Manufactured Housing’s 21st Century Paradigm Shift

COBA7® via Blog # 344 Copyright @ 12 April 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

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Manufactured Housing’s 21st Century Paradigm Shift

Industry’s Zeitgeist (‘spirit of the time’) Present in New Paradigm!

‘In other words; if you’re buying new HUD-Code homes, especially Community Series Homes, selling them on-site in one or more land-lease-lifestyle communities, and at times seller-financing them, YOU are making manufactured housing history, as a key part of this major paradigm shift in our traditional business model.’ George Allen

We’ve been writing about various aspects of this phenomenon, usually referred to as ‘paradigm change’, in this weekly blog posting for some time – just didn’t put the pieces together to paint the bigger picture – until now. So, hang on as we take a quick ‘word walk’ back to the turn of the 21st Century, when the chattel capital wheels came off (Some would say ‘taken off’) the traditional manufactured housing business model.

Without rehearsing the sorry history of what was described at the time as ‘turning our homebuyer/site lessee customers upside down’; suffice it to say, the immediate and lasting consequence have been less-to-little easy access to chattel capital (Still the case more than a decade later). And over time there’re now far fewer independent (street) MHRetailers, even company stores – because of said ‘loss of access’. Immediate to ultimate cost of those financial shenanigans? According to the CFPB* in a report published during 2014, between years 1999 & 2002, at least 300,000 repossessed manufactured homes valued at $1.3 billion! Those ‘repos’, in turn, competed with new home sales for several years thereafter – forcing a paradigm change in the way we did, and now, ‘do business’. And yes, along also came the S.A.F.E. Act, Dodd-Frank legislation, and the CPFB.

The first significant indicators of change(s) in the way we’d be ‘doing business’ going forward, occurred at two National State of the Asset Class causes held on the same date in successive years: 2/27/2008 among (then) 100 manufactured home community owners/operators convening in Tampa, FL; and then, 2/27/2009 among a like number of LLLCommunity folk and HUD-Code home manufacturers convening in Elkhart, IN. While not fully appreciated at the time, the first caucus gave MHCommunity investors/property managers needed focus, challenging them to take control of their future, e.g. ‘Sell, and if need be, seller-finance more REPO & RESALE home transactions on-site to fill vacant rental homesites!’ The second caucus answered, ‘What’s it going to take to sell more NEW homes into MHCommunities?’ Solution? Community Series Homes, or CSH Models, named as such by Don Westphal later in that year. Today, CSH Models are widely recognized as being singlesection or modest-size multisection homes with one or two WOW! Factors, and a plethora of durability-enhancing features, to speed turnover ‘make ready’, when need be, at minimal cost. That was the second stage of the paradigm shift.

There’re at least three consequences of this shift in emphasis from MHRetailers selling new homes into MHCommunities, and owners/operators buying/selling ‘repos’ & ‘resale’ units on-site, TO this whole new paradigm (After ‘repos’ & ‘resales’ dried up), where/when owners/operators routinely sell NEW Community Series Homes on-site, arranging financing as needed. First; the percentage of new HUD-Code homes being shipped into (now) land-lease-lifestyle communities (Will explain change in terminology shortly) increased from 25 percent, year end 2009, to 30 percent by the end of 2013 – and likely higher by end of 2014. Second; several of the largest home manufacturers have rolled out creative financing programs to help LLLCommunities ‘sell more new HUD-Code homes on-site’. This has been a decidedly mixed bag of results. Just recently, a community investor described one manufacturer’s heavy emphasis on their in-house finance program, more so than the quality of their homes, to position the firm’s finance package as a ‘loss-leader’, to ‘sell more homes’! The third consequence? To date, in this industry observer’s opinion, home manufacturers have NOT addressed the real need to teach LLLCommunity staff how to effectively market and sell new HUD-Code homes on-site!* This is a whole different perspective than teaching independent (street) MHRetailers how to simply sell ‘deals’. Here the emphasis is dual: AFTO (‘Asking for the Order!’) & ABC (‘Always be Closing!) for sure, but balanced with homebuyer/site lessee personal qualification and desire for the lifestyle, as well as needs and wants relative to the home purchase.

The ‘proof’ in how much community owners/operators have bought into this new paradigm (Actually, they ‘have to do so’ to survive as viable business entities…filling vacant rental homesites…estimated to be 250,000+/- nationwide) is the change in trade moniker from ‘manufactured home community’ to ‘land-lease-lifestyle community’. The latter? Underscores the fact, as many as six different types of shelter are now commonly sited in this unique, income-producing property type: pre-1976 ‘mobile homes’, post-1976 manufactured homes, modular units, park model RVs, RVs for a season, even stick-built homes constructed on-site to look like HUD-Code homes (only in FL.).

Another ‘proof’ of the new paradigm has to do with how LLLCommunity owners/operators are pricing their now homes ‘for sale’ on-site. Yes, many still try to achieve as much profit margin as possible on the sales transaction; however, an increasing number of these entrepreneurs sell their homes at little more than cost (i.e. home, freight, installation, etc.), to get said home ‘sold’ and rent meter running on the underlying realty. An interesting sidebar is how some of these ‘players’ go so far as to share the manufacturer’s invoice with their prospective customer, proving ‘what a great deal they’re getting in this home’! And since doing so, is soon to be one of three approved methods of effecting home valuation this Summer, why not? OR, stick with the traditional cost or replacement method (NADA), or arrange for valuation via market comps. Furthermore, an increasing number of owners/operators have become downright creative in the variety of ways and means they raise capital to fund individual home sales transactions on-site, utilizing a bevy of private investors, local lenders, lease-option methodology, ‘captive finance’ and much much more.

At this point we’ve come almost full cycle, describing the paradigm shift that began at the dawn of the 21st Century – and has now matured. One that’s been precipitated and influenced by an industry/realty asset class Zeitgeist wrought by circumstances of tumultuous and difficult economic times.

There remains a final sign of this significant shift, even sea change, in the way the MHIndustry, and LLLCommunities ‘do business’. The former has relied on the Manufactured Housing Institute and Manufactured Housing Association for Regulatory Reform, for decades, to handle national advocacy matters, particularly since the imposition of federal building code regulation during the mid-1970s.

On the other hand, LLLCommunities, while enjoying a national advocacy presence since 1996, via MHI’s National Communities Council division, have been long forced (30+ years) to rely on private business interests, to provide the variety of products and services needed by professional property managers. To this end, the Community Owners (7 Part) Business Alliance® was launched early January 2014. Now more than a year old, 200 businessmen and women, from all segments of the MHIndustry, have affiliated with COBA7®, to ensure 1) ongoing statistical research, 2) updating & distribution of resources (a dozen + Signature Series Resource Documents), 3) print & online communication via monthly business newsletters and a weekly blog posting, 4) peer networking events, 5) deal-making opportunities, 6) professional property management training/certification (via Manufactured Housing Manager® program), and 7) national advocacy when need be, e.g. offer of ombudsman (press) services and official industry historian. The icing on that array of products and services and more, will be when COBA7® becomes an independent organization in its’ own right, no longer a division of GFA Management, Inc., dba PMN Publishing.*

End Notes.

• CFPB = Consumer Finance Protection Bureau

• And the on-site, or in-LLLCommunity home sales drill doesn’t stop there. Manufacturers should be teaching how to realistically and fairly qualify homebuyers/households as to ‘how much home they can afford’; and, teach how to evaluate a potential local housing market in terms of what the citizenry can afford to buy. For starters, Annual Gross Income or AGI (in the first instance) and Annual Median Income or AMI (in the second instance) is a realistic place to start. Bud do manufacturers understand how to use those tools to help homebuyers/site lessees and not just themselves?

• To affiliate with COBA7®, simply phone the Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764.


Reviewing COBA7®s WISH LIST for 2015

Here we revisit the third of five WISHES on COBA7®s 2015 WISH LIST!

“Stay abreast of the Frost Free Foundation® or FFF® situation, in behalf of COBA7® affiliates in general, LLLCommunity owners/operators in particular. Encourage the dual goal of saving LLLCommunity owners/operators from forced concrete retrofitting expense @ estimated $5,000.00 per rental homesite, and ensuring manufacturers get the save and secure installation their HUD-Code housing product needs and deserves.”

Little to nothing has happened since we last covered this important and increasingly timely topic, in this weekly blog posting at Have you noticed, as I have? No one else is talking about the matter either. We should be asking ourselves: ‘Why not?’ It is no longer a secret, with Pam Danner, Esq., heading the manufactured housing program at HUD, the long dormant (since its’ passage in 2007) Federal Installation Standards are on track for implementation and enforcement in default states (i.e. where said standard has not been fully implemented, and in even more cases, enforced). So, I guess we’ll have to wait and see how all this pencils out during the months and year ahead.

In the meantime, know with the May issue of the Allen Letter professional journal, there’ll be a lagniappe ‘one pager’ describing the Frost Free Foundation®, where to get your copy of the multi-page document, and some helpful hints on implementing same. I ran it past a half dozen ‘experts’ on the FFF topic. George Porter replied, the information was adequate overall, maybe more than necessary in some locales, but likely ‘not enough’ in local housing markets intent on challenging the effectiveness of Frost Free Foundations®. What does this tell you? Better get educated soon, or face the very real prospect of having to replace existing, otherwise well-performing concrete foundations, when the Feds come your way. When I asked Pam, while talking in Albany, NY, recently, whether present day concrete foundations in compliant states are ‘grandfathered’ under the federal installation standards, she did not provide a clear answer, but the matter would be handled on a case by case basis. So, to get your FREE copy of the FFF® information ‘one pager’ mentioned above, see third * end note at the end of this blog posting.


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