cold facts. Only 78 names on MHI’s meeting official registration list. I’m one longtime member who recalls attendance eclipsing 200, in years past; and, at times, we’ve had nigh as many folk (75) at an NCC meeting! Of the 78 present, 19 were state association execs present (didn’t count Certified Reps) – the best represented segment of the MHIndustry for a change; a dozen landlease community (‘LLCommunity’) owners/operators; and, five HUD Code home manufacturers.

Of the dozen LLCommunity owners/operators present, seven were bona fide property owners, albeit ‘small ones’, owning from one to 16 properties apiece, for an average of five LLCommunities each, though three of us own but one of these unique income – producing properties. The five remaining NCC members were senior executives representing five mid – to – major portfolio ‘players’, averaging more than 50 LLCommunities apiece! Bottom line? Majority of attendees at this sparsely attended NCC meeting were small Mom & Pop owners, ‘yours truly’ included. However, the lions share of properties (i.e. 265+/- vs. 30+/-) were represented by five salaried execs. Previously agreed upon replacements for recently departed Greg O’Berry – chairman, and as other council executive positions, were summarily filled by three of these large portfolio operators. Interestingly, none of the three real estate investment trusts (‘REIT’) were represented at this meeting.

A timely question that begs answering, given the ‘near even – but also lopsided’ representation at this NCC meeting – described in the previous paragraph, is this:

Will MHI’s National Communities Council continue to be regarded, as it presently is by many asset class aficionados – as the ‘big boys club’, a semi – derisive commentary regarding presence and control of proceedings by major portfolio owners/operators; OR, will NCC leadership take definitive steps in the near and not too distant future, to identify advocacy, property management training, information, and related needs of smaller owners, to aggressively recruit them as new and active members of the council division?

Hence, maybe we’re at a fork in the road, relative to LLCommunity representation. The following sentiment is often expressed privately, but rarely publicly: ‘We’re either in this (‘NCC’) altogether in demonstrable fashion, or perhaps we – being major portfolio ‘players’ & Mom – Pop investors, should go separate ways, based on sometimes dissimilar marketing, operational, legislative needs and resources. And NO, this is not the opening gun to creating a new national trade or advocacy body for small LLCommunity owners/operators! It wouldn’t work anyway. Why? Lack of charismatic, widely known, national leaders, to take folk in a new direction; and, getting Mom – Pop owners/operators motivated to join with their peers, after 60 years of being loners.

However, rejuvenation of NCC membership, under the administrative leadership of Lisa Brechtel, and new chairman Steven Schaub of YES! Communities, David Lentz of Green Courte Partners/American Land Lease, and Stephen Braun of Hometown America, is entirely possible! The question is whether there’ll be directed and concerted efforts to increase membership and services across the board, or in one ‘group size’ direction or the other.

A related sidebar to all this, is while 43 percent of MHI’s budgeted income for 2011, is predicted to come from the manufacturers division, 19.5 percent is expected to come from the National Communities Council division; taken together, 62.5 percent of MHI’s total annual revenue is scheduled to come from these two divisions alone! To date, 42.8 percent has come in from manufacturers, and 20.6 percent from LLCommunity folk. Who’d a thunk; nearly 18 years ago, on 31 August 1993, when 18 LLCommunity owners/operators convened in Indianapolis, IN., to form the Industry Steering Committee (‘ISC’) – predecessor to the NCC, this real estate asset class would be 20 percent of the financial lifeblood of the Manufactured Housing Institute.

Oh yes, the second important thing I learned at last week’s NCC meeting! The lease – option, for self – financing new and resale homes on – site in LLCommunities, is experiencing far broader corporate application these days, in certain quarters, than previously realized. How’s it work? There’ll be a feature story in April’s issue of the Allen Letter professional journal, either integral to the newsletter or enclosed as a lagniappe, detailing ‘How to Do Lease – Option Right!’ Be sure to get and read your copy. Why not share details here? This blog posting is already long enough (Some will opine, ‘too long’) as is; and I really want to do this ‘expose & How To’ justice! Need a subscription to the Allen Letter professional journal? Read last paragraph of section IV of this blog, or phone the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

III.

Attempts to muzzle this blog

Let’s go into this at a later time. Just know, for now, some of the frank commentary appearing in this blog is perceived, by some, as maybe doing more harm than good. Do YOU see it that way? If so, please let me know in writing (see signature block at end of this posting). If not, I’ll also appreciate your encouraging words….

IV.

Inquiring minds want to know – and will be told, on 29 & 30 March, in Albany, NY.

If YOU own and or operate landlease communities East of the Mississippi and North of the Mason Dixon Line, YOU owe it to yourself to be present at the New York Housing Association’s Super Symposium II in 1 ½ weeks. Expecting close to 200 LLCommunity owners/operators to be present to be engaged by the best lineup of presenters, on in – community financing, ‘in years’. For information, phone Nancy Geer at (518) 867-3242.

And, if you’re selling and self – financing, or even leasing, new and resale homes on – site in your LLCommunities, but can’t be present at this stellar event, then at least buy the only book ever published (in 2010) on this timely and strategic subject. It’s the Manufactured Housing $$$ Primer, available only from PMN Publishing, for $25.00 (or $29.95 postpaid) per copy, by phoning (317) 346-7156. And while you’re at it, consider buying a copy of the 22nd annual ALLEN REPORT and one year subscription to the Allen Letter professional journal for total of $250.00 (postpaid) for both items! Also know the April issue of the newsletter will contain FREE copies of the 13th annual National Registry of Real Estate Lenders & Brokers Specializing in LLCommunity Mortgages, and the 12th annual ‘Who Ya Gonna Call in 2011?’ directory of freelance national consultants active in the MHIndustry & LLCommunity asset class.

Here’s a compelling reason to acquire these two Signature Series Resource Documents: If no one steps up to the plate, during 2011, to acquire copyrights to these items, they’ll likely not be available in 2012, if I’ve at least semi – retired by then! Think about it….

*****

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

YOUR TURN TO VENT & BE TITILLATED!

Tales, Opinions & a Lament, from MHIndustry Blog Floggers (readers); &,
Allusion to Major Occurring MHIndustry News You’ll Read Nowhere Else!

But first. Given the remote possibility you don’t know HUD Code manufactured housing continues to be ‘in the tank’ – ‘an historic nadir’, annual shipment volume – wise, know this: Year 2010 HUD Code manufactured housing shipments numbered 50,046 units; up just 257 homes from year 2009 total of 49,789. This is probably why an industry pundit recently labeled the past decade, ’a mhcession in the midst of the national recession’. And ‘No’, this is not the allusion to major occurring MHIndustry News available nowhere else….

I.

DISCLAIMER. The following tales, opinions and lament, provided by MHIndustry and LLCommunity aficionados, have been edited for length and clarity of expression, and are not necessarily the views of the blogger! GFA

The vicious cycle. This from a licensed MHInstaller: “Recently went, on behalf of a HUD Code home manufacturer, to a home that had problems. Had lots of water under it, the roof was dripping, floor squeaked, and doors stuck. Asked the MHRetailer, “Who set this up?” He replied, he did. I asked, “Why the water?” MHRetailer said he made a deal with the homeowner, that the homeowner would grade the lot. I said, “Well, couldn’t you see he did it wrong?” MHRetialer, “Not my problem!” I said, “Really, so why are you here now?” His response was that the home manufacturer said to show up, so he did. The manufacturer’s rep was outside, beating his head against a tree (figuratively speaking, I think), saying “How can you make someone care?” The vicious cycle: ‘The manufacturer can’t or won’t fire the MHRetailer. The MHRetailer can’t fire the homeowner for grading the lot wrong; and, the local building inspector is clueless and couldn’t care less. It was, after all, ‘just a trailer’.’ Frankly, this is how as an industry, we are sometimes our own worst enemy.

In search of a solution. This from a veteran landlease (nee manufactured home) community owner in the Southeast, asking ‘What’s wrong with this, if anything?’ “I buy a home from a resident or finance company for $10,000. and fix it up. Now I want to sell it outright for $20,000. or am willing to do a ‘rent to own’ if need be. So, a resident moves in and pays me $600 per month, with $200 of that earmarked for site rent, the balance is credited toward the eventual purchase of the home. Assuming there’s ‘no cash down payment’ and no interest or carrying charge, the home is paid off in 50 months. If resident want s to pay it off early, there’s no pre – payment penalty. If they abandon the home, the arrangement ends. I go into the home each month to change the AC filters and spray for insects. This allows me to oversee the condition of the home as long as I own it. If the arrangement goes bad, no public tax money is lost, no lender suffers, only me.” In search of a solution. What do YOU think or know?

The Mom & Pop Lament. This from a veteran LLCommunity owner in the Midwest. “The name of the game is to keep buying homes, so our rental homesites can remain filled, or sell out. My local bank doesn’t want me to sell out, but I get weary always being right at my credit limit for the home sales part of my business. And I really don’t like the ‘rent to buy’ avenue, even though it doesn’t differ much from a contract sale. But buyers do tend to feel a little more obligation if they’re buying on contract, rather than renting to own. It’s only semantics, to me, as ‘contracts’ are simply glorified ‘rentals’.” The Mom & Pop Lament. What would YOU do? What are YOU doing?

Large versus small owners/operators. This from a longtime LLCommunity owner in the East. “As I’ve said before, George, large operators and small operators of LLCommunities, march to different drums. The (operational) problems are identical, but solutions totally different; in that small operators can (and do) make decisions instantly, without worrying about stockholders, multistate regulations, Wall Street analysts, and the SEC. Smaller operators are more secure and comfortable in what we’re doing, and are more forthcoming – willing to share all when asked, describe what works and what doesn’t, with others in the business. People who work for big outfits think they’re going to get dismissed if their boss finds out they got a good idea from someone else. Hence, they oft parade around telling everyone they’ve got everything figured out. Usually takes two to three years to learn they don’t, then they get canned and the process begins over again. Do I care those guys disregard my advice or what I do? It would be real hard for me to care less!” Large versus small owners/operators. Has this been your experience, or something different? In fairness and truth, salaried LLCommunity executives are vulnerable to the whims of their bosses, while sole proprietors have ‘all their skin in their game’, understanding the concept of profit as being their ‘reward for taking risks!’

II.

In an earlier blog posting, we introduced the latest ‘trick pony’ to fill pages in real estate – related publications. Not any particular ‘generation’ demographic, or how to ‘leed’ the way ‘going green’, rather the concept (or fad?) of Sustainability – one more idea in play to end the national recession, mancession (i.e. More unemployed men than women), maybe even the decade long mhcession! (Described in first paragraph of this blog!)

Well, here’s how one blog flogger addressed Sustainability – ‘the innate ability to withstand normal use’. The writer comes at this, within the context of the MHIndustry, by citing personal and career expertise and experience as a home designer, consumer advocate, manufactured home owner, even MHLobbyist….

Home designer. “A firm I worked for, marketed modular homes as being comparable to ‘stick built homes’. Why? Cuz the public kept comparing ‘mods’ to ‘mobile homes’, which ‘everyone knew’ were temporary structures, underscored by ease of relocation among ‘mobile home parks’.” Situation here, where structural design and quality of fabrication, to enhance transportability, did not translate as Sustainability.

Consumer advocate disguised as a production inspector. “The corporate focus, observed while a plant inspector, was ‘Get those boxes out the back door!’ From sales commissions, to production line worker incentives, to corporate exec bonuses, all was geared to how FAST the completed boxes could be pushed from the plant. Yes, some companies gave lip service to quality, but that’s all it was; and too often still is, little more than a corporate smoke screen.” If true, how difficult –if – not – impossible it is, to build and ship a structure that’ll withstand normal use over time (Think Sustainability!), while using particle board flooring in bathrooms, thin gauge flap door hinges, plastic plumbing fixtures, and the like….

Manufactured home owner. “While still working in the MHIndustry, I purchased one of the best manufactured homes on the market, ‘fully optioned out’, and sited it on my own land. Since moving into this home less than a decade ago, I’ve completely rebuilt one bathroom due to water line damage incurred at the plant – but not realized till much later. Replaced the water heater after three years of use; the original refrigerator and dishwasher after four years. Air conditioning system is in the process of being replaced, along with kitchen counter tops. Carpet is shot, but will have to wait till savings catch up with expenditures.” Sustainable? Not this one.

Industry lobbyist. “Here’s an acid test. Ask anyone who works in manufactured housing this question: ‘Do You live in a manufactured home?’ Not many do; prompting recollection of that classic joke about not marrying a virgin from a certain distant state. ‘Why not?’ “Because if she isn’t good enough for her own kin, she isn’t good enough for you!” So, people who work in the MHIndustry know the product is temporary. In fact, a former colleague, upon hearing me grouse about problems with my home, commented: “You work in the industry, you should have known better than to BUY one.” Not sure how this observation squares with being an industry lobbyist; but it does raise further questions about product Sustainability. What say YOU?

III.

Not entirely sure what direction I’ll go with next week’s blog posting, but will tell you this: There’s a whole new privately conceived, funded and implemented national manufactured housing product and image marketing strategy already in play, regarding the smart positioning and advertising of an entire retirement landlease community property portfolio! In a word, it’s stunning ‘re – branding’; though its’ creator might disagree, and opine it’s ‘debut branding of the first order’! Either way, it is quite the unfolding marketing tale, about which more research and documentation needs to occur, before sharing specific or generic details here and elsewhere. Think Trojan Horse….

IV.

Have YOU made reservations to attend New York Housing Association’s Super Symposium II in a little more than two weeks? Surely hope so! Expect to interact with close to 200 LLCommunity owners/operators. For information, and to register, phone Nancy Geer @ (518) 867-3242.

I certainly plan to be present, and will bring along remaining copies of the 22nd annual ALLEN REPORT, to sell at a very special price. Or, if you don’t want to wait until then, phone (317) 346-7156 and ask for the special offer combination of the ALLEN REPORT & one year subscription (12 monthly issues) to the Allen Letter professional journal, together for only $250.00. – that’s a $334.95 savings off the cover price of the report & $134.95 newsletter subscription price! Offer only good as long as there’re copies of the 22nd ALLEN REPORT.

*****

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

MHIndustry’s Business Prosperity Glass Nearly Empty or Soon Filled?

Manufactured Housing’s Title I (chattel) financing. Victim of past abuse, today’s macro economy, uncertain capital markets, & widespread misunderstanding? A Look at the latter

Gotta love landlease communities; just don’t abuse their inherent investment strengths

Join me in Albany, New York, on 29 & 30 March 2011 for Super Symposium II

I.

Manufactured Housing’s Title I (chattel) financing. Victim of past abuse, today’s day macro economy, uncertain capital markets, and widespread misunderstanding.

Two weeks ago, in this Official MHIndustry & LLCommunity Blog, I penned: “Yes, it snuck up on me too; the realization HUD Code manufactured housing has permanently changed during the past decade, to the extent of being market – stiffed; maybe forever, sans new sources of third party chattel (personal property) finance!” That observation was straight historical retrospect, relating to the latest round of lending abuse foisted on homebuyers and investors, by the MHIndustry, at turn of the 21st century.

Last week, I cited the following confirming observation, quoted directly from a recent communiqué’ of the Manufactured Housing Association for Regulatory Reform (‘MHARR’): “…the one HUD program that helps put lower and moderate income consumers (i.e. manufactured home buyers) into new homes they can actually afford – the FHA Title I manufactured housing program – is subject to unreasonable and unnecessary restrictions that effectively limit it to only one financing provider and a minimal number of loans (1,834 during fiscal year 2010).”

I’ve since learned, the previous paragraph, relative to the FHA Title I (chattel or personal property loan) program, was viewed by some as misleading, causing confusion within some circles in the MHIndustry. To that end, I asked Thayer Long, of the Manufactured Housing Institute (‘MHI’), to set the record straight. Here he does so:

“The FHA Title I program is fully functional, and there is nothing in it that places unnecessarily high restrictions, preventing lenders from being Title I approved lenders! The reforms made to the Title I program were championed by all industry groups, and include a 90 – 10 risk share of loan loss; meaning, 90% of loan loss is covered by FHA, while the 10% loss remainder is assumed by the lender. I repeat, there is nothing wrong with the Title I program.”

“MHI has serious concerns, however, regarding capital requirements Ginnie Mae expects of securitizers of Title I loans, i.e. a lender must have a $10 million net worth, and keep an additional ‘reserve’ equivalent to 10% of the lender’s outstanding loans! Reasons? First, the aforementioned risk share. If a lender goes out of business, Ginnie Mae assumes the 10% loss incurred by the now defunct lender. Second; Title I loan actuarial data for their new program is lacking, since it’s so new, forcing Ginnie Mae to rely on old program loan performance for anticipated outcome. Third; Ginnie Mae’s approval is not structured for every lender. Only a fraction of FHA lenders ever become Ginnie Mae issuers. This is usually because one needs a large volume of loans to securitize, hence an aggregator to pull them together into loan pools.”

“Furthermore, MHI has had several meetings with FHA and Ginnie Mae staff, to encourage scaling back capital requirements for smaller lenders. Ginnie Mae can waive capital requirements if they feel comfortable with a lender. In fact, we believe if loan performance under the new program continues to improve, as we expect, they’ll likely reduce capital requirements for everyone.”

Bottom line? It’s not that MHARR’s statement was totally off track, but rather should have treated the matter as two related, but different aspects (i.e. FHA Title I & Ginnie Mae) of chattel (personal property) lending, relative to HUD Code manufactured housing. Anyway, Thayer Long ended his clarification by pointing out “…all this is a complex issue, impossible to fully explain in just a few paragraphs.” Now YOU know!

But even with the preceding explanation, not everyone in the MHIndustry believes ‘a better (lending) day is a – coming’. One MHVeteran, a highly respected financial advisor, lender and servicer, responded to last week’s blog thusly:

“I noted in your blog, you have finally come to realize Title I simply will not save the industry, no matter what _____________,or others, have proclaimed. And it’s not that Title I, or ‘Buy here – pay here’ and ‘captive finance’ methodologies can’t work in certain limited circumstances. It means, as I’ve oft said, ‘they alone’ cannot fuel a 100,000+ new home shipments per year industry! That seems to me, to be as apparent today as it was five to seven years ago. There simply is NO industry chattel loan silver bullet, none!” The writer goes on to suggest “The GSEs and HUD will not do any loans, even per our industry’s largest ‘players’, if they feature 16 – 19 percent default rates, and lots of work for originators” – the federal S.A.F.E. Act notwithstanding.

What’re the ‘certain limited circumstances’ referred to in the previous paragraph? Larger landlease (nee manufactured home) community portfolio owners/operators, frequently market and sell new and resale homes on – site, then (property owner) self – finance said transactions via ‘captive finance’ (i.e. using a third party financial service firms to collect mortgage payments from homeowners/site renters, etc.) or ‘buy here – pay here’ (i.e. property owner services his/her chattel loans to homeowners/site renters) methodologies.*1

Prevalence of this practice? Estimated chattel loan volume (contract sale paper) held by 500+/- LLCommunity owners/operators during 2009, was $3 1/2 billion. According to the 22nd annual ALLEN REPORT, by year end 2010, that total had swelled to nearly $5.2 billion! And it’s important to keep in mind, these 500+/- property portfolio owners/operators control only 10 – 15 percent of LLCommunities in the U.S., albeit the largest ones (i.e. properties containing more than 100 rental homesites apiece). *2 Furthermore, unlike a decade ago, when only ‘mobile homes’ (a.k.a. pre – HUD Code homes) and manufactured homes were sited in LLCommunities; today there’re at least four additional ‘types of housing’ to be found, e.g. ‘park model’ RVs, modular homes, ‘RVs for a season’, even site – built homes designed and constructed on – site to look like manufactured homes. So, word – playing the old country hit song, ‘A Community Owner Can Survive!’ – even ‘thrive’, as new HUD Code home shipments languish at 49,000 per year, as in 2009 and 2010. But there’s another side to this story. Read on….

II.

Don’t abuse inherent strengths of LLCommunities as realty investments!

Just what are the Eight Good Reasons LLCommunities ‘enjoy a near perennial sellers’ market among tens of thousands of real estate investors throughout the U.S. and Canada’? Well, they’re listed on page nine of the aforementioned 22nd annual ALLEN REPORT. But here we’ll identify three of them here, along with cautionary advice regarding how ‘not to abuse’ these inherent strengths:

• Stable competitive site rent! This is the second biggest bugaboo directly affecting property operating performance throughout the asset class. Time and again, novice – as well as some experienced realty investors, have been overly aggressive with rental homesite rent increases in specific local housing markets. Now some are paying a bitter price, typified by severely lower physical and economic occupancy at best, property forbearance or foreclosure at worst. Is there a formula for computing competitive but fair site rent? Yes. But rather than repeating it here, suggest you scroll back through the blog archive at this Official MHIndustry & LLCommunity website for earlier detailed descriptions. In the meantime, know an online resource has been identified, one that provides quarterly ‘apartment rent’ information for 200 SMSAs (Standard Metropolitan Statistical Areas, or urban markets), and is now being compared, ratio – wise, to LLCommunity homesite rental rates in the same markets, using data researched and published by JLT & Associates – to ‘proof’ or modify the aforementioned formula. Results of survey will be first published in the Allen CONFIDENTIAL! business newsletter, then the Allen Letter professional journal. *3

• Low operating expense ratio or OER! One would think this is a ‘no brainer’, but it’s not. It boggles the mind, to realize how many owners/operators don’t know how to compute, let alone use, this key statistical benchmark of operating efficiency. Simply divide Total Amount of Annual Operating Expenses (not including debt service/mortgage $) – or the total expense amount from just one Industry Standard Chart of Operating Expense Accounts category (e.g. refuse/trash removal), by Total Annual Amount of Site Rent Collected: $192,000 divided by $480,000 = 40% or .40 overall Operating Expense Ratio or OER. While this percentage happens to be the OER planning model for this income – producing property type (a.k.a. the Allen Model, featured on above – referenced Industry Standard Chart of Operating Expense Accounts), know that conventional apartment national OER is frequently 10 – 15 percent higher (given high resident turnover, expensive maintenance ‘get ready’ of vacant units, etc.), while LLCommunity OERs are also known to drop by half, when larger (200+ sites) are managed efficiently. What’s the OER for your property or properties? If you don’t know, you can’t control, let alone improve it! *4

• Opportunity to add value. This is the primary, uncertain bugaboo – more accurately, ‘bugbear’, affecting LLCommunity ownership/management these days! How to add value? In this instance, ‘Buy homes, then rent or sell & finance them on – site…’ (quoted from ALLEN REPORT). So, how’s this a bugbear? Unlike late 1970s & early 1980s – the ‘first go round’ of this nature (post implementation of the HUD Code in 1976), when these practices were generally unregulated; the recent bursting of conventional housing’s finance bubble has caught the MHIndustry up in its’ consequences as well. This has meant a whole new array of housing finance regulatory legislation and measures. Think the federal S.A.F.E. Act (and variegated state implementation thereof), Red Flag, and the like. Today, only the largest of property portfolio owners/operators might have a handle on the matter. Relief? Maybe, but too early to tell whether concepts like True Lease (of homes) will shelter some owners/operators. Read about these developments here first, and in one or another of Rishel Consulting’s free and subscriber – supported monthly chattel finance newsletters. (217) 971-3968.

There’re five additional ‘good reasons to invest in LLCommunities’ we won’t parse in this blog today. But again, whether a potential or novice investor in the unique asset class, or even as an experienced owner/operator, YOU should be comfortably familiar with all eight inherent strengths! If not, order a copy of the ALLEN REPORT and strengthen your investor knowledge of this income – producing property type!

III.

“Changing demographics, including household formation and housing consumer tastes, pose significant challenges and opportunities for the manufactured housing industry. As we emerge from the ‘great recession’, hear projections on when and how manufactured housing can lead housing’s return. Gain insight into how the industry, and LLCommunity owners, can best position themselves by understanding trends in the overall housing market. This session will also examine housing affordability, efficiency, and related strategies for manufactured housing.” Dr. David Funk, Cornell University

Need I say more? This is Dr. Funk’s clear and comprehensive description of the keynote address he’ll deliver at the New York Housing Association’s upcoming Super Symposium II in Albany, NY., on 29 & 30 March 2011. Will YOU be there? I certainly plan to be; wouldn’t miss those insights, as well as others from several excellent presenters.

And there’ll be several new HUD Code ‘Community Series Homes’ on display during the symposium. Here’s a question for you: Know how to calculate the sale and mortgage ‘price points’ a prospective homebuyer, or even the average consumer, in any local housing market in the U.S., can ‘affordably’ afford when buying a new or resale home within a LLCommunity or to be installed on a fee simple scattered building site? If NOT, be sure to attend this symposium to learn how to use the widely – acclaimed ‘Ah Ha! & Uh Oh! Worksheet for this purpose! For a program agenda, hotel accommodations, and registration information, phone Nancy Geer via (518) 867-3242.

*****
End Notes.

1. For more information on this specialized subject, read the Manufactured Housing $$$ Primer, PMN Publishing, Franklin, IN., 2010. Phone the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764, or (317) 346-7156. $25.00 postpaid.

2. For a copy of the 22nd annual ALLEN REPORT, phone the MHIndustry HOTLINE (See # 1 preceding). For a limited time, the $450.00 annual report is available for only $250.00 – and if mentioned when ordering, includes a one year (12 month) subscription to the Allen Letter professional journal at no additional cost!

3. To subscribe to the Allen CONFIDENTIAL! business newsletter, phone the MHIndustry HOTLINE (See # 1 preceding). Cost? $950.00/year (12 monthly issues), but only $750.00/year for subscribers to the aforementioned Allen Letter professional journal.

4. For a FREE copy of the GFA Management, Inc., (2) Number Crunching Cards, containing all operating formulae characteristic of the LLCommunity asset class (e.g. physical & economic occupancy, home & resident turnover, OERs, ‘cap rates’, New Rule of 72 – for estimating capitalized income value of a ‘C’ grade LLCommunity, & IRV, phone above – referenced MHIndustry HOTLINE (See # 1 preceding)

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

No One Else Will Tell You Any of This….

To REIT or Not To REIT?

Your Response to ‘New Era – New Voice’ Announcement!

How Many MHs in LLCommunities Nationwide?

And, ‘What’d I tell you?’

I.

To REIT or Not to REIT?

For a privately held firm to launch an IPO (‘initial public offering’ of stock), and become publicly – owned, as a real estate investment trust (‘REIT’), is no small, hasty or inexpensive decision! But since rumors are afoot these days, to that end – amongst one or more landlease (nee manufactured home) community aficionados, let’s take a cursory look. But first, a cautionary word from ELS’ Sam Zell, quoted in the February 2011 edition of Multifamily Executive magazine (p.16):

“I think there have been a lot of attempts to create REITs. The problem is one of
scale. If anything, I think the Street has learned, since the dawning of the modern
REIT era, that liquidity equals value. I think some people will make some serious
consolidations.”

For historical perspective, within our unique real estate asset class, pick up your copy of the 22nd annual ALLEN REPORT and turn to page # 22, and peruse the ‘Rental Homesite Count Among LLCommunity REITs’. Look down to the bottom of the list to 1994 entries. At that time, when ELS, Inc (nee MHC, Inc.) was first listed as a REIT, the firm owned 28,407 rental homesites; long gone Chateau Communities, Inc., had 15,689 sites; and, Sun Communities, Inc., claimed the fewest at 13,500 sites. UMH Properties, then already a REIT, owned but 4,623 sites.

Now turn back to page # 19 to see which of this year’s ALLEN REPORT listees own close to, let’s say 13,000 rental homesites (Thinking of Sun’s 13,500 rental sites in 1994), in their LLCommunity portfolios.

• American Residential Communities, a.k.a. ARC*1 54,933
• Hometown America 52,567
• RHP Properties 19,825 + 3,143 fee
• Lautrec, Ltd. 22,063 + 668 fee
• YES! Communities*2 18,388 + 77 fee
• Parkbridge Lifestyle (Canada) 18,254
• American Land Lease (Green Courte Partners) 16,690 + *3
• Carefree Property Management 12,990 + 288 fee

*1 formerly Affordable Residential Communities, and a REIT @ 2004 & 2005
*2 comprised mostly of former CMH (Clayton) LLCommunities
*3 with late 2010 acquisition of six LLCommunities & 1,850 sites from Florida – based CRF Communities, constructively moves this firm up from #9 to #7 on 22nd AR.

So, does this mean one or more of these firms will become a REIT during 2011, or even 2012? No, not at all. Simply identifying firms maybe large enough to do so. For that matter, there’s at least one veteran firm on the above list who was around when two previous REIT waves occurred, but never made the switch from private to public ownership.

Don’t have, but would like a copy of the aforementioned 22nd annual ALLEN REPORT? There aren’t many left. Either pay the cover price of $450.00, OR, reduced amount of only $250.00, and receive the 50+ page annual report, AND a one year subscription (12 monthly issues) to the Allen Letter professional journal. Simply phone the MHIndustry HOTLINE @ (877) MFD-HSNG or 633-4764, or (317) 346-7156 & mention this special offer!

II.

‘COMING! A New Era & A New Voice for Manufactured Housing’

Last week’s blog post title spawned more than a dozen thoughtful, and often lengthy, written replies from blog ‘floggers’ (readers) representing virtually all segments of the HUD Code manufactured housing industry! No way can we fit all, or even a select few of them, into this week’s posting; so, will spread them out during the next several weeks, as we consolidate replies – pro & con – per topic foci. Keep those facts and opinions coming via Gfa7156@aol.com

Frankly; in nearly 30 years of writing ‘about, for, and to’ the manufactured housing industry and landlease community real estate asset class, this weekly blog posting routinely draws more reader response than any other media (e.g. magazines and newsletters) this blogger has experienced to date! It’s very encouraging to finally see and read one’s peers ‘speaking out’ about business matters that concern them, and about which they are encouraged (i.e. a New Era); as well as being generally supportive of bold, stimulating journalism, supplanting poorly penned, unedited articles, features, and columns in trade publications stagnant during the past couple decades (i.e. a New Voice)

III

How Many MHs in LLCommunities Nationwide?

This question is asked more frequently than you might realize; and second only, to ‘How many landlease (nee manufactured home) communities are there?’

Relative to the number of LLCommunities question, read present issue of MHI’s National Communities Council (‘NCC’) division’s quarterly Community Connections newsletter. The feature article ‘splains’ how we know there’re 50,000+/- such income – producing properties. If not a member of the NCC, phone (703) 558-0678 to request a copy. The upcoming issue of that seminal newsletter will contain a feature titled: ‘To Rent (Homes) or Not to Rent!’ and contains information available nowhere else! For a free reprint, of the ‘# of LLCommunities’ piece, phone the MHIndustry HOTLINE number cited earlier in this blog posting. A reprint of the ‘rent’ article available soon.

Back to estimating the number of homes (manufactured and otherwise) in approximately 50,000 LLCommunities; where 85 percent number fewer than 100 rental homesites apiece, and 15 percent more than 100 sites apiece.

50,000 X .85 = 42,500 X average of maybe 50 sites/per property = subtotal of 2,125,000 rental homesites.

50,000 X .15 = 7,500 X average of maybe 150 sites/per property = subtotal of 1,125,000 rental homesites.

2,125,000 plus 1,125,000 = 3,250,000 rental homesites X 89.2 percent average national physical occupancy among LLCommunities during 2010 = 2,899,000 occupied rental sites, rounded to 3 million.

How’s that square with your thinking? Differing opinions and methods of calculating welcome!

IV.

What’d I Tell You?

Here’s the opening sentence from last week’s blog posting at this website: “Yes, it snuck up on me too; the realization HUD Code manufactured housing has permanently changed during the past decade, to the extent of being market – stiffed; maybe forever, sans new sources of third party chattel (personal property) finance!”

And four days later, this unfortunate, but confirming observation, contained in a communiqué from the Manufactured Housing Association for Regulatory Reform (‘MHARR’):

“…the one HUD program that helps put lower and moderate income consumers (i.e. manufactured home buyers) into new homes they can actually afford – the FHA Title I manufactured housing program – is subject to unreasonable and unnecessary restrictions that effectively limit it to only one financing provider and a minimal number of loans (1,834 during fiscal year 2010).”

What to do about this serious matter? Besides joining forces, as direct, dues – paying of MHI and MHARR (manufacturers only), to seek legislative solutions at the federal level, LLCommunity owners/operators are truly ‘the only game in town’, by dint of their ability to self finance chattel mortgages, via ‘captive finance’ or ‘buy here – pay here’ methodologies, new and resale homes they market and sell on – site at their properties. If YOU’re late coming to this ‘dance’, and want to learn the ‘ins & outs’ of property owner self – finance, make it a point to be in Albany, New York, on 29 & 30 March, when the New York Housing Association hosts Super Symposium II. Frankly, it’s the best lineup of manufactured housing (finance) and landlease community presenters I’ve seen in years! For information, phone (518) 867-3242 or visit the website nyhousing.org Sincerely hope to see you there!

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

COMING! A New Era & A New Voice for Manufactured Housing

Little did we realize 2011 will usher out an old era and old way of apprising!

I.

Yes, it snuck up on me too; the realization HUD Code manufactured housing has permanently changed during the past decade, to the extent of being market – stiffed; maybe forever, sans new sources of third party chattel (personal property) finance! Meanwhile, the other half this ‘double dual industry’ (i.e. manufacturing/distribution & commercial property development/management), its’ complementary investment real estate asset class, a.k.a. landlease (nee manufactured home) communities, has ‘moved on’, leaving those housing manufacturers behind, who don’t understand they must build Community Series Homes (‘CSH’) to survive! All this however, is but half the story unfolding in 2011, leading to ‘The End of One Era, The Beginning of Another!’

Other half the change? Well, especially for landlease community owners/operators (‘LLCommunities’), there’s a sea change a – coming, regarding big versus small owner/operator advocacy; operating data collection, analysis & distribution; print & online communications; even peer networking & deal – making. How so? That’s what’ll be reintroduced, during months ahead, as the ‘new voice for manufactured housing’. It was birthed, more than a decade ago in a print trade publication, but has lain dormant, till the timing was, and now nearly is, right – to help rejuvenate a moribund manufactured housing industry, and simultaneously encourage and promote the growing LLCommunity renascence! As they say in radio talk, ‘Stay tuned here to learn more!’

II.

Sustainability? It’s difficult to pick up a housing or realty trade publication, even a metropolitan newspaper these days, and not find some direct or passing mention of ‘sustainability this’ or ‘sustainability that’. A recent posturing, by HUD Secretary Shaun Donovan to Kenneth Harney at the Urban Land Institute (‘ULI’), was expressed thusly: ‘Embrace Sustainability, If You Want Federal Money’, got me to thinking….

So, just what is sustainability, in the single and multifamily housing context? I asked the folk at ULI for a definition/description, and this is what I learned: NOTHING. My email requests, as a realty trade journalist (Even stated my National Association of Real Estate Editors credentials!), have gone unanswered for nearly a week. Go figure.
So, ‘What say YOU?’ As a raw land developer or LLCommunity owner/operator, do YOU have a dog in this hunt for increased market penetration, via sustainability, relative to manufactured housing and or our unique income – producing property type? Your peers would like to know and read your view(s), via this blog site, regarding what’s either a contemporary ‘cutting edge concept,’ or simply ‘another temporary whimsy’.

III.

In search of the True Lease! In early January 2011, along with 40+/- fellow members of the IMHA/RVIC (Indiana’s state MHAssociation), I attended an afternoon panel discussion ‘splaining’ that state’s interpretation/implementation, to date, of the federal S.A.F.E. Act (Safe And Fair Enforcement of Mortgage Licensure Laws). One panelist, an attorney, stated a ‘true lease’ does not come under the purview of said act. Unfortunately, at the time, neither a definition or description of True Lease was provided, in any fashion. Since then, repeated requests for clarification have gone pretty much unanswered.

So, the challenge to YOU, loyal blog flogger (reader), is to share your knowledge or opinion of what a True Lease is!

Meanwhile, here’s one opinion. Given a property – owned manufactured home on a rental homesite in a landlease (nee manufactured home) community, and assuming said home & site rental rates in sync with other rental housing alternatives in the same local housing market (How to calculate such rates is the subject of a future blog….), lease said home & homesite for one payment (or two separate payments) per month for an agreed upon term (e.g. one year, more or less). Personally, I prefer weekly collection of home rent in LLCommunity settings….

In any event, and only at the end of the lease term, offer lessee (tenant of the home) the opportunity to extend said lease(s) for another term; OR, at that time make an agreed upon lump sum payment to the home owner (i.e. property owner) in exchange for title to the home leased to date. Assume no effect on the ground lease. If there’s no prior mention or agreement between the parties as to this relationship being a ‘lease to own’ or ‘rent to own’ or ‘lease with option to purchase’ at the front end, or during the term of the lease, might this not be a True Lease? Once again; what say YOU?

Of course I realize this is a legal issue that indeed might vary from jurisdiction to jurisdiction. But at this point, we’re talking concept, and your input is sought.

IV.

Did YOU know?

• ‘Joe McAdams Steps Down as President of Equity LifeStyle’; so reads a headline in the February 2011 edition of Woodall’s Campground Management. The article goes on to say: “Thomas Heneghan, ELS CEO, re – assume(s) role of president of the company. Following executive officers now report to Heneghan: Michael Berman, executive VP & CFO; Ellen Kelleher, esquire, executive VP, property management; Roger Maynard, executive VP, asset management; Marguerite Nader, executive VP, new business development; and Seth Rosenberg, senior VP of sales and marketing.” Page # 5. Now you know who’s on first, second…

• 13th annual National Registry of Realty Lenders/Brokers Specializing in LLCommunity Acquisition & Refinance Mortgages. This highly popular registry is the third in a series of 12 Signature Series Resource Documents, researched and published by PMN Publishing. The initial copies of the 13th Registry will be distributed as a lagniappe in the March 2011 issue of the Allen Letter professional journal. Also, for the first time in 13 years, a list of chattel (personal property) lenders will be included for contact purposes! So, if not already an Allen Letter subscriber, either sign – up for $134.95/year (12 monthly issues) OR, pay $250.00 and receive said subscription PLUS a copy of the recently – released 22nd annual ALLEN REPORT (a.k.a. ‘Who’s Who Among LLCommunity Portfolio Owners/operators in North America!’)! NOTE: Less than 50 copies of the ALLEN REPORT remain. Once this stock is gone, there are no plans to reprint! Phone the MHIndustry HOTLINE: (877) MFD-HSNG or 633.4764 to subscribe to the Allen Letter professional journal AND buy your copy of the ALLEN REPORT. Also phone (317) 346-7156.

***

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