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

Blog Posting # 715. Copyright 18 November 2022. EducateMHC

Perspective. Land lease communities, previously manufactured home communities, and earlier, ‘mobile home parks’, comprise the real estate component of manufactured housing!
EductaeMHC is the online national advocate, realty asset class historian, trend spotter, education resource, and textbook supplier for land lease communities throughout North America! To input this blog and or connect with EducateMHC, telephone (317) 881-3815, email gfa7156@aol.com or visit educatemhc.com

George Allen, CPM®Emeritus, MHM®Master, RV/MH Hall of Fame, & MHI emeritus ember


‘Go Along to Get along’ OR ‘Aggressive Opposition’

When I began my manufactured housing career in 1978 I expected to learn a raft of new trade terminology, rules of thumb, helpful formulae, ‘tricks of the trade’, acronyms and abbreviations. And that’s precisely what happened – then and during the nearly five decades that followed. Still learning! In the paragraphs to follow I’ll share just some of those Lessons Learned along the way. Ready? Here goes:

Have you wondered why, in a relatively small segment of the U.S. housing industry (i.e. factory-built homes), it appears necessary to have not one but two national trade or advocacy organizations? Well, we do: Manufactured Housing Institute (‘MHI’) and the Manufactured Housing Association for Regulatory Reform (‘MHARR’). MHI has been around for more than 60 years; MHARR was formed during 1985 by former members of MHI. But why? Because the largest producers of ‘mobile homes’, then in 1976 ‘manufactured homes’, MHI lobbied in ‘Go Along to Get along’ fashion with legislators and regulators. Smaller producers of the same product, however, unable to absorb increased product costs oft associated with increased regulation, formed MHARR engage in ‘aggressive opposition’ to what they viewed as unfavorable legislation and onerous regulation. So the die was cast, and the rest is history, e.g. today’s differing opposition to incorporation of Department of Energy Standards into the HUD Code for manufactured housing, by MHI & MHARR. Read their respective newsletters for details.

Have you ever wondered why HUD-Code manufactured housing, in general, lacks the ‘bells & whistles’ one encounters in traditional site-built (stick) housing? Now, opinions vary about this, but the general rule is NOT to add anything to the basic home that will increase its’ cost to the home buying consumer! It’s why ‘smart (manufactured) homes’ are not commonplace yet – if ever. And in years past, attempts to build single unit smoke alarms, weather radios, gas detectors and intrusion detection devices have just about always failed. And frankly, that’s a major reason why both national trade entities are fighting the product cost control battle alluded to in the previous paragraph, albeit from different perspectives.

For many years I heard the phrase ‘D&R Deliveries’ voiced in regards to manufactured housing delivery. Took me a while to learn this meant the manufactured housing industry had a wide reputation for delivering housing product, then leaving right away! This was early in the day, when independent (street) MHRetailers took delivery of homes into their retail homes sales center, onto privately-owned, scattered building sites, and into ‘mobile home parks’. D&R was a symptom of a much larger, more serious problem: lack of responsibility, on the part of anyone, for the safe and secure installation of new HUD-Code homes! Some have posited that D&R deliveries are the Achilles Heel of this industry. How so? Manufacturers routinely pushed this responsibility off onto the MHRetailer and community owners/operators; who, in turn, passed the responsibility onto homebuyers. And know what? The matter has improved today only because there are fewer MHRetailers in business, and the trend that 40+ percent of new homes are going directly into land lease communities where property owners/operators know the consequences of ‘drop and run deliveries and installations’. Safe and secure home installation remains an unresolved matter across much of the country, e.g. even in the face of empirical evidence the Frost Free Foundation system created and espoused by George Porter, continues to languish when it should, in this industry observer’s opinion, be HUD-approved methodology.

Did you know? In many parts of the U.S. it is commonplace, within land lease communities, to find water and sewer lines laid in the same utility trench? This is one reason infiltration of sewer lines, by ground and potable water, remains one of the most difficult challenges to address in this unique property type. How ‘bout another trade secret?

New Rule of 72. Until recently, when community valuations became unjustifiably high, this was a handy means of estimating the potential and real capitalized income values of average land lease communities. In the first instance, multiply the number of rentable homesites, occupied and vacant, by the prevailing rental homesite rate and then multiply by the whole number 72. For example: 200 sites X $300/month rent X 72 = $4,320,000. For the actual present estimated capitalized income value (not including the presence of rental units, if any), multiply the number of occupied and paying rent sites (e.g. 180) X $300/month X 72 = $3,888,000.

How ‘bout the traditional 3:1 Rule for estimating land lease community rental homsite rates in a given local housing market? Simply perform a Market Survey of 3BR2B conventional apartments in the local market. Once ascertained, e.g. $1,500/month. Divide this figure by ‘3’ for a result of $500/month estimated rental homesite rate. Now, of late, some portfolio owners/operators of large properties are dividing by ‘2’. Do it both ways to decide which is the reasonable approach.

And the beat goes on. There’re more such ‘tools’ to share with you in future blog postings. Are there such rules of thumb you’d like to share? Send them to me via gfa7156@aol.com

GFA