Archive

Posts Tagged ‘manufactured home communities’

About Government Forcing Manufactured Home Communities to Pay for Amenities

October 18th, 2016 No comments

I received your email on the article that highlighted the amenities package on which the counsel person in Austin was planning to introduce legislation. It was an interesting concept and one that may be a little misplaced.

ascentiacommunitiescollage-manufacturedhomecommunityindustryvoicesguestblogmhpronews

Editor’s note: the image collage above is by MHProNews, and was not part of the guest writer’s article or commentary. This is provided for those who are not familiar with this operation, and thus enhances the understanding of the guest writer’s commentary.

My comments on the article would be as follows:

1)      For new communities (developments):

  1. It seems to me that the amount of amenities depends largely on the clientele of the park. Nicer (4 and 5 star) communities likely already will have these amenities, so it’s a non-issue. However, lower quality (and therefore cost) communities are likely to, as you mentioned in your email, have to increase the pricing on their rent in order to accommodate the loss of rentable area and the development of the amenities.
  2. Notably, there was no talk of providing anything in the way of property tax or other tax incentives as are often done for other multifamily property types. If affordable housing is in such dire need and the council members would like them to be of higher quality (with more amenities and such), then why hasn’t the city council put their money where their mouth is and provided some incentives to bring the housing into the market?
  3. At the end of the day, this probably will have the same effect that it has had in other cities where they make the zoning and development more difficult. New developments will move out of the city and into the county where the laws are less restrictive and it allows them to provide an amenities package that is more consistent with the pricing of the product.
aboutforcingcommunityamenities-mirkomjvokovichbellwetherenterprise-manufacturedhomecommunityindustryvoicesguestblogmanufacturedhousingindustrymhpronews

Image collage and headline are by MHProNews. The link at the top of this article is a download to the topic which drew this thoughtful commentary.

2)      For existing communities:

  1. The advent of a “community garden” is probably fine with most owners as it is a smaller space and requires little to no capital investment.
  2. However, there are a number of communities in which adding that space would require taking away a home site. I would suggest that the city, again, put its money where its mouth is and purchase the lots which they would like to see a community garden or play area for 125% of appraised value since this would be, in effect, eminent domain.
  3. In purchasing the sites for play space and a garden, cities could make the argument that they are helping to keep and improve quality affordable housing while not devaluing the property for the community owners.

Those are my basic thoughts. It was an interesting article and I don’t wholly disagree with the sentiment that it would be nice to have higher quality MHCs out there. However, someone has to pay for it and considering that low income housing is in low enough supply as it is, city councils may want to be a little careful how much they burden those trying to bring the product to the market.

Thanks,

MJ

mirkomjvokovichbellwetherenterprise-manufacturedhomecommunityindustryvoicesguestblogmanufacturedhousingindustrydailybusinessnewsmhpronews

 

MJ Vukovich
Vice President
Bellwether Enterprise
225 South 6th Street    |    Suite 4100    |
Minneapolis, MN 55402

 

(Editor’s Note: MJ Vukovich’s commentary is on the same topic as the comments from TMHA’s DJ Pendleton, which are linked here.  Thoughtful, original commentary on issues that impact manufactured housing professionals or our customers are welcome.)

California Housing Crisis: Manufactured Homes Could Be Part of the Solution

October 14th, 2016 No comments

Costly government regulations have stifled the development of attainable housing

October 14, 2016 (Sacramento, CA) – In an effort to educate public policymakers on how mobilehome parks operate and how the misapplication of rent control has contributed to California’s housing crisis, the Western Manufactured Housing Communities Association (WMA) has launched a statewide public education campaign.

There is no question that California is one of the most expensive places to live in the country,” said Sheila Dey, Executive Director of WMA. “So when the purchase price of a mobilehome can be up to 30% less than a traditional home, state and local government should be creating incentives to build more mobilehome parks and not less.”

manufacturedhomeskitcaliforniamanufacturedhousingindustryvoices-mhpronews

Fish-eye lens camera view of California manufactured home by Kit, – this photo was not part of WMA’s original column. Photo credit, ManufacturedHomes.com

Rent control is a reaction to local government’s failure to plan for their community’s future housing needs. When attainable housing is no longer accessible, politicians force parkowners to subsidize a tenant’s housing costs regardless of income, which often leads to a reduction in park amenities and in some cases, lawsuits when rents do not cover a park’s operational costs.

California has created a regulatory environment where existing parks are threatened by rent control ordinances that undermine a park’s economic sustainability, and cost prohibitive building regulations and fees that have stifled the construction of new parks. As a consequence, it’s been decades since a new mobilehome park has been built in California.

rentcontrollocalgovtfailureplantakelandlordsrights-sheiladeywesternmanufacturedhomecommunitiesassociationwma-postedindustryvoices-mhpronews

Graphic credit – MHProNews.

Building more manufactured home communities could ease California’s housing crisis,” said Dey. “But first, politicians are going to have to address rent control’s failure and reduce building fees, and at the very least, require means-testing so that rent control truly benefits the needy.”

In an effort to educate policymakers, WMA has released a video which explains how parks operate and how they have become a source of quality housing for scores of people from all socio-economic backgrounds. To demonstrate its misapplication, the video showcases a rent control park in Malibu, California, where millionaires live in beachfront properties, and for some, the properties serve as a second home.

 

 

Fast Facts

  • Mobilehomes offer all the quality and comfort of traditional homes, for up to 30% less.
  • Unlike a traditional rental property such as apartments, mobilehome parks operate like small villages or cities. Rents often cover property taxes and fund essential neighborhood services, such as, park management, utilities, cable, roads, landscaping, security, recreation and more. When rent control ordinances reduce or freeze rents at below market rates, services can be reduced like a city facing budget deficits.
  • Rent control ordinances do notrequire means-testing. As a consequence, park owners are required to subsidize the housing costs of tenants, regardless of their need.
  • In an extraordinary case, a father and son want to close their mobilehome park, but the  City of Palo Alto is standing in the way by threatening to forcibly seize it by eminent domain.
manufacturedhomecommunitiescalifornia-postedmanufacturedhomeindustryvoices-mhpronews

Image collage inserted by MHProNews.com, and was not part of WMA’s original column.

  • Very much like homebuilders, costly regulations and fees do not provide financial incentives to expand or build new mobilehome parks in California, limiting the potential for new stocks of attainable housing. Even though mobilehomes are a source of affordable housing, not one park has been built in California in decades.
  • Rent control regulations can cost local governments millions of dollars to administer and to legally defend; all at the expense of other government servicesand programs.
  • Rent control can lead to lawsuits when parkowners are denied their right to a fair and reasonable return on their investment. This year, afederal jury unanimously found that the City of Carson’s mobilehome park rent control ordinance violated the constitutional rights of a parkowner in Southern California. The parkowner was awarded $7.5 million in damages.
  • Many parkownerssupport long-term lease agreements and direct rental assistance programs, which provide bonafide rental protection and help to those mobilehome park residents truly in need.

To follow WMA’s campaign to reform the failed practice of rent control, visit

www.wma.org/real-housing-solutions,

www.facebook.com/realhousingsolutions and

twitter.com/CAHousingFix ##

sheiladey-wma-westernmanufacturedhomecommunitiescalifornia-postedindustryvoicesmhpronewsSheila Dey & Marko Mlikotin

WMA

 

(Editor’s Note: Rent Control and Measure V (see our latest story, linked here and in the image below) have both local and national importance. So MHProNews offered to provide this forum for this column to be republished.  Other industry perspectives are welcome – indeed, there are other professional views on rent control in recent Industry Voices guest blog posts. Scroll down below or see the listing below the banner ads on the right.

As a matter of public policy, editorially MHProNews opposes rent control as contrary to the long-term interests of all involved.)

battleovermeasurevyes-no-manufacturedhousingindustrydailybusinessnewsmhpronews-575x214

 

ireportmhnewstipsmhmsm-com-mhpronews

To submit your own thoughtfully written guest blog post, please use the email address shown above, and put Industry Voices Guest Blog in the subject line. Attach a photo you want to use with your column. Thank you – the editor.

Manufactured Home Community Owner Pounds “Park Owner,” Corruption in Government and Media Bias

August 30th, 2016 No comments

Tony, I agree with the Daily Business News article and the comments from other manufactured home industry professionals regarding Councilman David McCartney in Baytown. He should face criminal charges. However, we know that will not happen.

Once again, it’s the hypocrisy of our Government, this time, local government.

Properly operating a business is a full time job. Properly managing a MH Community is a full time job. There are many people who think they can own and manage a manufactured home community and keep their day job. I suppose you can, but the results are an absolute disaster.

 

ShouldFaceCriminalCharges-HypocrisyGovtLocalGovt--postedIndustryVoices-MHProNews-

Todd Lamb’s comment above is about the story, linked here.

Regarding the ABC News 13 report, also from the Houston metro. Crime occurs all over America. Apartments, houses, MHC’s, rich and poor communities – it strikes all over.

Sure, there is more crime in certain demographics, certain neighborhoods, certain sides of towns, etc.

But manufactured home communities that are well managed or in nicer sides of towns have little to no crime, while those that don’t get the proper attention may tend to have more criminal activity.

The attitude and practices of ownership and proper management of these communities is a major contributing factor to avoiding crime, but it’s not the catch all.

We work diligently to screen our people and have a no-nonsense attitude toward violating our community rules. This takes daily discipline and persistent dedication, usually not something that is going to happen while you are working another job.  But the results are a cleaner community, overall happy homeowners and less crime.

Thanks for all you do. ##

(Editor’s Notes: Todd Lamb is quite right about crime in manufactured home communities, as a study by independent researchers demonstrates, see article linked here. This post will be updated with a link to the story soon to be published that Lamb is commenting on, meanwhile, ICYMI, the Baytown story is linked here.)

ToddGLambLambInvestments1postedIndustryVoices_ManufacturedHomeCommunities-MHIndustry-MHProNews200x200

Todd Lamb
Lamb Investments, LLC
TMHA: Texas Manufactured Housing Association member
Black Raider Oil
Houston, TX area

Why Retailers and Community Operators should go to Tunica!

March 19th, 2014 No comments

As I read the digital 2014 Tunica Show brochure and business building and profit protecting seminar line up, it became crystal clear why Retailers and Community Owner/Operators ought to be in Tunica next Wednesday morning through Friday at noon (March 26-28)!

Retailers and Communities can get free:

  • Networking with your peers,
  • Compare Manufacturers side by side, over 80 homes will be on display!
  • Compare products and services needed by your business side by side,
  • Get the latest on Manufactured Home Lending available TODAY, from all the major lenders all under one roof.
  • Get expert guidance on Commercial Lending on MH Communities,
  • Get marketing and sales tips in the Dominate Your Local Market 2.0 Seminar, featuring manufactured housing marketing and sales veteran, L. A. “Tony” Kovach.
  • Compare CRM products in a free panel discussion with Scott Stroud and myself, and learn why they are a key to growing your sales in 2014 and beyond.
  • Get success tips on MH Communities (MHCs) from pros with successful firms who know!

Let me give you a quick snapshot of the last bullet point above, which will provide the reasons you need to grab your business cards, and have your photo ID so you can enter the Tunica Show, free!

In the last decade, as the numbers of retailers and shipments declined, manufactured home communities (MHC) have of necessity become on-site-home leasing and selling operations.

Communities have always had to do the types of services and duties that developers and multi-family operations have provided in the conventional housing world.

Tunica has become a magnet in recent years, attracting more communities as well as more retailers than in prior years.

Here is the line up of on the panel for MHC Lessons Learned, to be held Thursday, 10:00 AM – 10:55 AM on March 27th.

Success Tips from Manufactured Home Community Owners & Executives!

For anyone in or thinking about getting into the land-lease community business, this panel discussion is for you! Hear practical tips from community operators that can help you operate your community more professionally and profitably.

jenny-hodge-national-coummunities-council-ncc-industry-voices-manufactured-housing-pro-news

Jenny Hodge, Vice President of the National Communities Council (NCC), will be your panel moderator.

You can learn more about Jenny in this month's MHProNews exclusive interview A Cup of Coffee with…Jenny Hodge.

tammy-fonk-8-2013-cbre-posted-mhpronews-industryvoices

Among those on the three person MHC panel is Tammy Fonk, an Associate with the CBRE MH/RV National Group. Tammy was born and raised in the MH industry with two family owned communities. She operated the family owned company's sales and marketing business as well as having an active role in day to day community operations and resident relations. As a member of the MHRV Team, Tammy now works closely with public and private investors on building business relations and opportunities to enhance the Manufactured Housing Industry as well as the RV Resort and Marina properties in North America. Tammy works with owners and buyers of small, medium and larger communities in addition to representing large portfolio owners.

maria-horton-newport-pacific-capital-posted-industry-voices-manufactured-housing-pro-news-com

Maria Horton is a regional manager with West Coast powerhouse, Newport Pacific. Maria's bio is linked here, but having met her, let me tell you what her resume doesn't say. This is a warm, delightful engaging professional! You will love to hear here insights and experiences on this panel discussion.

rick-rand-great-value-homes-l-sam-zell-equity-lifestyle-properties-els-chair ... layton-clayton-bank-chairman-industry-voices-manufactured-home-pro-news

Rick Rand (l), Sam Zell (c), Jim Clayton (r)

Last and not least, is Rick Rand, who made quite a stir recently with this guest column. Rick was the subject of another MHProNews.com interview, A Cup of Coffee with…Rick Rand.

If online registration for the Tunica Show is closed by the time you read this, don't worry! You can bring your business card and a photo ID, retailers, communities, builder-developers, realtors and installers will be able to sign up at the door, free with those credentials!

Let me close with a tip of the hat to L. A. Tony Kovach. Dennis Hill recently gave Tony quite the well deserved public shout-out, for his key role in the come back of the Louisville Manufactured Housing Show.

Community Operations executive Ted Gross, with Continental Communities praised his session as being the best marketing presentation he had seen since coming into the MHC business.

We've worked with Tony about 90 days now, and let me tell you from first hand experience his deep passion for the MH Industry.

Tony cares about the success of people, operations and loves to see happy consumers enjoying our product.

I don't personally know of anyone who gives more time away for the benefit of the industry.

Tony's consulting and banner ads have helped our company's growth and presence in MH significantly! On MHProNews, he brings out the articles, experts and tackles the topics others shy away from, and is a friendly, peace loving professional and family man.

When you think about it, Tony's efforts to inspire our industry to do more and grow at shows like Louisville and Tunica are part of the rising tide of sales in our industry. You may or may not know it yet, but he makes you money just by being here and spreading the good word about our industry on sites like ManufacturedHomeLivingNews.com and here on MHProNews.com.

These are among the reasons why I'll be voting for him as MHI Supplier of the Year, and I hope others that read this will consider doing the same.

We will be at booth 13H in Harrah's Convention Hall. Change your plans! Make your travel arrangements! Fly, drive or hitch a ride, but we hope to see you in Tunica for the 2014 Tunica Manufactured Housing Show! ##

brad-nelms-coo-manufactured-homes-com-posted-mhpronews-comBrad Nelms
COO
ManufacturedHomes.com

Communities Themes Point to Rebound and Revitalization

September 25th, 2012 No comments

by Richard “Dick” Jennison

richard-dick-jennison-ceo-mhi-1-posted-industry-voices-mhpronews.com-mhmarketing-sales-management-75pxl-75pxl-As President and CEO of the Manufactured Housing Institute (MHI), I participated in a manufactured home communities focused event held this year in San Diego, Calif. During my presentation, I took the opportunity to educate the approximately 250 members of the land-lease community sector of the manufactured housing industry on the work that MHI undertakes each day representing industry interests in Washington, D.C. I also outlined the benefits and importance of the National Communities Council, the only national organization devoted to advancing the interests of manufactured home community owners, managers, developers, lenders, brokers and service suppliers. Such forums as this also provide me an excellent opportunity to hear first-hand from industry members and to clarify and reinforce MHI positions on key industry issues.

The annual gathering of the land-lease manufactured home communities industry drew approximately 250 attendees from 27 states to discuss the state of land-lease communities.

Reinforcing the sentiments of other manufactured housing industry events over the past 12 months, the meeting featured three key themes:

  • a renewed or new confidence in the role and value of land-lease manufactured home communities;
  • innovation on the part of manufactured home builders in terms of new, creative designs for homes built specifically for placement in land-lease communities, as well as new financing programs designed to assist communities to retain residents and boost occupancy rates; and
  • the continuing need for dialogue between financial lenders/analysts and community owners on how to accurately valuate land-lease communities.

On the first point – renewed or new confidence in land-lease communities – it was both somewhat surprising and encouraging to hear more than two dozen investors declare their strong interests in acquiring land-lease communities across all regions of the country. This level of enthusiasm and confidence will be critical in maintaining and rebuilding land-lease manufactured home communities as a viable housing option for low- and middle-income American families.

As to the issue of innovation by manufacturers in home designs, there were numerous “business development officers” from major manufacturers who were there with the sole focus of reaching out to community owners to showcase their new series of manufactured homes designed specifically to accommodate the smaller lot sizes of older land-lease communities. From what I heard and saw, their efforts were greatly appreciated by the community owners who are looking for ways of upgrading and filling their communities with homes that appeal to a broader audience.

Another key factor in maintaining manufactured home communities is helping community owners and managers keep their occupancy rates strong and ensure the financial viability of communities. Several new financing programs designed to build partnerships between the financial services sector and community owners, such as the C.A.S.H. Lending Program from 21st Mortgage Corp., were highlighted and generated a significant interest on the part of the community owners. Again, this ability to fill communities with new residents and new homes is vitally important in maintaining the viability of land-lease communities.

Yet the meeting was not without some points of debate.

There was continuing concern voiced over how financial analysts and investors valuate land-lease communities, with many community owners encouraging analysts and investors to rethink their valuation formulas and approaches. While this “friction” is not ideal, the point is that this issue was openly discussed and methods for resolving it are “on the table.” Such open communication and debate are the proper way to creating valuation methods that serve both the investors’ and owners’ interest.

All of these meeting themes – even the need for ongoing dialogue – reinforce the positive outlook for our industry that I hear and see every day, both from our industry colleagues and from people interested in being part of our industry renewal.

Land-lease manufactured home communities are critically important to the residents who live and depend of them for a “quality-of-life” hard to find elsewhere in today’s housing marketplace, as well as to the owners and operators who have invested so much time, energy and resources to build and maintain their communities.

It is genuinely encouraging to see and hear that all forces within the communities sector are moving in the right direction, looking at the future with confidence and innovation. Such sentiments bode well for both the communities sector and the manufactured housing industry at large. ##

richard-dick-jennison-ceo-mhi-1-posted-industry-voices-mhpronews.com-mhmarketing-sales-management-75pxl-75pxl-Richard Jennison is President and CEO of the Manufactured Housing Institute (MHI). He can be contacted directly at (703) 558-0678 or visit www.manufacturedhousing.org.

What is the the future of independent Manufactured Home Communities?

October 22nd, 2011 1 comment

A question brought up by an individual at a real estate investment group meeting in  Tacoma, WA did not get answered at that time so thought I would attempt to put my perspective on it and then get feedback as to other people’s opinion.

The question:   Where do you think the MHP industry (a.k.a. Manufactured Home Park, Manufactured Home Community, Land Lease Community) is headed?

To start, I will explain some of the chatter on the internet on this subject.

Many are under the impression that within 5-7 years the MHPs will fade into history. Manufacturers are not listening to MHP Owners and are not building the types of manufactured homes needed to fill the lots available in the older MHPs.

The MH Retailers have such a high markup from the factory price that the end users cannot afford their homes.

Banks & Mortgage Companies are not interested in financing a “mobile home” that is not attached to land.

So MHP Owners have had to step in and do the financing for the individuals looking to buy. Politicians are trying to over-regulate the industry by passing new laws dealing with financing, rent control, maintenance issues. Their interference with the free market is killing the industry overall.

On paper in WA (lip service?) some politicians have made efforts to extended benefits to help Owners maintain and develop MHPs as the last form of affordable housing. Yet they did not provide funding to support their magnanimous ruling on paper.

On top of all this the taxes keep going up – calculated as a commercial operation according to the Pierce County Assessor’s Office instead of as multifamily residential. That is where it stands. In order to bring some relief to the overall picture all parties need to get together and work out a solution.

There are numerous summits and all of the above are represented, except there are no representatives from Mobile Home Park Owners that count. The ones who have 500 -1000 units are there, but they do not represent the ‘mom and pop’ MHP Owners as a whole.  Community Owners need to get their input into these meetings in some way.

Another problem that will arise is that many Owners are from out of state and depend on a mismanagement company to run their operations. They do not have an office on site – their office is 5-10 miles down the road or more. These MHPs fall into a state of disrepair and then the city officials step in and close them down.

The tax base from the personal property taxes are not very much. By closing the MHPs down, then they can build a new car dealership or motel that brings in more taxes for the city. Watch over the next 3-7 years to see how many MHPs are closed by city officials and not a developer Buyer.

As for the smaller operations – business will continue as usual. A home is abandoned – take it over, rehab it or have a Lonnie Dealer do it for you with you providing concessions for them. Sell the homes and finance it with a note. Same with those that are selling their homes: Buy it at a discount, rehab it, sell it on a note – never RENT a MH. If repo homes come available in another MHP – the Owner of that MHP should jump on the opportunity of keeping the home in their MHP. If they do not and it is available, you need to buy it, relocate it to your MHP and get it occupied.

Several of the trainers for the Washington State Mobile Home Community Owners Association have provided classes explaining to all in attendance that for each home that comes into your MHP you increase the overall value of your MHP.

For example if lot rent is $400/month and you bring in a home to fill a vacancy. The rent for one year is increased by $4800 (12 X $400). Dividing this by 0.10 (10 CAP) the value of your MHP just increased by $48,000.00. As long as you have the frame in your MHP, the mobile home can be rebuilt and your income stream will continue to flow in.

One MHP can be considered a pretty decent retirement plan. Most people who get involved in the industry are not satisfied with just one and may have more. Just be careful not to get overextended. Why?  The scuttlebutt on the internet is that the commercial loans will have the same problems as the residential loans. One cause is that loans are not being made. The financial institutions are saving their funds for when interest rates climb to 11-12%. (A rumor was started that this was supposed to happen in November 2009). The main cause will be that the banks and mortgage companies will be sticking their noses up in the air and looking down on financing or refinancing of MHPs. Many MHP Owners have 3-5-7 or 10 year balloons that will be coming due soon.

Last year at the convention I brought this up and one of the instructors stated that one of his clients was in this type of predicament. One solution is for the use of Private Money to bail out fellow MHP Owners. The elimination of the banks and mortgage companies would be a great relief to many. Yet, who has deep enough pockets to take them out of the picture?

Email me your thoughts as to where you see the MHP industry going in the future. The above is my own personal observation of where things are going.   # #

Dale Osborn
Owner of 1 MHP in CO and 2 in WA.
dale_w_osborn@msn.com

The Manufactured Housing Industry is ready to replace homes in Minot.

September 20th, 2011 No comments

The manufactured housing industry is ready to replace homes in Minot. Manufactured and modular home builders have the unique ability to build homes fast and in large quantity. Many Minot area residents are shopping for new homes, anxious to find something before winter. The area home retail centers are ready to help, but when the customers ask “where can we put these homes?” there are no answers. Why is the government moving so slow to help open lots for these people. Home removal in existing manufactured home communities is a major hurdle. In past press conferences, existing manufactured home communities were identified by FEMA as the fastest way to get people back into their permanent homes.

What is being done to remove homes in these communities that are destroyed? The homeowners in most cases can’t afford or coordinate the removal of these homes and in some cases they have completely abandoned their home. FEMA indicated in a previous press conference that they were looking for ways to expedite the process of removing flooded homes from these communities.

Time is running out. The potential for many homes to be replaced this year in established locations is fading away. The Minot and surrounding area has eight manufactured home communities that were flooded, which represents around 800 lots. These manufactured home communities have to do infrastructure repair and replacement, but the homes must be removed to be able to do that. The government did so much to remove trash and demolition materials from all of the valley neighborhoods, but it seems they left the manufactured home communities to fend for themselves.

Having 800 lots sitting idle through this winter would be a shame. While the government is building lots for temporary housing, 800 lots for permanent housing sit idle. A plan needs to be in place in days not weeks and not months.

Lance Kennedy,

President of the North Dakota Manufactured Housing Association,

Used with permission of

Minot Daily News

Dodd-Frank Act and Manufactured Housing

July 12th, 2011 No comments

Editor’s Note:  Received from the Manufactured Housing Institute (MHI), July 2011, thanks to a communication from Executive Director Thayer Long

The Wall Street Reform and Consumer Protection Act of 2010 (or “Dodd-Frank”) is approximately 2,200 pages long and affects all financial service products, including manufactured home loans.  Because of the legislation’s enormous size, complexity and its broad scope of impact, discussing it in piecemeal terms is difficult.  Even within the banking industry, community banks have a different focus compared with the large national banks.  For non-depository institutions, the same problem also exists.

Yet, there is a commonality of interest across a number of sectors.  Dodd-Frank contains a number of unintended consequences that impact a variety of industries and consumers.  For instance, with respect to the manufactured housing industry, Dodd-Frank was structured and written around a regulatory framework for real estate mortgages.  However, the bill essentially reclassifies all manufactured home loans as mortgage products.  Manufactured home loans not secured by real estate are not the same as mortgages.  To regulate all home loans the same way is an unsuitable model, which creates significant challenges to the industry and the consumers it serves.

Manufactured home loans have unique characteristics.  Manufactured home loans, in most cases, are much smaller than typical residential real estate secured mortgages and have shorter durations, which make transactional costs harder to recover.  Manufactured home loans have higher servicing costs than residential mortgages, requiring specialized knowledge and more personal contact and less reliance on technology.  Many manufactured home loans (with the exception of FHA Title I loans) are made with no government guarantees or potential losses to taxpayers.

How is the Industry Impacted?

First, the law creates a new standard for a “high-cost mortgage” loan which is based on interest rate spreads that fluctuate over time.  If the Annual Percentage Rate (APR) exceeds the average prime offer (the loan purchase rate established by Freddie Mac) by more than 6.5 percent, or in personal property transactions under $50,000 by 8.5 percent, then the loan is considered “high cost.”

For example, if the law became effective today a “high-cost mortgage” loan is any residential loan over $50,000 with an APR of 11 percent or more, or, a loan under $50,000 (if the dwelling is considered personal property) with an APR of 13 percent or more.  The law does not prevent “high-cost mortgage” loans from being made, but it does make it more difficult to make these loans, and it imposes a significant level of potential legal liabilities making them virtually impossible to securitize.

This is a problem because since our cost of capital is higher, manufactured home loan interest rates are typically higher.  Since Fannie Mae and Freddie Mac do not purchase loans or create a secondary market where manufactured housing lenders can access capital at a discounted rate, lenders need to rely on other sources to make loans.  These sources charge a higher interest.

Also, there are other fixed costs associated with making any kind of loan, such as fees for preparing the legal documents necessary to originate a loan.  These basic costs increase with each state and federal law and regulation that is enacted.  In addition, there are costs associated with each prospective borrower, including borrowers that are rejected and those who for whatever reason end up not taking the loan.  These costs also include a portion of the advertising and marketing that go into borrower acquisition, the costs of maintaining methods of communication, and the costs of determining loan eligibility.

This conflict is particularly compounded with existing manufactured homes sales, where loan balances tend to be smaller.  The loan may be smaller, but fixed costs are the same regardless of the loan size.  These fixed costs must be recouped in some way in order to make the loan.  Therefore, the only way to recoup these costs is by charging a higher rate.

If a lender decides to make a “high-cost mortgage” loan under Dodd-Frank, they must be prepared for a variety of new regulations, including

  • requirements for borrowers to undergo loan counseling by a HUD-Certified Counselor, the cost of which is expected to be $400-$600;
  • prohibitions that prevent financing points, fees and closing costs;
  • rules limiting late fees; and
  • rules requiring multiple disclosures to sell or assign “high cost” loans.

Second, Dodd-Frank does provide a path for relief through the definition of a “Qualified Mortgage (QM),” which is intended to provide a legal safe harbor from some of the Act’s more burdensome provisions.   However, the criteria that must be met to be considered a qualified mortgage include:

  • no balloon loans;
  • points and fees are restricted to 3 percent of the loan amount;
  • ability to repay must also consider taxes, insurance, and assessments; and
  • standardization of debt to income guidelines that have not yet been determined.

Again, because of the nuances in manufactured home lending, the definition of QM is unworkable for many loans made in our industry.  First, while balloon payments are not commonly made by manufactured home industry lenders, they are common with captive finance companies and local banks.  Second, the cap of points and fees at 3 percent coupled with our smaller loan balances will force lenders to charge a higher interest rate (thus tipping the scales and classifying them as “high-cost mortgages.”)

Communicating this in detail is complicated because the law’s impact will vary from lender to lender depending on their business model and the types of loans that they make.

What is true of all of the existing non-captive lenders involved in manufactured home lending is there is a limit, which varies from organization to organization, of how small a loan they believe they can make and still recover a reasonable amount of their costs.  Lenders will have to make a decision on what their lowest loan amount will be due to new limits on their ability to recover those costs.  To better understand this, a lender has only three ways to recover costs which are:

  • to buy the loan at a discount, which is only possible if there is a motivated seller involved in the transaction who is able and willing to accept a discounted payout;
  • to charge the borrower additional closing costs; and
  • to raise the interest rate and recover the costs as the borrower pays back the loan.

Even the strategy of using points to keep the interest rate below the triggers of a “high-cost mortgage” is impeded leaving no way to recover costs.

To further clarify, if the cost of origination and legal compliance equals X, that number does not change based on the loan size or duration.  The shorter the term and the lower the dollar amount, the harder it is to recover those fixed costs.  Here is an example:

A lender is considering making a $10,000 loan with a term of four years.  Using a risk-based pricing model, the correct interest rate is determined to be 11 percent.  If the fixed costs of origination are figured to be $2,000, the lender must charge the borrower either in points or closing costs that $2,000 to keep the rate at 11 percent.  If a law or regulation caps the lender’s closing costs or points, then the lender must look to raising the interest rate to recapture whatever costs could not be recaptured through points or closing costs.  If the entire cost were recovered via interest, the interest rate would need to be increased to 17 percent to recover the costs.

Captive finance companies currently have zero, or very low, minimum loan cutoffs.

Typically, they utilize higher interest rates to recoup costs, but often the justification for lending in the first place is that their related entities are profiting from the transaction in other ways, not the home loan itself.

What is the Result if Dodd-Frank is Not Amended?

Financing will still be available for those buyers with good credit and who can make a sizable down payment.  Industry lenders that have or require higher credit quality customers may not be as impacted by the “high-cost mortgage” loan provisions.   Those needing to serve customers with more challenged credit quality, and therefore needing to risk price their loans accordingly, will be impacted.

Also, those who fund low balance loans will find it more difficult to do business and existing homeowners will find it very difficult to sell their homes to buyers that need financing.

The dollar amounts for not making a loan will vary by lender because of all the variables detailed above, but each lender will find and set a minimum loan requirement based on their internal numbers.

It has been estimated that 50 percent of all the loans made on manufactured homes in manufactured home communities are under $25,000.  Another source has estimated that nearly 75 percent of all manufactured home personal property loans are under $75,000.00.  If the fixed transactional costs mandated by current and proposed law are higher than the lender’s ability to recover costs, the loan will not be made by lenders independent of other profit center relationships.

Bottom line is that without changes, there will be a significant number of consumers who will not be served.

Potential Solutions

MHI has an effort underway to seek bi-partisan legislative relief in six specific areas that needs and deserves the support of everyone in the manufactured housing industry.  The issues identified by the MHI Dodd-Frank Task Force are as follows:

  1. Elimination of the expanded scope of Homeowners Equity Protection Act (HOEPA);
  2. Clarification of the Qualified Mortgage Standards;
  3. Clarification and Consistent Standards of a Mortgage Originator;
  4. Exemption of Manufactured Homes from the new Appraisal Standards;
  5. Exclusion of Manufactured Home Loans from the Residential Mortgage Loan Definition; and
  6. Clarification and strengthening of exemptions for manufactured home retailers from CFPB Oversight.

A six-page white paper created by MHI can be obtained from MHI or any state association.  Industry members should obtain copies and distribute them to their Representatives and Senators along with personal letters and emails urging them to support this effort.  Those reading this article should distribute it as widely as possible throughout the industry along with their personal efforts to persuade other industry members, including employees and community residents, as well as suppliers,  to also contact their Representatives and Senators.

##

MHI is the preeminent national trade association for the manufactured and modular housing industries, representing all segments of the industries before Congress and the Federal government.   This article was prepared with input from the MHI Dodd-Frank Taskforce, in particular Ken Rishel, Sheila Dey, Dick Ernst and TF chair Tim Williams.

George Allen Forecasts Manufactured Housing Industry Change and Future

April 6th, 2011 No comments

Part IV: Manufactured Housing Industry Change and Looking Forward

Editor’s Note: This is the fourth of a four-part series of the exclusive interview George F. Allen gave MHMSM.com Industry in Focus Reporter Matthew J. Silver.

MHMSM: What have been the major changes in the industry you have witnessed in your 25+ years in the business? 

GFA: We’ve covered some of it. But it goes back to some of the trends, mainly the consolidation trend. But you have to understand, before 1990 there was not even a dearth of knowledge about operating statistics, or occupancy percentages, or any kind of numbers – it just did not exist. And the prominent players at the time did not want it to exist. They may not say that, but it’s true.

When I hung out my shingle as a consultant, I thought of what kind of statistics would be helpful to the industry. But my detractors were the very people I was trying to help. The attitude back in the 90s was, “Why document this information, and publicize it; it’s only going to attract investors.” People are only going to want to compete for this limited number of properties. It wasn’t until Sam Zell took MHCs public, and the Wall Street analysts asked, “What’s your occupancy, what’s your operating expense ratios?” Basically, what the companies claimed to do did not make the Wall Street guys happy because they had no norms to compare them to.

Then the major guys came to me because they wanted to go public, and started supporting me as an independent third-party researcher and writer. That changed the whole landscape. Other investors started showing up, and that made it a whole different ball game.

Some of that same attitude exists today, and it works in two ways:

1. I guarantee you in the next few months, I will get calls from people who want to know the numbers in the Allen Report, but they are the same people who refused to give me numbers when I was putting it together.

2. The other is, there are still areas that are totally unexplored. How much do you pay a community manager? Is it based on the size of the community? What’s the nature of the manager’s duties? Nobody wants to share. We’ve tried several times through MHI to survey these 500 portfolio people at national meetings, and no one wants to participate. They don’t want to reveal what they are paying, and they don’t want their managers to hear what other people are paying their managers. We are notoriously low pay for what we require. But they don’t participate in the HR surveys that they claim to want.

MHMSM: What are you going to do after you semi-retire this year?

GFA: I have a number of personal and family projects I want to be engaged in and enjoy. Not that I don’t enjoy what I’m doing now. The problem is I’m so passionate about the industry that it’s hard for me to pigeonhole my time to enjoy these other areas. I don’t plan to disappear entirely.

MHMSM: Do you have other speakers lined up for the International Roundtable later this year? Are you locked in on a location for this year’s Roundtable?

GFA: I’m working on that right now. I’m working on my speaker list and the location. Sept. 14-16 is what I’m targeting now. I always try to come up with some sort of a theme. I think it’s going to be, “The Past, Present, and Future of Landlease Communities.” I normally have one or two keynote speakers. But this time, if the three different entities I’m in negotiations with right now to sell my report, step up to the plate and buy sections of what I’m doing, they will come together at the Roundtable. They are looking at my Report from three different perspectives. I’m not going to identify them, but one is a national not-for-profit that’s looking at using certain things I do to continue to serve the portfolio owners from coast to coast. That’s the big picture. The second group is a for-profit that wants to serve the 85 percent of the small ‘mom and pop’s’ across the country. The third part of the puzzle could very well be a first time ever academic presence that wants to better serve the research and statistic gathering and publication requirements of both the manufactured housing industry and the land lease community asset class. I’m in discussion with all three of these entities.

It’s not just the report they’re looking at – it’s my newsletter, my database, various other reports I do. I think they could pick up what I’m doing and move ahead in their specialty areas. Nothing would please me more. And I think the three organizations could do a better job than just one person. That’s my cautiously optimistic view of what I would like to be able to market at the Roundtable this fall as being a turning point in the history of the asset class.

Thirty years ago, none of this existed. Today it exists in a sole proprietor fashion, but going forward, in 2012, it could be more encompassing, more efficient, and better serve all the community owners across the country. So, the plan is to bring these three to the Roundtable. Two of them have been there before. And even if we weren’t negotiating now, they would be there anyhow, but representing only much smaller parts of what they have been doing up to now. What I’m hoping is that the Roundtable might represent the coming together of all three of these entities, giving them the opportunity from the bully platform to say, “This is what we’re picking up from where George is leaving off.” The only thing I might have a problem with, is all three want me to continue to be involved. That could be a greater time commitment than I have now.

MHMSM: Do you think the industry as a whole is on an upswing, or will it just maintain this somewhat tepid – bumping bottom – atmosphere, with new home shipments hovering around the 50,000 home mark annually?

GFA: The school book answer is, “Of course I’m looking for a bright future for manufactured housing.” But the truth of the matter is, there won’t be a bright future for that half of the industry until third-party chattel financing returns. If the retailer could take the buyer by the hand and lead them to a Green Tree, say, and tell the customer that they can have a 650 score and we will underwrite the loan for your new home. Until that happens, and it’s not even on the horizon yet, we will be at 50,000 homes a year.

But I call it the ‘double dual’ industry. You have the factory and distribution side of the house that’s on the ropes. Then you have the real estate investment and development side of the house, the communities, smiling all the way to the bank. Yes, we have to take risks to make it work, but it’s a seller’s market. This is the only type of real estate investment you can be involved in that, if you are willing to take an extra risk, you can add value by reselling your homes on site and carrying your own mortgages.

MHMSM: If you had to do it over again, what might you do differently?

GFA: That’s a broad question. I could have been a much wealthier person concentrating on buying and selling more properties, than concentrating my energies on creating and developing all the resources I am now selling. Even if I get my dream price for this, I will have made far less than if I had bought and sold manufactured home communities as an investment. I have been very happy on the consulting side. It’s been more personally fulfilling.

MHMSM: Anything you want to add?

GFA: What is not widely known is that through most of that 30-year period of time I have been involved in the industry, there have been individuals involved with portfolios of manufactured home communities who have contributed significant financial support to what I’ve accomplished, who have by choice remained unidentified to this day. I feel they deserve a lot of credit that they’ve not received, and probably will never receive, at their preference. I’m happy with what I’ve accomplished; I just regret that they’re unsung heroes, to whom individuals and companies who own a land lease community in this country and in Canada owe this debt of gratitude, but will never be able to express it. It bothers me, because they made it possible for me to do what I am doing, with money and otherwise. I keep the communities as a separate business, but it could never have supported me in doing what the individuals did quietly, behind the scenes. That may change later in the summer. Stay tuned.

MHMSM: Thank you for your time.

Reporters note: GFA could have retired 20 years ago, but found the consulting work more satisfying than even a zillion dollars. # #

Click here to read Part I

Click here to read Part II

Click here to read Part III

Exclusive Interview with George Allen on Key MHC and Industry Issues

March 29th, 2011 No comments

Part III: The Future of Manufactured Home Communities (MHCs)

Editor’s Note: This is the third of a four-part series of the exclusive interview George F. Allen gave MHMSM.com Industry in Focus Reporter Matthew J. Silver.

MHMSM: What do you envision as the future of MHCs? Expanding as the boomers retire? Growing as a result of predictions made by Dr. Funk at the Roundtable last year? Or not really changing that much?

George F. Allen (GFA): I don’t expect to see the asset class change all that much. What I have seen in my experience, and what continues to this day, is consolidation. In the 1970s and 80s, the communities were individually owned. That’s why there were only 25 on that original list in 1987 and there are potentially 500 today.

In the 1980s, the first wave of consolidators was comprised mainly of syndicators. Real estate investors would get a group of doctors, say, to put up money to buy a community as limited partners under their control. Some of those portfolios exist to this day.

The second wave in the 1990s was the REIT (real estate investment trust) wave. On page 22 of the Allen Report, you can see how Equity Property Lifestyles Incorporated (ELS), which is Sam Zell’s, went from owning 28,407 homesites in 1994 to 111,000 last year.

Sun communities started out as a REIT in 1994 with 13,500 homesites, and now has 47,579, less than half the size as Sam Zell’s. In terms of overall sites, the number has basically doubled since 1994, from 88,000 to 165,000.

The third wave that started eight or nine years ago was the equity wave. Some of the portfolio guys have gone out and found deep pockets, mainly pension funds, to form new portfolios. Two of the most well-known ones have been Hometown America and Green Courte Partners.

Another ingredient in the mix was that back in the 1980s, you could have an adult section of your community, and you could have a family section. The family section was a little tougher to run. Around 1990, the government stepped in and said that was discrimination; that you could not segregate like that in one community. You can have an all-adult community or an all-family community. That was a trend, you could be all mixed, but you could not segregate.

Another trend was the beginning of professional property management. Today many properties are overseen by Certified Property Manager members of the Institute of Real Estate Management. It’s like what a CPA is to accounting, and I’m proud to be one of them. There are about 200 CPMs who claim affinity to the asset class. The most aggressive property management system is the Manufactured Housing Manager (MHM) program that I started about eight years ago to provide a one-day training certification experience for owners and operators of properties to enhance professionalism. Today there are a thousand MHMs across the United States. A third one is the ACM, Accredited Community Manager, which is controlled by the MHEI, the Manufactured Housing Educational Institute, which is an arm of MHI (Manufactured Housing Institute).

Another trend has been the growth of Recreational Vehicle (RV) sites, which have become a major part of the mix. If you look at page 22, you will see the footnote that says over half of the ELS homesites are actually RV sites, nearly 68,000 out of 112,800 in 2008.

Another trend is a whole new business model of manufactured housing sales on site, self financed. Twenty years ago, there were 20 retailers in Indianapolis who sold manufactured homes. They would routinely send their customers to the community on the side of town where they wanted to live. If they sent these buyers to community owners like me, I would spiff them with a check for $500. But that’s all changed. Now there’s only two or three retailers in Indianapolis. That’s because the chattel finance went away. Those guys can sell homes; there’s just no way to finance them. Now, the only finance guys in town are those of us who own communities with excess cash flow and are becoming the bankers. Manufactured homes, new and used, on site, are self-financed. It can be a very lucrative business. I can also send people to the bank for financing, but that’s the exception.

MHMSM: Is it necessary for HUD Code home manufacturers to survive in order for land lease communities to continue to be viable as affordable manufactured housing locations?

GFA: That’s a loaded question. The school book answer to that question is ‘of course!’ You want to think gratuitously of the segment of the industry that brought us to where we are today.

But the honest answer is, as much as I want to see them continue – in the first place, I don’t think it’s completely necessary for them to continue. And number two, I’m not too sure the decisions made today by some manufacturers are going to keep them continuing. No longer are there just mobile homes pre-1976 HUD, and manufactured homes post-1976 HUD.

My interest is in land lease communities; that’s what I write about, not manufactured home communities. There are at least four other types of homes: There’s modular homes, there’s recreational vehicles, park models, and in a few instances, stick-built homes that look like a manufactured home.

1. I could take you to areas in the country where there are two-story, huge modular homes, sitting on leased sites, mostly in high value areas like outside Washington, D.C., where it would cost so much more to own that piece of ground.
2. Then there are Park Models, no larger than 400 square feet, because above that they would have to meet HUD codes. Basically it’s a one bedroom efficiency apartment on wheels. They are also called mini-flats. There are entire properties in some Sun Belt areas that contain nothing but Park Model homes. Some people live there year round, for some it’s a second home.
3. Then there are RVs. I have some people on my property who have very large RVs. They go to Rio Grande, Texas, for the winter, and come back to Illinois for spring, summer and fall.
4. The last category is stick-built homes, and that happens only in Florida after hurricanes. It’s sometimes cheaper to build a home than to have one manufactured because they have to beef them up so much with 2 x 6 wall studs, and so on.

The point being, if you’ve got six different types of housing in these communities, there’s no point in calling them manufactured home communities. Call them what they are: they’re land lease communities. That’s what’s happening as we’re going forward; it’s a very subtle difference.

MHMSM: A fair amount of news material we cover focuses on modular housing, especially the so-called energy efficient ‘green’ homes. Do you think this will be a large part of the land lease community market in the future?

GFA: No, not in the near future. They cost so much more that it flies in the face of the affordability issue of manufactured housing and land lease communities. I think maybe it could happen in the areas around Washington, D.C. or Chicago, and people want to go with the latest fashion, like LEED or green. I don’t see it being a major issue.

Next week: the Conclusion – Part IV: Manufactured Housing Industry Change and Looking Forward
Click here to read Part I
Click here to read Part II