Land Lease Communities Extolled by NREI Magazine

Blog # 591 @ 26 June 2020; Copyright 2020.

Perspective. ‘Land lease communities, previously manufactured home communities, and earlier, ’mobile home parks’, comprise the real estate component of manufactured housing.’

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INTRODUCTION: Ah, this is a classic GOOD NEWS/BAD NEWS Communique!


Land Lease Communities Extolled by NREI Magazine

“Manufactured housing properties are not only surviving the economic crisis created by the spread of the novel coronavirus. By some accounts, the sector is thriving compared to other types of real estate. There are some estimated 50,000 land lease communities of all sizes in the United States. Of these communities, a majority are properties comprised of 100 or fewer rental home site, and a minority are properties with 100 or more rental home sites. The larger properties, consisting of 100 or more sites, are already widely owned by the 500 known major players.” P.9 June 2020 issue of NREI magazine.

In my opinion, this superior operating performance (i.e. relative to physical and economic occupancy measures) during the coronavirus pandemic, has been one of the better kept positive secrets among land lease communities. Sure, there are, and continue to be, exceptions to this generality; but time and again, I hear reports of near 100 percent rental homesite fee collection! Reason? Can only guess at this point, but probably due to homeowner/site lessees being sincerely grateful to be living a lifestyle replete with an eminently affordable home.


The Other Side of the Land Lease Community $ & Lifestyle Coin

Here’s correspondence penned by a 20 year homeowner/site lessee (i.e. resident, tenant) of a land lease community in Montana.

“…they…raised our lot rent – the monthly fee we pay for the land our homes sit on – from $285 to $450. They also started charging us new fees, like for garbage and water, which used to be included in our monthly lot rent. When you add in the extra fees, the new property owner) basically doubled our rent. And they have indicated more increases are on the way.”

What’s happening here is not unusual these days! Consolidators (i.e. land lease community portfolio owners/operators from within or outside the manufactured housing industry), in order to acquire investment grade (i.e. usually more than 100 rental homesites) properties are willing to over value and over pay for them – in the near term, enriching the sellers; but in the long term, financially handicapping homeowners/site lessees. Once in control, and to be able to pay the already known operating expenses, AND very large debt service (mortgage) payments, the new owners/operators increase the site rent rate to whatever level accomplishes these ends.

So, what’s going on here, besides the obvious? Different people call these circumstances different things. Some say profiteering (i.e. ‘making an unreasonable profit on the sale of goods’ – and or leasing scarce property rights and housing units); others say predatory land lording (i.e. ‘seeking to exploit or oppress others’), while still others simply call it capitalism.

Consequences? For those, we’ll have to, for the time being anyway, wait and see. Seriously. During my 40+ year career in manufactured housing I’ve seen and experienced our industry’s ‘boom to bust and back again’ scenario over and over. Examples:

• Mid 1970s when new ‘mobile home’ shipments experienced their historic acme level (i.e. 579,940in 1973), plummeting when prudent lending practices among banks and service companies all but disappeared, and credit (repossession loss) insurance companies unaware of their extreme exposure to uncontrolled loss ‘crashed’.

• Loan term limits in 1980 were extended out to 20 years, increasing to 30 years by 1995. Result? No equity on most ‘home-only’ loans, for extended periods of time, and down payments dropped from ten to five percent.

• During late 1990s, as manufactured housing firms competed with traditional site-builders for ‘land and home’ package sales and placement, emphasis on ‘big box = big bucks’ focused marketing attention away from in-land lease community installation of new HUD-Code homes. Consequences? Loss of easy access to chattel capital for new home seller-financing. And our industry experienced a two decades long paradigm shift characterized by new homes sold, less and less, by independent (street) MHRetailers and ‘company stores’, and more and more, directly into land lease communities (e.g. 24% in 2009; 40+% by 2016).

Now it’s two decades later and we still, as an industry, have not returned, or eclipsed the 100,000 new HUD-Code homes shipped annually benchmark. And what’s happening at the behest of some portfolio owners/operators of land lease communities, relative to rental homesite rates as just described, will not stimulate new home sales and placements! Rather, the practice is akin to ‘shooting oneself in the foot’!

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