Stealth Starbucks & ManuFractured Housing

Stealth Starbucks & ManuFractured Housing!

Short story how Starbucks is reinventing itself. Lesson for manufractured housing?

During mid – 2009, “…Starbucks tried to avoid being judged by its own label by
opening its first unbranded coffee shop. The ‘stealth Starbucks’, as the distinct
Settle outlet immediately became known, is decorated with ‘one of a kind’
fixtures and , unlike regular Starbucks shops, customers are invited to bring in
their own music for the stereo system, and their own pet social causes for the
message board. The only hint of branding is the fine print on the backs of menus:
‘Inspired by Starbucks.’ After spending two decades trying to blast its logo onto
every conceivable surface, Starbucks was now trying to escape its’ own brand!”

Quoted from ‘No Logo (the book) at 10’, in the Baffler magazine. Vol. 2, No. 1, p.30.

Question: If Starbucks is trying to escape its’ own brand, as good as it is; isn’t it high time for manufractured housing do the same for a better brand?

To help you think through that possibility, here’s our industry’s scenario in three parts:

The Problem!, The Challenge!, The Opportunity!

based on the premise: ‘No New HUD Code Homes Manufactured by 2020!’, and as many of our peers are now saying: the universal distress signal SOS (Save our Ship!) has become, for manufractured housing, SOI (Save Our Industry!). So, with that said…

The Problem has only gotten worse…

While it took brass to go public predicting ‘No New HUD Code Homes Manufactured by Year 2020!’, verbal and written blog response sentiment, by email and phone calls, to this MHIndustry observer and blogger, has been supportive:

“If our industry’s leaders don’t get on the stick NOW, there’ll be ‘No New HUD Code Homes Manufactured by 2015!’

“ManuFractured Housing (moniker) is really cool, and most adequately represents our industry’s current condition!”

And latest year end HUD Code housing shipments for 2009, are running around 46,000; below the predicted 50,000 worst case scenario guestimate earlier in the year, under the 81,889 in 2008; and light years from the 372,843 shipped in 2008.

How, you say, can this be possible? Inaction and misaction in several different ways:

Continued dearth of third party chattel (personal property) financing! Yes, I know you/we’ve heard this before, but that doesn’t make the emergency any less real and serious. But now the tragedy is playing out on not just one, but two fronts, and more:

First; FHA Title I. Ask yourself: ‘How long have we been waiting and waiting for this, hearing one empty assurance after another, from industry leaders and lenders?’ It’s truly become, ‘The promise that isn’t!’ Time has come to learn the real reasons FHA Title I has not, and likely will not, materialize for HUD Code manufactured housing! Accept no rehash of excuses intended to mollify! Some now suggest consolidation conspiracies exist in more than one segment of the MHIndustry, with the nefarious goal of ensuring ‘the survival of one, or a very few, at the expense of everyone else’.

Second; Self – finance. You know, of the ‘captive finance’ and ‘buy here – pay here’ varieties, so commonplace on – site in landlease communities, where new and resale homes are routinely marketed and sold these days. You know, the ‘carrying of paper’ that’s mushroomed from a few million dollars a decade ago, when almost everyone decried the practice given its’ potential to devalue one’s LLCommunity investment upon disposition, to more than $3,500,000,000.00 dollars estimated to be now held among just the 500+/- known portfolio owners/operators of this unique income – producing property type.*1 ‘Ah, but here’s the rub!’ Once states have enacted and implemented their versions of the federal S.A.F.E. Act of 2008, look for this Survival Cum Profitable Business Model to all but disappear.*2 How so? Just look at the state laws, to this end, recently implemented in Ohio and Pennsylvania. Either you’ll be hiring an outside licensed chattel mortgage firm to handle loan origination and servicing functions for you, or you’ll likely find yourself getting licensed as a lender or mortgage broker, and anyone on staff even talking to homebuyers about home finance, being in need of criminal background checks; required training to pass mandatory mortgage licensing tests; and ultimately, formal licensure as a mortgage originator – or more. Reads like low level job security and restraint of trade to me.

And there’s more, much more…

Another growing major problem, has to do with the transfer of regulatory authority over manufactured housing, away from HUD, to other federal agencies and state governments.

Start with the proposed transfer of housing – related energy standards to the Department of Energy or DOE. This is a significant first chip out of the MHIndustry’s preemption protection.

Then comes the water sprinker issue. While an added expense for manufacturers when building a HUD Code home, have LLCommunity owner/operators thought about probable consequences when this regulatory authority segues from HUD to state governments? It leaves the door wide open for the National Fire Prevention Association (‘NFPA’) to lobby all existing homes in LLCommunities be retrofitted with water sprinkler systems! ‘Bye bye’ preemption; ‘Hello’ replacing your underground water system to handle the greatly increased design load!

Are you asking yourself yet, ‘Why aren’t our two national advocacy bodies telling me this? Well, they really are trying to do so, but in different (sometimes conflicting) ways and with different (tones of) voice, bearing with minimal success and results. For example…

Do YOU know about the non – career administrator position being overtly stonewalled by HUD leadership? As long as HUD does so, ‘their (career bureaucrat) man’ Bill Matchneer has effective control of OUR destiny as an industry and YOUR business future! His hands are in every issue just identified, including the S.A.F.E. Act of 2008! Frankly, the appointment of a non – career administrator to shepherd the HUD Code program is Our Last Best Hope & Opportunity to counter much of what’s just been described and much more! And that brings us to…

The Challenge to turn our titanic – like destiny around before…

How? Become informed, become involved, and demand action! In other words, ‘If you’re no longer content to sit back as part of this growing Problem, accept this Challenge, and become an active part of the Opportunity to ‘Save Our Industry’!

By the time you read this blog, it’ll be nearly too late for YOU to make arrangements to attend MHI’s Winter meeting on 1 & 2 February 2010, in Savannah, GA – where HUD’s Bill Matchneer will be a keynote speaker. But try anyway; phone (703) 558-0678 and talk to Thayer Long, MHI’s executive VP, expressing YOUR opinion about the present conditions of, and the probable future of the MHIndustry & LLCommunity asset class. And, if not already a direct, dues – paying member of MHI, sign – up immediately! You’re no help to the industry or yourself, if you attempt to ‘Save Our Industry’! from afar, even via your state’s salaried and elected representatives to MHI meetings! It’s simply not the same, nor nearly as effective, as YOU being present!

If attending the MHI Winter meeting, as I am, go prepared to ask hard questions and demand honest answers. One of the foremost should be, ‘Where’s the much – vaunted Manufactured Housing Congressional Caucus, of a couple years ago, in this regulatory mix?’ Here’s another I’m hearing frequently these days: ‘What individual or individuals effectively shape the regulatory posture and political thrust of the two advocacy bodies in Washington?’ Well, with MHARR, it’s pretty simple. A bevy of small HUD Code home manufacturers give Danny Ghorbani his specific marching orders. MHI? Much more complicated and vague. Its’ 21 member Board of Directors? Highly doubtful, as that’s akin to ‘management by committee’. The recently dollar – empowered National Communities Committee (‘NCC’) division? Maybe in time, but those members aren’t yet knowledgeable of, or sensitive to, the causes, effects and nuances of HUD’s covert maneuverings. One manufacturer? Maybe. MHI’s salaried executive? No; new to the job and responsive to the whims of elected leaders. The few executive committee members of the Board of Directors? Probably. And that’s the point! Give at least five alternatives, how are we, as direct dues – paying members of MHI, to know who really shapes and directs the regulatory posture and political thrust of this advocacy body, along with our collective business futures? I’d like to know; how ‘bout YOU? Other timely and pithy questions? Reread previous paragraphs and zero – in on the issues! Call and ask Danny Ghorbani, at MHARR, for input: (202) 783-4087.

The Opportunity for a new & better future…

New Business Model needed to convert manufractured into A.C.E. housing!*3

It’d be premature here, to introduce anything different from today’s status quo. However, depending on what, if anything – proactive and substantial, comes out of MHI’s Winter meeting, there’ll be two divergent different paths for the manufactured housing industry to consider; one, is to be more united and stronger than we are today! The other? Well, let’s just wait and see, for the time being. Are you keeping 26 February 2010 ‘open’ on YOUR Business Survival calendar?

A hint. One sage MHIndustry veteran recently penned this email message to me:

“I believe HUD Code housing manufacturers, MHRetailers, LLCommunity owners, and financiers need to gather in the same room and be given the Clear Challenge to Work Together! They need each other, even though they often function like they do not. Our business is not particularly complicated. It is – or should be, Customer Driven, not factory or retailer driven, not LLCommunity or financier driven. All four segments of the industry must work together to meet the customer’s need for housing!” NB (lightly edited. GFA)

To which I’d add. This needed revival, restoration, resuscitation, reawakening, and renewal (Or is it rethinking, reinventing, reorganizing?) has not, and likely will not, occur in a regularly scheduled meeting of any formal trade organization or advocacy body. It must be a separate venue, driven by a bona fide industry wide need; in this case, to Save Our Industry! Similar precursors occurred twice during the past two years; first, when LLCommunity owners/operators convened on 2/27/08 in Tampa, FL., to identify and codify focus for the asset class going forward*4; then when HUD Code home manufacturers and LLCommunity owners/operators convened on 2/27/09 in Elkhart, IN., to ascertain what it’d take to sell more new manufactured homes into this unique income – producing property type, than at any time since the early 1970s.*5 Tangible results? You bet! Which begs the question, now – and – again: Will anything proactive and substantial, relative to achieving MHIndustry strategic focus, advocacy unity, and restored vitality, result from MHI’s Winter meeting in Savannah, GA., next week?

In the meantime, feel free to communicate your views to me by replying to this blog, via email:, MHIndustry HOTLINE: (877) MFD-HSNG or 633-4764, or (317) 346-7156. What do you think manufractured housing’s New Business Model should entail, contain, and do?

Look at it this way. If Starbucks thinks it wise to, at least in part, ‘escape from its’ own brand’, via stealth Starbucks; surely the manufractured housing industry, with shipments as bad as they are today, at a 60 year nadir, should at least consider if and how to escape from its’ image and brand, into one more promising and profitable!

The Countdown nears its climax…

End Notes.

1. See 21st annual ALLEN REPORT, available from PMN Publishing for $250.00 or ‘free’ with a one year subscription to the Allen Letter professional journal @ $134.95/year (12 issues). Just phone the MHIndustry HOTLINE: (877)MFD-HSNG or 633-4764, or (317) 346-7156.

2. Safe And Secure Enforcement of Mortgage Licensing Act of 2008

3. Uniquely Attractive, Cost – Effective residences that are American – made, Comfortable & Energy – efficient!

4. National State of the Asset Class (‘NSAC’) caucus; an international, informal, quasi realty investment and property management body specializing in the landlease (nee manufactured home) community real estate asset class.

5. Historic SUMMIT Meeting

George Allen, Realtor®, CPM®, MHM Consultant to the Factory – built Housing Industry & The Landlease Community Real Estate Asset Class
Box # 47024 Indianapolis, IN. 46147 (317) 346-7156

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