Finally, Out into Open Discussion = 3 Serious Questions
Blog # 380 Copyright 2016 COBA7® @ 3 January 2016: community-investor.com
Perspective. ‘Land-lease-lifestyle communities, a.k.a. manufactured home communities and ‘mobile home parks’, comprise the real estate component of manufactured housing.’
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INTRODUCTION…Hang onto your seats for this one! What started as a review of last week’s ‘Question not addressed by national advocacy entities representing HUD-Code manufactured housing & land-lease-lifestyle communities’, blossomed into a recitation of not just the One, nor even Two, but Three ‘Serious Questions’! When you’re done reading and pondering, and have opinions, on one or more of these issues, tell us!
Finally, Out into Open Discussion!
Part III of last week’s posting of blog # 379, titled: ‘The Question’, Stirred Responses.
Realized, when I penned ‘The Question’ last week, I risked ire from certain industry leaders accustomed to charting manufactured housing’s political course without discussion among its’ businessmen and women. And while the expected ‘ire’ did not materialize, something else did: Yet another ‘Serious question NO national (MHIndustry) advocacy group has publicly addressed’ to date!
But first, a rewording, for clarity; and brief revisiting, of ‘The Question’ posed in last week’s blog:
Duty to Serve. Is the regulatory manipulation of, and political/lobbyist pressures on GSEs (i.e. Fannie Mae & Freddie Mac fiscal policies, via conservator, Federal Housing Finance Agency, et. al.), to accommodate ‘underserved’, low income, would-be homebuyers and mortgagors, GOOD for consumers – and the manufactured housing industry (i.e. increasing monthly volume of new HUD-Code home shipments), but BAD for U.S. taxpayers, by dint of adding yet another ‘$$$ entitlement program’, given the dire $$$ consequences within the same politico-socio GSE arena between 2008 & now? (*1) Think about it. Talk about it. Decide how you feel and let your national advocate know!
’The (same) Question’, again – but from a different perspective: ‘Do we really want to risk going down the same or similar $$$ entitlement road again so soon?’ Here’s one recent, very public private enterprise perspective, on the same Duty to Serve matter!
Recently published (26 December 2015) point & counterpoint exchanges of critical and at times vitriolic views, in an article in the Seattle Times, and Press Release response by Clayton Homes, Inc. (& by extension, Warren Buffett, Berkshire Hathaway, 21st Mortgage Corporation, and Vanderbilt Mortgage & Finance, Inc.), describes what befell this private enterprise, attempting to unilaterally accommodate ‘underserved’, low income, would-be homebuyers and mortgagors; to wit: the firm ran afoul of social activists unwilling to examine, let alone understand, negative consequences of uncomfortable personal and familial details (e.g. being underqualified & exhibiting intermittent irresponsibility) oft characterizing this market.(*2) Like borrowing President Obama’s recent use of this metaphor: “If you’re doing big hard things (‘Think Clayton Homes here’), there’s going to be some hair on it – there’s going to be some aspects of it that aren’t clean and neat…” Bottom line? Given this private enterprise Duty to Serve perspective (i.e. corporate desire to supply ‘affordable’, not ‘subsidized’ housing), expect to be misunderstood – and worse, especially when doing so over the long haul…
And now, here’s the new ‘Serious Question no national (MHIndustry) advocacy group has addressed to date’ – arriving at this website in the form of correspondence from a longtime blog flogger (reader), and supplemented with industry statistics provided by the MHIndustry historian:
‘The (new) Question’. “Why rejuvenate federal regulations effected in 2007, affecting manufactured housing & land-lease-lifestyle communities, left dormant until now?”
In 1998, the manufactured housing industry’s most recent and likely last renascence, 372,843+/- new HUD-Code homes were shipped throughout the U.S. At the time, responsibility for the safe and secure new home installation was a heady and very public topic of conversation. Disputes among manufacturers, MHRetailers and homebuyers were aplenty.
Consequences, and planned but interrupted changes, in the MH business environment. In year 2000, the Manufactured Housing Improvement Act was passed – but arguably, never fully implemented. This was followed, seven years later, by Dispute Resolution & Federal Installation Standards. By then however (2007), given the loss of ‘easy access to chattel capital’, new HUD-Code home shipments plummeted to only 95,769+/- units! That downward spiral continued thru 2009, when only 49,789+/- new homes were shipped! A 7 ½ fold DROP in new HUD-Code home shipments over a decade!
POINT? The manufactured housing industry, by 2007, and certainly by 2009, 1) Wasn’t doing enough business to fund its’ regulator (i.e. HUD) via label fees, and 2) There weren’t enough homes being sold and installed to raise concerns, nor were there many disputes to resolve! And frankly, these matters are unchanged to this day, with an average of only 55,146+/- new HUD-Code homes shipped per year between 2009 & 2014. Year 2015? Maybe 70,000+/-, but compare that to the fivefold higher volume of 372,843 units in 1998. So, too few new HUD-Code homes to install, even fewer disputes to resolve!
So, why not leave the sleeping (some say, ‘dying’) dog lie? Or to put it another way, ‘What’s caused HUD to unilaterally rejuvenate federal regs effected in 2007, that are now, arguably unneeded?’ As they say, ‘Follow the money!’ If HUD continues to oversee the manufactured housing program, it will need income to pay its bills (e.g. inspectors, staff). (Read End Note #3) Where’re $$$ to come from? Primarily HUD label fees – already jacked more than 100 percent a scant two years ago. But with monthly and annual new home shipments at historic lows for nearly a decade, and unlikely to change (without reasonable access to chattel capital), additional oxen will have to be gored! Whose? Think land-lease-lifestyle community (a.k.a. manufactured home community) owners/operators nationwide! How so? To begin with, Dispute Resolution is ‘dead on arrival’ – given so few cases filed during the past decade. But HUD administering the Federal Installation Standards in default states, is where the monies will likely be found, at least for the time being. Just ‘how’ will be worked out during the months ahead, as LLLCommunity owners/operators pay their way, via installation inspection fees and the federal regulatory process. Even the ingenious Frost Free Foundation®, at one time viewed as our industry-saving ‘silver bullet’, regarding new home installation, has been stymied! How so? HUD-Code home manufacturers appear to be avoiding overt approval of FFF in installation manuals delivered with new homes. Why? Ask them. Might be their lack of confidence in licensed installers and LLLCommunity developers and owners/operators, to properly implement said FFF system. Sad, but likely true.
So, what’re the two national advocacy bodies, one of which claims representation of the entire manufactured housing industry, doing to mitigate the arguable negative effects of HUD’s unilateral rejuvenating of 2007 era regs, where new home installations in LLLCommunities are concerned? Little to nothing! Why? Ask them! After all, their MH program director of choice is in the driver’s seat at HUD. Likely however, this benign neglect has to do with the primary controlling nature (i.e. home manufacturers) of their direct, dues-paying membership. NOTE. A possible unintended consequence of ‘not publicly addressing this serious question’? The ‘beginning of the end’ where LLLCommunities are concerned. We’re not building many new such income-producing properties (Read details in the 27th annual ALLEN REPORT), and the small, older properties (i.e. 85+/-% of estimated 50,000+/- LLLCommunities in the U.S. today) lack financial resources to replace adequate existing installation infrastructure @ $5,000+/-/rental homesite, when a new HUD-Code home arrives on-site! Could well be rocky years, 2016 & 2017, ahead for the realty asset class.
In closing, also know year 2016 commemorates the 40th anniversary of HUD’s (performance-based, federally preemptive, national building code) regulatory relationship with the manufactured housing industry. Watch for a soon to be released feature article, in either a HUD or manufactured housing-related publication, describing this ‘From Lemon to Lemonade’ partnership between years 1976 & 2016.
Postscript. Believe it or not, there’s a third ‘not so new but never publicly discussed question’, related to the second one (above), imbedded within End Note # 3 here following. You’ll want to read and ponder it as you did the first two hush-hush questions.
1. Though some say 1992, when Congress imposed affordable housing goals on the two GSEs, requiring them “…to guarantee certain numbers of mortgages made to lower income borrowers.” From P. 46 of Bethany McLean’s SHAKY GROUND, ‘The Strange Saga of the U.S. Mortgage Giants’, Columbia Global Reports, NY, 2015, 159 pages. A succinct history of Fannie Mae & Freddie Mac since the turn of the century.
2. SEATTLE TIMES, ‘Minorities Exploited by Warren Buffett’s mobile-home empire’, by Mike Baker & Daniel Wagner. Dated 26 December 2015
Press Release: ‘Reporting Mischaracterizes Clayton Homes’ Treatment of Customers and Employees’…’Company Serves Underserved Markets, Making Homeownership Affordable.’ Dated 26 December 2015
3. Here goes. ‘More than rumor has it’, HUD sought to sunset (i.e. ‘terminate’) the manufactured housing program a few years ago, when it became obvious label fees from 50,000+/- new HUD-Code homes shipped per year, would not adequately fund department activities in this area. GAO interviews with manufactured housing businessmen and women, at the time, alerted the industry to this serious, but also potentially ‘freeing’ impasse. What’s happened since then is now history, in large part kept quiet, and only hinted at within exposes’ such as this. Hmm. Wonder who reading this though, is astute enough to see the ‘third (unanswered) question’ concealed within the shadow of this recitation, i.e. ‘Is manufactured housing, as an industry, better served as a federally-regulated & protected shelter type; or better off, shedding 40 year old regulatory fetters and operating freely among local housing markets (Yes, and having to please, and negotiate with, NIMBY-tainted land planners, and LULU zoning boards) throughout the U.S.?’ (See # 4) What do you think? Inquiring readers of this weekly blog posting would like to know. Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764
4. NIMBY = ‘Not in my back yard!’; LULU = ‘Locally Unwanted Land Use’; &, BANANA = ‘Build Absolutely Nothing Anywhere Near Anybody!’ = ‘the Big Three Acronym Barriers to Affordable Housing in Many Local Housing Markets Coast to Coast’. GFA
NOTE. If you’re not already affiliated with the Community Owners (7 Part) Business Alliance®, a.k.a. COBA7®, you should be! Why? Because no one but no one provides more land-lease-lifestyle community-related products & services (e.g. ongoing statistical research, 12+ Signature Series Resource Documents & Directories, weekly & monthly print & online media (Like what you’re reading here, plus two hard copy monthly newsletters), superb networking & deal-making opportunities, professional property management training & certification via the Manufactured Housing Manager®, or MHM® program, even national advocacy when need be…official ombudsman (press) & historian for the manufactured housing industry!) To affiliate, simply use the Official MHIndustry HOTLINE given in End Note # 3 above, or use COBA7® brochure attached to BEBA (Blast Email Blog Alert) introducing this week’s blog posting # 380…
Next MHM® class is on 19 January 2016 in Louisville, KY. Only $250.00/person. Team taught by Katie Hauck, MHM® & GFA. Phone (317) 346-7156 for a brochure and or to register. Class limited to 20. Note: 1,000 MHM®s now own/operate LLLCommunities throughout the U.S. & Canada! Are YOU certified? This is your opportunity to do so!
Five LLLCommunity owner panel @ 10-11AM, the morning of 20 January at the Louisville MHShow in Kentucky! If you own/operate one or more LLLCommunities you don’t want to miss this unique opportunity to learn from five successful owners who’ve ‘experienced it all’. To register, phone Dennis Hill via (770) 587-3350 or via firstname.lastname@example.org I’m facilitating this panel discussion, so expect The Very Best!
And on the 21st, Spencer Roane, MHM®, along with his Atlanta-based staff will teach the basics of ‘Marketing New HUD-Code Homes to Hispanics’. Nowhere else will you find this training in 2016. Again, it’s at the Louisville MHShow. Call Dennis Hill. I certainly plan to be in the audience. Will you?
Finally; Pam Danner, manufactured housing program chairman for HUD will address the Louisville MHShow on the 21st of January. Wonder if anyone there will be bold enough to ask her the second question posed in this week’s blog posting? I plan to be in that audience as well. You owe it to yourself to learn as much as possible about HUD’s plans for the year ahead.
And, if you’re interested in participating in the ‘Two Days of Plant Tours & Home Sales Seminars’ planned for late Spring (2016) in the Elkhart, IN., area, ask me for a postcard when we network at the Louisville MHShow in mid-January. Filling in and returning said postcard gets you onto the ‘inside track’ where this first time ever educational and ‘first hand experience’ event is concerned. Especially designed for small to mid-sized LLLCommunities throughout the Midwest.