Not Everyone Agrees…Level Playing Field for MH $!
July 2019; Copyright 2019; www.educatemhc.com
Perspective. ‘Land lease communities, previously manufactured home communities, and earlier, ‘mobile home parks’, comprise the real estate component of manufactured housing.’
This blog posting is sole national advocate, official ombudsman, historian, research reporter, education resource & online communication media for North American land lease communities
To input this blog &/or affiliate with EducateMHC, telephone Official MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764. Also email: firstname.lastname@example.org & visit www.educatemhc.com
Motto: ‘U Support US & WE Serve U!’ Goal: Promote HUD-Code manufactured housing & land lease communities as U.S. source of affordable obtainable housing! Note: MHM class on 7/26!
INTRODUCTION: OK, a relatively brief blog posting this week, but no less timely and important than last week or the week before. Yes, I’m well aware ‘leveling the $ playing field’ for all types of manufactured housing finance is heretical to some, logical and desirable to others. Your view on the matter?
AND, here’s your opportunity to throw ‘your hat into the ring’, or someone else’s, where two top manufactured housing industry executive positions are concerned….
Not Everyone Agrees There Could/Should be a Level Playing Field for All MH Loans!
Gist of the Proposition:
Chattel Capital Loans on New Manufactured Homes, Installed on Rental Homesites within Land Lease Communities, Could/Should Enjoy IDENTICAL LOAN TERMS, Especially Percentage Rates, When Owner of the Income-producing Property Arranges Seller-financing and Personally Guarantees the Homeowner/site lessee’s Personal Property Mortgage!
If the UNDERLYING IMPROVED REALTY, beneath a new HUD-Code home installed on a scattered building site conveyed fee simple, provides loan security lenders require of their real estate-based home loan, then the PERSONAL GUARANTEE of the sole proprietor owner of record, of the land lease community, where new manufactured homes are installed on rental homesites, could/should deserve and receive equal respect, utility, and loan terms! You agree or disagree?
A Contrary View
“Until and unless the owner of the rental homesite can give the lessee ALL the advantages they would have if the home was sited on their own parcel of real estate, there will NEVER be a perfectly level playing field relative to interest rates where personal property and real property loans are concerned. (‘In my former life, I was also a banker, and served on the loan board’…besides being a community owner and independent – street – MHRetailer.)” BB (lightly edited. GFA)
Furthermore, in the opinion of the respondent cited above, “A level playing field would require the land lease community to be owned by the tenants, who’d have ownership to whatever their percent ownership of the entire community amounts to. Similar to a condominium development….” GFA Note. This similar to the mini-trend conversions of for-profit communities into resident-owned communities (i.e. ‘ROCs’), via forming of cooperatives, then securing acquisition-financing via specialty multifamily lenders. GFA)
50 years ago, a city planner and professor at Missouri University in Columbia, MO., considered by some at the time, to be the ‘Patron Saint of Mobile Homes’, expressed this opinion in private conversation:
“Rental mobile home parks will eventually cease to exist.”
And know what? More and more it appears his prophesy might be fulfilled. How so? Seems more and more folk, within and outside the manufactured housing industry ‘want big pieces of the action’, to the detriment of the business model. Examples:
• Recent private equity consolidators of land lease communities have rewritten the traditional 3:1 Rule of Thumb for estimating rental homesite rates, trending towards a 2:1 Rule; e.g. Local housing market conventional apartment rent @ $1,000/month? Then, 3:1 Rule suggests $333/month rental homesite rate; whereas, 2:1 Rule suggests $500/month; meaning $167/month ‘less house’ homeowners/site lessees can ‘affordably’ purchase in that land lease community with higher site rents.
• Some HUD-Code housing manufacturers appear to be slowing the industry’s heretofore steady return to a 100,0000 units/year shipment volume, by increasing wholesale pricing of their product by 15+/-% every six months or so. Some opine this has to do with awareness of community owners selling new homes at minimal profit margins, to speed filling vacant rental homesites, preferring long range permanence of site rent as annuity income. Think about it.
• Independent third party chattel lenders continue to offer manufactured housing financing, of the conventional real estate type & personal property loans, to would be homebuyers, as well as homebuyer/site lessees. This is where the disparity between lending rates, oft a 3+/-% difference, comes into play. The disparity becomes especially clear when said lenders, besides insisting on higher interest rates for personal property loans, also require personal guarantees of these loans by land lease community owners. Kinda like ‘wanting one’s cake and eating it too’.
• The GSEs (i.e. Fannie Mae & Freddie Mac) continue to fashion their Duty to Serve (‘DTS’) programs to support the sale of, and lending on, manufactured homes going onto scattered sites conveyed fee simple, e.g. MH Advantage & Choice programs of late. In the meantime, little to no relief to date, for the chattel capital folk, where lending support is needed most, for new HUD-Code homes installed on rental homesites in land lease communities.
• Local housing market land planning and zoning penchant for regulatory barriers to all forms of affordable housing, stifle the development of new land lease communities, hence less inventor of truly affordable shelter for area workforce, low income, and very low income citizens. So NIMBY (‘Not in my back yard!’) continues to prevail despite recent nods of support to the fledgling YIMBY (‘Yes, in my back yard!’) movement.
And the list goes on, but surely you get the idea. It’s not at all like land lease communities are on their last legs. Rather, they continue to be grossly underutilized as a primary source of affordable, obtainable housing and lifestyle on one hand, while being sorely abused by others, at the same time.
Bottom line of sorts? As the aforementioned Missouri professor also allegedly proclaimed: “GREED killed more than the Golden Goose!”
Two Key Positions to Be Filled in 2020
• New salaried executive director of the Manufactured Housing Institute (‘MHI’)
• Non-career administrator of the manufactured housing program at HUD
I’ve been asked to recommend candidates for both positions. If you believe you are qualified, experienced and motivated to fill one or the other of these two key national roles, apply directly to MHI & or HUD; or let me know of your interest via email@example.com
And or, if you know someone familiar with manufactured housing and land lease communities, who – in your opinion – is qualified, experienced and motivated to take on either of these heady job responsibilities, do likewise! But if you prefer, let me know of names and contact information via GFA c/o Box # 47024, Indianapolis, IN. 46247.
Why was I asked? Probably because I had been encouraged, from several quarters, if I’d be available for one of the two positions. But I made it clear, relocation to Washington, DC. is not an option for Carolyn and me. However, I do plan to be ‘ready & willing’ to attend meetings and working sessions there, if invited, re manufactured housing & land lease communities, with HUD, FHFA, the GSEs, & DOE, as well as MHI, MHARR, NAMHCO, and other NGOs.
Manufactured housing, as an industry, is on the threshold of doing Great Things in 2020, where affordable obtainable housing is concerned. But it sorely needs capable, experienced, motivated new leaders at MHI and HUD, to ensure this occurs. And this is your opportunity to help make it happen! Have your recommendations to me by the end of July 2019. Thank You.
George Allen, CPM, MHM
• 5 August at the RV/MH Hall of Fame in Elkhart, IN. During the day, meet with Spencer Roane, MHM, and me to discuss ‘evergreen (MH) issues’, the new E-HOP chattel capital program for MHs sited in land lease communities. Let me know of your interest: (317) 346-7156. For RV/MH Hall of Fame banquet tickets, phone (574) 293-2344
• 8-10 September in Indianapolis. 28th Networking Roundtable. For details and to sign up, visit www.educatemhc.com