‘Where’s There’s Smoke, There’s Fire’
Blog Posting # 631 @ 26 March 2021: EducateMHC
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: This has not been a comfortable blog to pen. Anyone who knows me, knows I’ve spent my career promoting and improving HUD-Code manufactured housing (via Community Series Home design in 2009, and monthly MH Shipment & Stock Market Reports) and land lease communities ( via books, newsletters and 32 years of ALLEN REPORTs) in every way possible! It’s long bothered me it takes two national advocates (i.e. MHI & MHARR) to represent big and small housing manufacturers; and, how the National Communities Council (‘NCC’) division of MHI stands idly by – or so it appears, as a few large property portfolio firms, including some from outside the industry, abuse our homeowners/site lessees with impunity. Somewhere along the timeline of manufactured housing, these anomalies must be addressed – by ‘us’ or by ‘someone else’. Which will it be? Read here and decide for yourself….GFA
‘Where’s There’s Smoke, There’s Fire’
This idiom, underscored by a proverb suggesting the “indication of a problem or wrongdoing, such a thing probably occurred or exists.” So what are smoke signals the manufactured housing industry and land lease community real estate asset class are experiencing in early 2021?
• ‘Monopolization of the American Manufactured Home Industry’ MHProNews
• ‘A ‘Hostage’ Strategy for (Mfd) Housing Investment?’ Private Equity Stakeholder Project
• ‘What Happens When Investment Firms Acquire Trailer Parks’, New Yorker magazine
It’s not my intent, in this blog posting, to dig into these three exposes’ appearing this month (March) in three different media; but rather suggest, in the words of Tariq Ramadan*1,
“If there is smoke, there is fire, that is quite true. But one should find what the fire is, and who lit it.”
During 40+ years in and around factory-built housing, and as a long time land lease community owner, I’ve seen ‘smoke come and go’, almost always signaling a significant challenge or issue (as opposed to ‘problem’) within the industry or realty asset class. For example, recall the:
• regulatory mashup upon and since the debut of the HUD-Code during the mid-1970s!
• clamor for effective land lease community national advocacy during the early 1990s, as real estate investment trusts (‘REITs’) formed and property consolidation accelerated!
• misguided attempt to compete with site-builders during the late 1990s*2 – resulting in the loss of easy access to chattel capital for home-only loans, and disappearance of 10,000+/- independent (street) MHRetailers, for 20 years; 2000-2020!*3 & 4
• Increasingly obvious downsides of two sector corporate consolidations, relative to small business owners (i.e. housing manufacturers & land lease community owners/operators*5), as well as severe reduction in the number of small business owner members supporting state manufactured housing associations nationwide!
There, I’ve said (& penned) it; CONSOLIDATION, the ‘bugaboo or crown jewel’ of manufactured housing and land lease communities nationwide!
To ‘out’ these latest two smoke storms affecting our industry and realty asset class is risky business for me. Why? Because I’ve pretty much ‘made my living’ since the late 1990s, 1) by identifying who the community consolidating portfolio firms were and are*6, and 2) tracking stock market performance of all nine public companies (i.e. four HUD-Code housing manufacturers and five land lease community portfolios).*7 Yes, CONSOLIDATION has made this dual task easier, to be sure, but I’ve also seen the ongoing consequences, pro & con, of these acquisitions and mergers. And that’s what the three named exposes’- all penned by outsiders, named at the beginning of this blog, are doing: identifying the mostly negative, significant consequences of CONSOLIDATION.
Within the HUD-Code housing manufacturer sector of the industry, is it a ‘good or bad’ thing for the three largest consolidated firms to garner 75+/- of national market share of new manufactured homes shipped nationwide? And what effect does it have, if any, that these Big 3-C firms belong to, and are major financial supporters of, the largest national industry advocacy institute? And the questions continue…
Within the land lease community sector of the industry, is it a ‘good or bad’ thing for “The Top Ten firms…comprised of three REITs…and seven privately-owned firms (during year 2020)…to own and fee-manage 559,216 rental homesites in 1,820 land lease communities…”? This compared to 926,828 rental homesites in 4,989 land lease communities reported by 92 of 500+/- known portfolio ‘players’ domiciled throughout North America? Yes, that’s how lopsided the rental homesites/property counts have become since CONSOLIDATION ‘took off’ during the mid-1990s.*8
So, where does all this leave us today? Hard to really say, without exaggerating.
Within the aforementioned HUD-Code housing manufacturer sector of the industry, the terms monopoly and fair trade are increasingly being thrown around, to account for how the largest firms better absorb changing and increased regulatory measures (costs) foisted on the industry by its’ regulators.*9
Within the aforementioned land lease community sector of the industry, the collective term ‘predatory landlord practices’ (e.g. exorbitant site rent increases, new ancillary charges, home sales and seller-financing) are increasingly cited by homeowner/site lessees, as significant impediments to their otherwise affordable attainabale lifestyle.
Once again, in the history of the manufactured housing industry – and land lease community realty asset class, we approach that proverbial fork in the road, offering us opportunity to self- police and address our CONSOLIDATION-related challenges in both industry sectors; or, as has been our sad practice in the past, sit on our hands and wait for someone else (e.g. tenant activists and government regulators) to come along and regulate us even further! What will be our choice?
1. Swiss Muslim academic and philosopher
2. Era of ‘big box = big bucks’ Development Series manufactured homes
3. 10,000+/- per MHI; (and) Two decade long paradigm shift, from year 2000 thru 2020
4. Independent (street) MHRetailers. A term coined by William Carr, freelance consultant to the manufactured housing industry
5. Owners/operators. A term coined by David Helfand when CEO of ELS, Inc.
6. 25 portfolio owners/operators in 1987; today, more than 500, per 32nd ALLEN REPORT.
7. 25 housing manufacturers in 1977; today, far fewer, beyond the Big 3-C Companies: Clayton Homes, CAVCO Industries, & Skyline-Champion. Performance tracked monthly in the EducateMHC: ‘MHShipment volume & Stock Market Report’. See www.educatemhc.com
8. Ibid., 32nd ALLEN REPORT
9. E.g. HUD & DOE, for starters
George Allen, CPM, MHM @ EducateMHC
Very Special Announcement! Monday, 29 March, is National Vietnam Veterans Day. If you know a Vietnam Vet, please reach out and Welcome him or her home. Seriously. There were no public ‘Welcome Home’ greetings and accolades during the 1960s and early 1970s. Semper Fi!