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Looking back

The rear view mirror isn't our focus when we drive. But danger may lurk from behind when driving, so we ignore the rear view mirror at our own peril. Or as historian philosopher George Santayana said:

Those who cannot remember the past are condemned to repeat it

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George Santayana

A variation on Santayna's gem is this:

 Those who cannot learn from history are doomed to repeat it.

Before we take a quick peek at what transpired at the TxMHA's annual event and what is up and coming here at MHProNews, let's take a brief walk down one fellow's memory lane.  Hang with me in looking back, for this is a story that should make you sit up and think regardless of where you live and what you do in factory-built housing. Thoughtful consideration proceeds sound action.

Kingwood

It wasn't so long ago that yours truly called Kingwood, TX home. While in Houston for the Texas Manufactured Housing Association's (TexasMHA) annual convention, I took a few side trips to 'look back' and check some places to see what the intervening years had brought about. Kingwood was one of those side trips.

Kingwood's main boulevard had many of the same bank buildings, some of which had made name changes. There are today some new fast food, restaurants, retail and other businesses.  Much of what I saw were beautiful tree lined, shady streets, quite similar to the days when that town included my address.  Some upgrades were evident and overall this suburban center was better, not worse, for wear.

The Woodlands

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Two Views of their river walk knows as The Woodlands Waterway

The Woodlands was actually my first stop, which newly elected TxMHA board member Kurt Kelly thoughtfully gave me a tour of that town last Saturday. Before my wife and I moved to the upper Midwest 7.5 years ago, The Woodlands was known as one of the nation's finest master planned communities. It has changed quite a bit. There is their new river walk. Single and multi-family housing developments, townhouses, business, retail and more were all advances of an already grand master planned community.

Exit Ramp

After The Woodlands but before swinging through Kingwood, I jumped off US 59 to grab these neighborhood photos you see here.

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Houston Houses near the exit ramp off US 59

While Houston is a relatively young city, it has thousands of houses like these. Think of any mid-to-major city in the U.S. that you personally know. Aren't you familiar with neighborhoods with scores of houses like those in these photos? Sadly, yes.

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This is a significant problem which masks an opportunity in disguise. But will we do what it takes to tap it?

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All of these – and more – where clustered nearby. I could have made numerous stops like this around the Houston area. One has to ask out loud – why HUD doesn't back manufactured housing up to make it easy to use our industry's 'enhanced preemption' – so manufactured homes could be permanently installed to replace untold numbers of challenged housing units like these?

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Perhaps part of the reason is that too many regulators either don't know the facts about modern manufactured homes, or because what they see with their eyes belies the potential realities of our industry today.

houston-tx-houses -shot-guns-

Interestingly, these shot guns were among the best in this Houston
neighborhood. Do they remind you of a front -loaded 14×66?

Which leads me to the following example from looking back.

While in the Houston market, one of the turn-around projects I was involved in was an infill of an MHCommunity that the now defunct Manufactured Home Merchandiser Magazine published as a cover story article – Those Vexing Vacancies – in their July 2006 issue.

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Clubhouse with pool in back as it looked earlier this week. A nice first impression…

This MHCommunity was a visionary project for this location in many ways.  The land lease community boasted a nice clubhouse, swimming pool, curbed streets with sidewalks, a private 3 acre community park for the residents with playground equipment, grills, picnic tables, flower gardens and shade trees. It's located near a popular lake. It is not far from FM 1960, a major thoroughfare.  The town has a respected school system. The community offered owner financing, plus third party lending on manufactured homes.  So back then, the location had a number of attractions and tools, but the best efforts of the community owner and a string of managers and consultants had failed to fill more than about half the sites after over four years of efforts. Those efforts included paying hefty bonuses to retailers who brought in homes.

As the 2006 Merchandiser article reported, the vacant manufactured homes and sites rapidly began filling profitably as a result of management and marketing changes following my involvement.

So the last time my eyes gazed at this community, it was a solid four star property that was attracting dozens of new, qualified households moving in monthly. It boasted neatly edged grass along the sidewalks and curbs. There were standards maintained that attracted good people. That was then.

Today…

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Lazy-boy takes on a whole new meaning…

lakewood-village2-manufactured-home-community-posted-mhpronews.com-

…well, you tell me.

It was sad to see what's happened in the years since.

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This was an informal, unscheduled, drive-by visit.
The white convertible Mercedes by the office suggested that the owner
was there and knows what it's like in his MHCommunity.

On the plus side, the community has full physical occupancy.

now-leasing-lakewood-village-manufactured-home-community-posted-mhpronews.com-

Bright banners, but notice the sagging rails on the fence.

But the apartment style banners advertising units for lease suggested that the economic occupancy is not full. Why? See what the photos above tell you.

> Unmowed grass.
> Trash piled up at the curbs.
> Yards, siding or roofing aching for attention.
> Clearly the Guidelines for Living at this location was as neglected as were so many homes and sites.

So is this property “four stars” today?

Do I hear your – “No Way” – okay?

With this in mind, looking back to the earlier question…

Why doesn't HUD help back the enhanced MH preemption the MHIA of 2000 gave us?

IMHO and speaking as a non-attorney, legally, there is no excuse for HUD. The Manufactured Housing Improvement Act of 2000 (MHIA 2000) law is what it is. Being part of the federal government doesn't put you above federal law. It ought to be enforced.

But beyond the law, are real people in federal offices.  Those federal staffers naturally communicate with state and local officials.  Those locals often think and express “NIMBY!” when it comes to manufactured housing.

“Not in My Back Yard.”

The Rental Risk

The property drive by tour above reminds me of a related topic. There is no doubt that renting in communities from coast to coast is being done due in part to the regulatory environment we are in today. SAFE Act fines can be $25,000 per incident. While there are hopeful signs, what the Consumer Finance Protection Bureau (CFPB) will do as far as implementing Dodd-Frank is far from certain, as DJ Pendleton told TMHA attendees this week.

One of the many challenges that a community like the one above is or will face will be pressures from apartment and other rental housing. To live in the complex shown below, you would surrender the enhanced privacy that the land lease community offers. But if you had good credit, costs were similar and you were image sensitive, which would you choose to call home if these where your two best options?

apartments-huffman-tx-posted-mhpronews.com-1

This is just part of a huge complex maybe a mile from the MHC shown above.
Same school district and closer to the lake and the Houston metro.

The point is that when you go down the rental path in a land lease community instead of using owner occupied homes exclusively, you are opening yourself up to a new set of challenges.

This is especially true when standards are not being maintained.

Retailers and communities alike have to consider the long term consequences of what it means when you fail to do what is necessary to keep your location a desirable destination. Once you start down a path of lax standards – which includes both guidelines for living and credit standards – what typically follows is a clientele that is less financially stable, some of whom will use/deal drugs and the property will cycle downward until someone takes the bull by the horns or it simply becomes blighted and targeted by the local jurisdiction for closure in favor of a 'higher, better use.'

Sometimes, we are our own worst enemies

In the long run, it pays to do things right.

It pays to attract more customers with cash or good credit. As Dick Ernst – who did a great job of moderating both of the finance panels at the TMHA's event – observed, there is no lack of capacity among any of our industry's lenders when it comes to funding credit worthy customers. As you will see in a September report, we could be doing 200,000+ annual shipments instead of hoping to finish 2012 around the 60,000 shipment level mark.

Where we have a problem is when we want to sell the sub 630 credit score customers who have insufficient equity. We don't want to ignore those with credit challenges. There are ways to serve them well and get them back on track financially. But we as an industry must learn to attract those better qualified clients or we are robbing ourselves of a potentially very bright future!

A pristine, properly managed property that is full will draw a better CAP rate when it goes on the commercial market than when a property like the one shown above is listed for resale.

It also pays to do it right in terms of more opportunities for the future. As attendees at the TMHA's annual meeting heard, there will be a need for some 20 million new housing units by 2030. That's not counting those forms of housing that are in need of retirement – like those shown above off U.S. 59 in Houston – or will burn, flood, harmed by earthquakes, etc.

But there are other impacts that are less easily defined. One of the lenders presenting in Houston this week told attendees; banks and other lenders are often not interested in making manufactured housing loans.

Why?

It often starts with issues that revolve around the image of our housing product. Look at the once appealing community above, and the answer grows clearer. Financing for single family houses? Easier. Financing for multi-family projects today is easier too.

Financing for manufactured housing is available, but it tends to be higher interest rates, shorter terms and it can be harder to qualify to obtain those home loans.

So looking back – compare what happened in this once nice manufactured home community to those two Houston metro conventional communities. Since leaving Kingwood, TX., the visible changes were mostly for the better.  The Woodlands, big advances on an already rock solid foundation.

In stark contrast, the 7.5 years since working in the manufactured home community shown above? A dramatically visible down-hill slide.

We as an industry have many fine community portfolio players along with “mom and pop” owners who take pride in making their locations a destination that is desirable. When that predominates in an area, the opportunities for manufactured housing in that market can blossom. When quality affordable lifestyles are fostered, it can be the basis for a sustainable boom for manufactured housing and the communities asset class.

But when good property management and the related marketing and sales are lacking, not only does a poorly operated location lose, but arguably, so does the industry. When communities are allowed to degenerate, the number of problems they will face grows as a direct result.

Good management

One of the many take-aways from this could be the fact that just having a well planned community is often not enough. You still have to manage, market and sell the vision!

But experience suggests that even a modest community – 1 or 2 stars – that is properly managed can be a reasonably good reflection on the property and thus for the Industry too.

Okay, lets wrap up with a sneak peek at some items you will likely see in our September 2012 issue.

  • Dr. Harold Hunt, one of the many insightful presenters at the 2012 TMHA annual meeting, has agreed to share an article with our readers. This will include the power point he shared. This has information that goes well beyond Texas, including the Dakotas, Ohio, Pennsylvania and more. You can find those university study level insights right here in less than 10 days.
  • We will do a photo report Looking Back at the just concluded TMHA 60th Annual Event.
  • We've asked other presenters and attendees to share their thoughts on the TMHA annual event. We will see what we can gather in the next week.
  • Much more on the RV/MH Hall of Fame.

  • Our usual array of quality articles by experts in marketing, sales, communities, fair housing and other subjects that are of importance to manufactured housing professionals.

If you haven't already read our Daily Business News brief on this article, please check out some of the comments from those who where there! You will find the article TMHA Meeting Rocked, at this link.

All of this ties into the lessons from George Santayana's quotation above.

We must learn the lessons of the past. Looking back – and looking around – suggests what must be done in order for us to advance and prosper.

It won't be easy. But it is worth effort. ##

l-a--tony-kovachL. A. "Tony" Kovach
MHLivingNews.com=Re-Discovering and Spotlighting the MHLifeStyle
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