Industry Voices

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

In a disappointing scenario being played out in disaster-stricken communities across the nation, Federal Emergency Management Agency (FEMA) policies are resulting in de facto discrimination against HUD Code manufactured housing as both temporary emergency and permanent replacement housing.  At the same time that these policies are unnecessarily complicating badly-needed relief for disaster victims, FEMA, on June 7, 2011, hosted a day-long meeting in Washington, D.C. to explore, discuss and otherwise consider the details of a possible “small footprint” temporary HUD Code emergency home design.  Given these two seemingly opposite directions, a good many HUD Code manufacturers, anxious to meet the current pressing need for post-disaster housing with the most affordable, transportable and rapidly deploy-able homes available, while facing historically low productions levels, are starting to wonder exactly what is going on.

What is “going on,” is that FEMA, facing an immediate need for both short-term emergency relief housing and permanent replacement housing in communities where the existing housing stock and infrastructure has largely been decimated, has, for now, seemingly retreated from the use of new federally-regulated HUD Code housing as a primary source of emergency housing.  Instead, displaced disaster victims have been put-up in rental housing as much as an hour away from their former homes, or in non-HUD Code modular units.  Media reports, for example, indicate that FEMA is currently constructing up to 324 three-bedroom modular homes in Kansas City, Missouri, that will be sited on city-owned land in the north part of town, for some 624 Joplin families and individuals in need of housing.

In part, this appears to be a reflection of specific policy choices by FEMA.  In a May 31, 2011 Associated Press article regarding Joplin, Missouri relief housing, a FEMA spokesperson stated, “despite the distance, putting people in permanent housing is preferable to trailers….”  Another FEMA spokesman commented  that “the agency will consider bringing trailers to Joplin if enough existing housing isn’t available.”  Consequently, FEMA policy seems to be that today’s HUD Code manufactured homes, despite serving as “permanent housing” for millions of Americans and being regulated under federal law as residential dwellings and not “trailers,” are somewhere down its list of options to house disaster victims.

In other places, like Cordova, Alabama, FEMA has failed to overrule — or even object to — local officials who have barred the placement and use of HUD Code manufactured homes as emergency relief housing based on local ordinances, even though such emergency housing is provided with federal tax dollars by a federal government that, under the Manufactured Housing Improvement Act of 2000, is supposed to “facilitate the availability of affordable manufactured homes.”  According to news reports, FEMA’s official comment on this HUD Code  housing ban affecting large numbers of displaced disaster victims, was that “it’s a local issue….”  Whether this is an outgrowth of a “second choice” policy for HUD Code housing or simply unwarranted deference to biased local officials, the result is the same — discrimination against HUD Code manufactured housing that hurts both disaster victims and the industry.

In the meantime, against this backdrop, FEMA, at its June 7, 2011 gathering, devoted an entire business day to a discussion — with industry members — of hypothetical “small footprint” one-bedroom HUD Code units that FEMA might be interested in purchasing under a “possible” future contract.  This, in turn, has led to the creation of  task forces, committees, discussion groups and the like, and meetings of those groups, to explore the particulars of such units, while, at the same time, it was apparent from the various FEMA presentations, that there is considerable confusion and disagreement, within FEMA, regarding the most basic aspects of such a unit, including: its size and configuration; its compliance with federal accessibility criteria; possible mandatory compliance with the International Residential Code; the installation and storage of such units; and the possible use of such “small footprint” homes as permanent housing.  And all this is if FEMA goes forward with such an initiative at all — with FEMA officials cautioning that nothing has yet been decided.

The bottom line for now, is that while there is the appearance of discrimination against new HUD Code manufactured housing in the field for both relief and permanent replacement housing, the industry has been left to chew over the details of a possible new opportunity that may be, could be, or might not ever be.  So, what to do?

Let there be no mistake, the industry can and should continue to work with FEMA.  The HUD Code industry has traditionally taken the lead in providing — on a quick, timely and flexible basis — safe, decent and readily deployable relief and replacement housing for disaster victims.  The industry should continue to pursue this role vigorously with FEMA at the policy level, which is why MHARR participated in the June 7, 2011 FEMA meeting and the Association has already started to follow-up on ways that the HUD Code industry can provide even more assistance to FEMA and other government agencies responsible for post-disaster relief.  The HUD Code industry already has the knowledge, know-how and experience to  provide whatever FEMA and disaster victims need.  But it must also address current FEMA policies.  Very simply, FEMA must be urged to change policies that have resulted, effectively, in discrimination against HUD Code manufactured housing and to re-commit to the use of HUD Code housing — of all types — as an equal participant in its federally-funded programs for both short-term emergency housing and permanent relief housing.

In MHARR’s view, the HUD Code industry has long been at the forefront of helping government provide both temporary relief and permanent replacement housing for victims of natural disasters, and with appropriate policies in dealing with FEMA, there is no reason why it should not continue in — and even expand — that role. # #

Danny D. Ghorbani is President of the Manufactured Housing Association for Regulatory Reform.  MHARR is a Washington, DC-based national trade association representing the views and interests of producers of federally regulated manufactured housing.  Danny can be reached at 202-783-4087.

With Congress in recess and with members back in their districts for the balance of the Summer, now is the best time of the year for industry members to seek out, communicate with – and meet – their federal representatives away from the distractions of Washington, D.C. While MHARR is in regular contact with Congress in Washington, D.C. in order to address and advance issues of importance to both the HUD Code industry and consumers of affordable housing, members of Congress are always anxious to hear directly from their constituents on matters that concern them. This is particularly true leading up to the November 2010 mid-term elections, with the control of Congress hanging in the balance.

As a result, grassroots industry members have an outstanding opportunity over the next few weeks to tell their members of Congress directly about the major challenges that the industry faces in Washington, D.C. in key areas, including private and public financing (i.e., the “Duty to Serve” and FHA Title I), and continuing issues affecting the HUD Title VI program, including the deteriorating status and stature of the Manufactured Housing Consensus Committee (MHCC) and the avoidance of – and non-compliance with – required consensus and rulemaking procedures by program regulators on major regulatory issues, such as the ongoing de facto expansion of in-plant regulation.

The common thread running through all of these issues (and many others), that needs to be constantly reinforced with Congress, is that the difficulties the industry faces in Washington, D.C. do not arise from the lack of good laws. To the contrary, Congress has provided the industry with highly beneficial legislation over the past decade, including the Manufactured Housing Improvement Act of 2000, and the “Duty to Serve” and FHA improvement provisions of the Housing and Economic Recovery Act of 2008. Instead, much of the difficulty faced by the industry is a consequence of the failure of relevant federal agencies to fully and properly implement these laws in a manner consistent with the intent of Congress. In large part, this occurs because of the comfort level that regulators routinely get from forces within the industry, or outside the industry, or both.

As many in the industry are rapidly recognizing, given the nature of the problem, the solution does not lie in passing more laws that will similarly be ignored or manipulated. Instead – and as MHARR has already begun to explore – ongoing industry engagement with Congress needs to be expanded to include effective congressional oversight of these matters to ensure that the good laws already on the books are respected and properly implemented by federal regulators. With the industry continuing to decline and with regulators’ continuing resistance to the full and proper implementation of these existing laws – which needlessly exclude consumers from the manufactured housing market – Congress needs to be fully engaged in an oversight capacity. And, the best time to embark on such an approach is right now, with one-on-one meetings of industry members with their congressional representatives, at home, in their districts, to be aggressively followed-up in Washington, D.C. by the industry’s national representatives.

Danny D. Ghorbani
Manufactured Housing Association for Regulatory Reform
1331 Pennsylvania Ave N.W., Suite 508
Washington, D.C. 20004
Phone: 202/783-4087
Fax: 202/783-4075
Email: mharrdg@aol.com