‘Hey HUD! Help Out!’ YOU too….

Blog # 232 Copyright 2013 10 February 2013

Perspective. ‘Land lease lifestyle communities, a.k.a. manufactured home communities, & earlier, ‘mobile home parks’, are the real estate component of manufactured housing.’

SPECIAL NOTE to readers of this week’s opinion/editorial challenge…

This op/ed piece debuts here as blog posting # 232, on the community-investor.com website. Next, it’ll appear as a reprint, enclosed as a lagniappe, in the March 2013 issue of the Allen Letter professional journal. It is recommended, and hoped, YOU will send copies of ‘Hey HUD! Help Out! to all members of your state’s Congressional delegation, and include a personal note requesting they discuss this timely and apt challenge, at their earliest convenience, with Department of Housing & Urban Development officials!

Hey HUD! Help Out!

“Given Our Nation’s Near Stagnant Economy, it’s Time for the Department of Housing & Urban Development (‘HUD’) to Move Beyond Simply Enforcing the National Manufactured Housing Construction and Safety Standards (a.k.a. ‘NMHCSS’, passed by Congress in 1974 & implemented during June 1976), to Actively Promote & Help Finance Placement of New Homes into 50,000 Land Lease Lifestyle Communities, Coast to Coast!”

by George Allen, CPM®Emeritus, MHM®Master
Consultant to the Factory – built Housing Industry,
The Land Lease Lifestyle Community Asset Class &
Affordable Housing Purists & Enthusiasts Nationwide

The above challenge ‘has been in the making’ throughout my 35 year career in housing, four years shy of the 39 years the HUD – Code manufactured housing industry has been living with – some say ‘enduring’, the only prescriptive national (home) building regulatory code in U.S. history! Why the long wait for this challenge to grow legs?

Frankly, it’s taken nearly four decades for the right pieces to come together; and now, in my opinion they’ve finally done so! But first, here’s the recent triple trigger that gelled my thoughts and experience on the timely topic, prompting this essay challenge.

The Fall 2012 issue of Evidence Matters, is a 28 page booklet published by HUD’s Office of Policy Development and Research. It opens with a feature article, titled: ‘Paths to Homeownership for Low – Income and Minority Households’. Then, within the first three pages of the HUD publication, that lead article title is stated, restated, reinforced three times by Erick C. Poethic, Acting Assistant Secretary for Policy Development and Research; as well as by Rachelle Levitt, Director of Research Utilization Division:

• “Helping low – and moderate – income and minority families achieve successful homeownership has always been a core goal of the U.S. Department of Housing and Urban Development.” P.2. Ms. Poethig (Emphasis added. GFA)

• “…supporting housing opportunities for low – income and minority American remains central to our mission.” P.3. Ms. Levitt (Emphasis added. GFA)

• “this issue of Evidence Matters examines various approaches to promoting successful homeownership opportunities for low – income individuals….” P.3. Ms. Levitt (Emphasis added. GFA)

As I read and reread of HUD’s core goal and mission; then absorbed what other writers in Evidence Matters had to say about ‘paths to homeownership’, Individual Development Accounts, Housing Choice Voucher Homeownership, and a couple shared equity models, I found myself thinking, once again:

‘Why isn’t HUD, manufactured housing’s federal regulator for 39 years, actively promoting and assisting with the financing of new home placement into land lease lifestyle communities (a.k.a.’ manufactured home communities’, and before that ‘mobile home parks’) as a practical means of ‘Helping low – and moderate – income and minority families achieve successful homeownership’?”!

Well, you’ll have to ask HUD officials how they answer ‘that question’; and why, for 39 years, they’ve not explored using the inexpensive factory – built housing type they regulate, as one, if not the key answer, to addressing this nation’s perennial affordable housing shortage? *1 Having been actively involved in factory – built housing since 1970, and the land lease lifestyle community real estate asset class since 1978, I have long and well – honed opinions on that particular matter.*2 But that’s not the gist of this essay challenge.

So, ‘Why today?’ One paragraph in Evidence Matters, crystallized the matter for me, and hopefully it will for you, as well. Here goes:

“Renters of HUD – assisted units may become homeowners via the Housing Choice Voucher Homeownership program, which has been responsible for nearly 15,000 homeownership closings in the past decade. This program allows participating public housing agencies to offer residents the option to apply their rental voucher subsidy toward monthly ownership expenses. After satisfactorily completing a preassistance counseling program that covers home maintenance, budgeting and money management, credit counseling and credit repair, and mortgage financing, the purchaser finds an eligible home. Foreclosure, delinquency, and default rates were quite low for these buyers, who were mostly single mothers with children, minorities, and people with disabilities moving into neighborhoods with higher homeownership rates and slightly lower poverty rates than the neighborhoods where they had rented.” P.8 Quoted from an interview with Janneke Ratacliffe. (Emphasis added. GFA)

It was the latter two of four highlighted portions of this paragraph that hooked me. An eligible home? Why not a HUD – Code (regulated) manufactured home? And, ‘moving into neighborhoods with higher ownership rates’? In traditional land lease lifestyle communities, the vast majority of sited homes are owned by rental home site lessees! Yes I know; for a reason no one has ever satisfactorily explained to me, the fact that underlying realty is owned by someone other than the homeowner/site lessee gives government officials, politicians, lenders, and the like, pause. Yet somehow it’s ‘OK’ to subsidize low income and minority renters living in apartment units and communities affixed to realty owned by someone other than the apartment lessee. Go figure. Some call it discrimination among housing types, and politics among housing players. Reread end note # 2.

Perhaps NOW is the time to take a renewed look at the pieces of this housing puzzle that, when appropriately addressed and accounted for, shall motivate HUD to ‘finally and actively promote & finance new home placement in land lease lifestyle communities from coast to coast’ via the Housing Choice Voucher Homeownership program, or something akin to it!

The right pieces?

• An eligible home. Must be the right size, configuration, and price for the would be homebuyer/homeowner. So, why not a HUD – regulated manufactured home?

• Rental voucher subsidy. The right loan terms and a 30% Housing Expense Factor (‘HEF’), that includes PITI: loan principal & interest, apportioned real estate taxes and insurance premium; as well as all household – related expenses, not including CATV & telephone expenses).*3

• High homeownership neighborhood. A professionally managed *4 land lease lifestyle community, charging a monthly rental homesite rate 1/3rd the monthly rent rate for a 3BR2B garden style apartment or townhouse in the same local housing market *5; and, requirement for a long term written lease, to ensure a fair and just ongoing housing value proposition for the homeowner/site lessee.

The final paragraph of the Evidence Matters publication feature, inspiring this challenge to HUD, to move from being ‘just a housing product regulator, to active promoter and finance facilitator for HUD – Code manufactured housing being sited in land lease lifestyle communities’, underscores the potential merit and reward of the aforementioned recommendations:

“Because the housing market remains fragile, it will take time and thought to
develop reforms that provide access to mortgages for creditworthy low – income
and minority families while also reducing risk and increasing protection for
consumers, investors, and taxpayers. These outcomes are vital to sustainable
homeownership for millions of Americas and are central to the overall health of the economy.”

Yes, it’s past high time for this long awaited and much needed reform; so, let’s join together, MHARR & MHI, along with the Manufactured Housing Congressional Caucus and clamor for…

‘Hey HUD! Help Out!’

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End Notes.

1. Affordable housing. This is one housing writer who rarely mentions ‘affordable housing’ &/or ‘housing affordability’ without providing a definitions and a multipart frame of reference for readers. So, FYI. Definition: “Housing is affordable when individuals or households ‘…earning less than half of their area’s median income or AMI’, can afford to rent a conventional apartment and or buy a home in their local housing market.” Quoted from June 2011 issue of Multihousing Professional, page # 11. The multipart frame of reference includes Six Measures of Affordable Housing & Housing Affordability that include: the 30% Housing Expense Factor or HEF; The Housing Opportunity Index or HOI; The Housing Wage or HW; The Workforce Housing or WFH; The Income to Home Value Ratio or IHVR; and the very subjective, ‘One Who Believes’ that “Ownership housing is affordable if the price is right”. The latter frame of reference definition quoted from Shelterforce magazine, Fall of 2007. This material summarized from Chapter # 4, ‘Affordable Housing & Housing Affordability’ in the Book of Formulae, Rules of Thumb, & Helpful Measures…by George Allen, PMN Publishing, Indianapolis, IN. 46247., 2012.

2. For example, take the Manufactured Housing Improvement Act of 2000 (a.k.a. ‘MHIA@2000’). It was designed by Congress to require and achieve full parity between HUD – Code manufactured homes and all other types of housing! Specifically, the U.S. Congress directed HUD, in this law, to “facilitat(e) the acceptance of the quality, durability, safety and affordability of manufactured housing within the Department” – in other words, place HUD – Code manufactured housing into the mainstream of housing and home financing programs supported by HUD, to the tune of billions of tax dollars every year! And once the MHIA@2000 law is ‘finally and fully implemented’, after a 12 plus year hiatus, HUD, FHA, lenders and others, must STOP discriminating against HUD – Code manufactured housing, and begin treating it, in every way, like all other types of housing in the U.S. Just how far out of touch is HUD today, when it comes to ‘promoting’ HUD – Code manufactured housing as an affordable housing alternative in the U.S.? HUD – Code manufactured housing is not even on the department’s ‘radar screen’ of Strategic Plan goals and sub goals! For example; an ‘Advanced Search’, entering the words ‘manufactured housing promotion’, on the department’s website, produces this left field result: ‘Promotion of alternative dispute resolution’, along with other similar red herring results, all having nothing to do with promoting HUD – Code manufactured housing as an affordable housing choice, within or outside 50,000+/- land lease lifestyle communities located throughout this nation! Yes, it’s high time for a change: ‘Hey HUD! Help out!’

3. The oddly but appropriately named ‘Ah Ha! & Uh Oh! Worksheet’ was designed for use within and outside the manufactured housing industry and land lease lifestyle community asset class, to: Using a prospective homebuyer’s Annual Gross Income (‘AGI’) and/or local housing market’s Area Median Income (‘AMI’), as a starting point, and a 30% standard Housing Expense Factor (‘HEF’), to calculate the maximum amount of home mortgage and home Price Point a homebuyer or local housing market can afford under ‘affordable’ & ‘risky’ lending and home buying conditions, whether said home was being sited within a land lease lifestyle community or on a scattered building site conveyed fee simple. Form is available, for the asking, from PMN Publishing via the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

4. Professional property management or PM is not, unfortunately, all that widespread among the estimated 50,000+/- land lease lifestyle communities scattered throughout the U.S. As a starting point, however, firms engaged with HUD, in an effort to promote homeownership of manufactured homes to be sited within this unique, income – producing property type, in my opinion, should be expected to have at least one Certified Property Manager® or CPM® member of the Institute of Real Estate Management® or IREM® on staff at all times! And every on – site property manager should have been trained in and completed, one or another of the several professional property management programs, and not just parts thereof, presently available to them via MHI’s MHEI: the Accredited Community Manager® or ACM® program; PMN Publishing’s Manufactured Housing Manager® or MHM program; or in California, that state’s homegrown PM training and certification program.

5. 3:1 Rule of Thumb. While this guideline is hotly contested by some, it’s been a practical mainstay throughout the land lease lifestyle community asset class for at least three decades. A few tweaks apply. 1) When estimating the stabilized rental homesite rate in a land lease lifestyle community along or adjacent to an interstate highway beltway around a major SMSA or MSA, divide the average area apartment or townhouse rental rate by 2.5 instead of 3. 2) This rule of thumb might indeed need further refinement when used in one or another of the Sunbelt regions of the U.S., e.g. Florida, southern California, Arizona, Nevada. 3) And when preparing apartment/townhouse and land lease community Market Studies to effect this 3:1 calculation, ensure one is comparing apples to apples, by checking to see that items such as water and sewer billing, even heating, is treated similarly before the mathematical calculation is completed. For other formulae and rules of thumb associated with manufactured housing and the land lease lifestyle community real estate asset class, read Book of Formulae, Rules of Thumb, & Helpful Measures…available from PMN Publishing by phoning the MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.

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George Allen, CPM®Emeritus, MHM®Master
Consultant to the Factory – built Housing Industry,
The Land Lease Lifestyle Community Asset Class &
Affordable Housing Purists & Enthusiasts Nationwide
Box # 47024, Indianapolis, IN. 46247
(317) 346-7156

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