Five Tough Questions begging answers!

COBA7® via Blog # 348 Copyright @ 10 May 2015

Perspective. ‘Land-lease-lifestyle Communities, a.k.a. manufactured home communities and ‘mobile home parks’, comprise the real estate component of manufactured housing.’

This blog posting is a national advocacy voice, official ombudsman (press), research reporter, & online communication media, for all LLLCommunities in North America!

To input this blog &.or affiliate with Community Owners (7 Part) Business Alliance®, a.k.a. COBA7®, use official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

COBA7® Motto = ‘U Support US & WE Serve U!!’, & Goal of its’ print & online media = to ‘Not only inform & opine, but transform & improve our MHBusiness model!’

You get one five part topic this week. The matters in question here should be of utmost importance to MHBusinessmen & women reading this challenging blog posting…

But before we begin, let’s agree on this: Business is not a democracy and business decision-making is generally not a result of the democratic process.

Rather, business decision-making involves assessment of opportunities, in terms of risk & reward, related to ability to supply solutions (i.e. products & services) to prospective customers’ needs & wants. Result? As is oft said: “Profit is the reward for taking risk!”

Corporations & their leaders are expected to make profit motive-based decisions; however at times – like now – when faced with entrenched muddle (e.g. absence of easily accessible chattel capital for 15 years), they should step back, reflect and consider viable, mutually beneficial alternatives to ‘business as usual’.

Hence, relative to these Five Tough Questions, alternative solutions will not be found via the democratic process during Think Tank deliberations, but only thru serious discussion cum decision-making among savvy participants during Think Tank deliberations. GFA

Five Tough Manufactured Housing Questions Never Before Addressed in Any Public Forum

COBA7®’s Goal, as stated in the mast head of this week’s blog posting (See above) is to: ‘Not only Inform & Opine, but Transform & Improve our Manufactured Housing Business Model!’ That’s a four step process; and in the following paragraphs, this blog posting will take the first two steps: to Inform & Opine. Whether the next two steps, Transformation & Improvement take place, will depend on elected and salaried leaders of three national entities representing, advocating for, and affiliated with HUD-Code manufactured housing and land-lease-lifestyle communities nationwide:

• MHARR. The Manufactured Housing Association for Regulatory Reform headquartered in Washington, DC; represents smaller, regional HUD-Code home manufacturers. (202) 783-4-87.

• MHI. The Manufactured Housing Institute, in Arlington, VA. Self-described national advocate for all segments of HUD-Code manufactured housing. (703) 558-0400…

• COBA7®. The Community Owners (7 Part) Business Alliance® in Indianapolis, IN., serves land-lease-lifestyle community owners/operators nationwide and in Canada. Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

Whether all three ronin (‘non government agent’) entities ‘come together’, in Think Tank fashion, as has been suggested before (i.e. Publication of MHIndustry’s Official WHITE PAPER in mid-2014, & proceedings at 23rd annual Networking Roundtable) – but ignored, remains to be seen. Only grassroots entrepreneur businessmen and women, who’re direct, dues-paying members and affiliates of all three entities, can exert sufficient pressure to make this happen. However, entrenched, large scale and specific business self-interests likely will not opt for open discussion, let alone change, relative to one or more of the following Five Tough Questions.

Here’re ‘Five Tough Manufactured Housing Questions Never Before Addressed in Any Public Forum’, let alone in the trade press.*1

FIRST Question. What’s BEST for the Present & Future of HUD-Code Manufactured Housing: Continued Federal Oversight & Regulation, via National Preemptive Performance-based Building (HUD) Code; OR, Deregulation & Cease Funding the Department of Housing & Urban Development’s (‘HUD’) Manufactured Housing Program? And the Best Answer to this Tough Question is?

First, as a related and telling sidebar, know HUD does ‘next to nothing’ to promote manufactured housing, widely recognized as the last true form of nonsubsidized ‘affordable housing’ in the US today! In other words – and in my opinion, ‘HUD is manufactured housing’s federal regulator, Yes; but a fan of its’ affordable housing, No’

Onto to the answer to this Tough Question. Methinks this important decision was made, mid-year 2014 – almost a year ago, by our industry’s elite, sans input from thee and me! (Remember, this is not a democratic process.) The key indicators? Start with the 165 percent increase in label fees last Fall, then the recent ‘recitement’ of two HUD regulatory initiatives that have lain dormant since year 2007. Specifically, nationwide implementation and enforcement of Federal Installation Standards, & Dispute Resolution. Indirect proof? Ask yourself: ‘Why are these regs and measures being rolled out now, AND who will be paying whom for them?’ Answers: Again, in my opinion, ‘To finance the HUD manufactured housing program’, AND ‘$$$ fines from LLLCommunities for the same purpose’!

Our default alternative to deregulation? (It’s all we have left, if I’m right about ‘the decision’ having already been made, in our behalf, to finance HUD). Work on improving perception of manufactured housing via a national advertising campaign – where our factory-built housing type is depicted as (Gasp!) the ‘regulated hybrid housing’ alternative we are! OR, if/when we do deregulate, maybe someday in the (distant) future, demand and be recognized as nothing short of bona fide housing!

SECOND Question. What’s BEST for the Present & Future of HUD-Code Manufactured Housing AND Its’ Homebuyer/Site Lessee Customers living in Land-lease-lifestyle Communities (a.k.a. manufactured home communities): ’Traditional Chattel (personal property) Capital Loans on New & Resale Homes Installed on Rental Homesites, OR, Conversion to Lower Interest Rate, Real-estate Secured Conventional Home Mortgages, Somewhat Guaranteed by Written Leases with Time Terms Longer Than Housing Purchase Agreements?’

The tradeoff? In the first instance, potentially greater risk to, but enhanced protection of, lenders – as well as higher ROI; versus new opportunities to ‘Sell More (affordable) Homes!’ in the second instance. Is it as simple as that? No. Some folk are concerned about (maybe) change in valuation/taxation of homes proper. Others about warranty deeds replacing titles; and still others, how to handle abandoned homes – though usually a local taxing authority matter.

Bottom line? When the FHFA decides, in the near future, what GSEs must do, regarding Duty to Serve, relative to manufactured housing, perhaps they’d be do everyone a favor, and consider both sides of this Tough Question.*2 Word has it, ‘they already are doing so.’

If/when someone tells you this possible change, from chattel capital to real estate-secured mortgaging is the ‘beginning of the end’, know that’s not the case. Rather, it’s likely a better way to take affordable manufactured housing ‘into the future’; and, be assured, chattel capital, especially for lower price/value homes will always be with us.

The effect of all this on land-lease-lifestyle communities, as we know them today? Well, that’s yet another Tough Question. But if it means ‘filling more vacant rental homesites with new and resale homes’, well…

THIRD Question. What’s BEST for the Present & Future of HUD-Code Manufactured Housing AND Its’ Homebuying Customers in LLLCommunities and on Scattered Building Sites Conveyed Fee Simple: ‘Buying from Independent (street) MHRetailers; OR, via in-Community Home Sales Operations; OR, via Factory-direct Where/when Available?’

In many instances, local housing market-related conditions (e.g. housing availability & local economy) and issues (e.g. zoning) influences, but buying decisions are also affected by ease of access to chattel lending and/or conventional mortgage capital, home installation expertise, customer and warranty service, and more.

How does the manufactured housing industry prefer to market its’ product today and in the future? Via 1) Independent (street) MHRetailers and ‘company stores’ (as in the Past), 2) via in-LLLCommunity housing retail salescenters (Present day), and/or 3) factory direct to prospective homebuyers, whether siting their purchase on scattered building sites conveyed fee simple, or in-community (the Future?). Which will it be? Or perhaps an interesting combination of all three?

Here’s why this is a pivotal (tough) question in manufactured housing today. As long as easy access to chattel capital remains absent from the business scene, as has been the case now for 15 years, there’ll be relatively few independent (street) MHRetailers in business; with maybe lesser effect on ‘company stores’, unless they have access to factory lending programs. On the other hand, many if not most of the known 500+/- LLLCommunity portfolio owners/operators today routinely purchase new Community Series Homes from manufacturers, often engaging in seller-finance programs of their own choosing and servicing.

But that latter business model accounts for only 15 percent of the estimated 50,000+/- such properties nationwide. The other 85 percent? They’re Mom & Pop-sized investment properties (i.e. characterized by fewer than 100 rental homesites apiece) and, for the most part, are not presently engaged in filling their increasing number of vacant rental homesites with new manufactured homes. Why? The whole process, including seller-finance, is foreign to them, especially if second and third generation property ownership.

Factory-direct home sales might be the only answer to their economic survival over the long haul, unless they entice nearby homes sales operations to fill their vacant sites. But it’s too early to tell, as ‘factory-direct home sales’ is only now entering business conversations across the country.

FOURTH Question. What’s BEST for the Present & Future of HUD-Code Manufactured Housing, Land-lease-lifestyle Community Owners/operators, AND Its’ Homebuyer/Site Lessee Customers: ‘Widespread Enforcement of (2007) Federal Installation Standards for Manufactured Homes; OR, Approved by Manufacturer and Strictly Implemented Frost Free Foundations®, a.k.a. FFF Installation, for New and Resale Homes being sited in LLLCommunities?’

What’s pivotal here, is the issue of compliance with federal standards and/or FFF, and who’s paying for the installation (i.e. forced re-installation via retrofitting of developed, even well-performing rental homesites) thereof, the homebuyer/site lessee or LLLCommunity owner/operator?

Likely not the home manufacturer! Hence the lukewarm endorsement of FFF since ‘recitement’ of Federal Installation Standards was announced. Why? Apparently, lack of confidence that licensed installers and/or LLLCommunity owners/operators will implement FFF properly – and wind up being fined accordingly. And they just might be right…

No, this one’s ‘on the LLLCommunity owner/operator’ cum homebuyer/site lessee, from start to finish – and for the most part, neither sees it coming! So reminds me of the time, at the turn of the Century, when the chattel capital bubble burst – how Randy Rowe, of Green Courte Partners, warned a group of us of the coming (2007) self-immolation by the conventional housing finance market. He/we clearly saw it coming, but no one did anything to prevent it! (What could we have done anyway? Nothing!) Now we’re faced with a similar situation, where the Federal Installation standards in general, and Frost Free Foundations®, in particular, are concerned – along with dollar consequences almost certainly to be borne by LLLCommunity owners/operators nationwide!

FIFTH Question. What’s BEST for Rental Homesite Lessees AND LLLCommunity Owners/operators: ‘Application of the Traditional 3:1 Ratio, to Estimate Stabilized Rental Homesite Rent Rate in Most Local Housing Markets ( with possible Sunbelt exceptions); OR, Application of the ‘in-Vogue Among Some Property Portfolio Players’, 2:1 Ratio, to Set and Justify Rental Homesite Rent Rates in Many, Local Housing Markets?’

Example applications of both rules of thumb: 3BR2B conventional apartment rent is $900/month. Divide that figure by ‘3’ to estimate $300/month site rent in the same local housing market. OR, divide by ‘2’ to estimate $450/month site rent in some (portfolio) LLLCommunities. Who cares? Reasonable LLLCommunity owners/operators, and homeowner/site lessees concerned about maintaining the value of their residences.

This MHIndustry observer has been criticized in the past, for pointing up this difference; but it’s difficult to ignore, in light of the large number of mismanaged LLLCommunities on the ‘for sale’ market since the turn of the Century – oft characterized by too high site rent rates and declining physical and economic occupancy. If overly aggressive rent increases drive investors out of business, so be it! But what about the lenders, homeowners/site lessees, and former employees compromised and or injured in the process? So, how will you estimate LLLCommunity site rents when going into new local housing markets in the future?

KNOW WHAT? These five tough questions deserve open (industry) discussion, and hopefully resolution, in a Think Tank setting – the sooner the better! And the time is ‘right’ for this to happen. How so? When the Urban Land Institute (‘ULI’) dissolved the Manufactured Housing Communities Council (‘MHCC’) this Spring – following its’ decade run (formed in 2004), a ‘public forum vacuum’ materialized, relative to identifying and parsing industry issues and related matters.

All that needs to happen, is for salaried and elected leaders of MHARR, MHI, & COBA7®, to agree to convene in the Chicago area, OR at the RV/MH Heritage Foundation in Elkhart, IN., this Summer – maybe even on Monday, 3 August, the day of the annual Hall of Fame (evening) Induction Banquet?

And make this national forum available to anyone in the MHIndustry and LLLCommunity asset class who’s willing to pay their own way! Will this happen? I sincerely doubt it – for a couple sorry reasons.

FOLLOW THE MONEY! Well, here’s the gist (‘essence or substance of a matter’) of all Five Tough Questions! No matter how each is answered and resolved, as they say: ‘Someone’s ox is going to be gored!’ It’s just a darn shame personal and corporate self-interests are so strong and pervasive, in some if not most quarters, the overall general health of the manufactured housing industry (i.e. Nadir average of only 55,146 new HUD Code homes shipped/year between 2009 & 2014, with no end in sight!), and to a lesser extent, the land-lease-lifestyle community asset class (i.e. Estimated 250,000 vacant rental homesites to be filled nationwide) continue to be back burnered, suffering in the prevailing, stagnant, self-serving ‘business as usual’ process!

It’s like ‘we’ve retrenched so far to survive’, since year 2000, ‘we’ve lost the will to thrive’, except via old and proven ways just described. In my opinion, we’re, as an industry and realty asset class, simply afraid to answer these Five Tough Questions, out of fear of the answers and needed changes. Prove me wrong!

Who and where’re the capable, experienced, motivated, savvy, and charismatic national leaders to bring all of us (i.e. MHARR, MHI, COBA7, & independents) together to SAVE OUR INDUSTRY; to, as was pointed out at the beginning of this posting, ‘transform and improve’ our 70 year business model, returning us to prosperity?! Until that happens, the following quote from a nationally known and respected businessman (not me) sadly applies: “George, I wish we had a __________(national advocacy body) that was leading instead of managing!” Amen to that!


End Note.

1. Trade press. A decade ago, we were generally well-informed by the Manufactured Home Merchandiser magazine, The Journal, and the Allen Letter – all print publications. There were no online ezines. Today? Only The Journal and (renamed) Allen Letter professional journal remain, along with two online ezines and a weekly blog posting at (bearing this particular posting).

2. FHFA = Federal Housing Finance Agency; GSEs = Freddie Mac & Fannie Mae. All three federal government entities are expected to be present and participating in the 24th annual International Networking Roundtable, 9-11 September, in San Diego, CA. For an informative brochure and or to register, phone the Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

George Allen, CPM®, MHM®
COBA7®, a division of GFA Management, Inc., dba PMN Publishing
Box # 47024, Indpls, IN. 46247
(317) 346-7156

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