For the next few minutes, imagine a hedge fund or deep pockets investor. In the following blend of the hypothetical mixed with numerous significant linked elements of evidence formed by reality, picture in your mind the following. Reflect on an outsider looking into why Warren Buffett – or other lesser known, yet successful investors – are into manufactured housing in the first place. Manufactured homes aren’t normally viewed as a ‘sexy investment.’
Cool or sex-appeal aside, are the manufactured housing industry’s various segments potentially good investments? If so, why – in some measures – is the industry underperforming? Is underperformance an opportunity in disguise? Let’s review to gain perspective, before diving into the headline topics.
There are scores of other investment opportunities. There are speculative, but sexy items like: AI, technological, internet, automation, robotics, and whatever is after 5G.
There are tried and true fields of investment like automotive, restaurants, entertainment, health, sleep, furnishings, electronics, gaming, or anything that deals with the necessities of life: food, drink, clothing, transportation, and shelter.
There are also human emotional needs, physiological, sociological, and spiritual demands that could be described or explored.
What follows isn’t per se why affordable housing is potentially ‘the best of the best.’ But like the other basics of life, people routinely do their best when they have at least adequate shelter. So there is an obvious potential for a fine ethical development of investing successfully in affordable housing. There is always a need for affordable homes too.
That begs the question, what’s the most proven form of affordable housing?
The most proven form of affordable shelters aren’t tiny houses, apartments, or any of the emerging technologies in shelter. For example, a 3D printed housing professional has told me they see turn key costs about $72 per square foot, plus land costs, not the lower shell house cost per square foot that some headlines hyperventilate over. When reports – like the one below – sounds too good to be true, it often is. That doesn’t mean there isn’t promise. It does mean that the claims are incomplete at best. Manufactured homes are still lower in cost, and have other benefits.
Media Claims New Story/ICON Builds 3D Printed Housing for $4000, Fact Check & Analysis | Manufactured and Modular Housing Industry News
Different construction methods exist – or emerge – for a variety of reasons. 3D printing of housing, for example, is being tested globally. Some say 3D printed housing is the obvious answer for building housing on the lunar landscape, or other planets. “It sounds crazy, but it …
Prefabricated and modular, they all have their places in the housing puzzle, which is why Amazon’s Alexa Fund, Softbank, Revolution, and others are investing in that space. There are also opportunities in maintenance of conventional buildings.
So, with that outline, what’s the most proven form of affordable housing in America?
The most proven form of permanent, safe, greener-by-design affordable homes are perhaps the least sexy from much of cultural or societal viewpoints. The most proven form of affordable housing are HUD Code manufactured housing, and the millions of mobile homes and trailer houses that came before them.
Yes, the terminology matters, because the terminology determines what code a home was built to meet. Hold tight to those thoughts. Don’t skim, or you’ll miss the investment bonanza that has savvy billionaires salivating.
Sam Zell
Investment mogul Sam Zell articulated the contrarian investor formula like this. “While others are going left, look right.”
It’s noteworthy that Zell told MHProNews news that they have “never lost confidence” in manufactured housing and manufactured home communities. Indeed, Zell’s Equity LifeStyle Properties (ELS) routinely out-performs other REITs or equities.
Ponder Zell and those factoids, but don’t get locked into what others are doing – yet – until you have a more complete picture. The problem for too many is that they don’t research carefully enough. Too many presume they know something, when in fact what they ‘know’ are outdated or mistaken claims.
Warren Buffett has said that he only wants to be in industries that make sense. His Berkshire Hathaway is the largest player in manufactured housing production, retail, and finance today.
Buffett also believes in long-term investing in good companies, that he prefers to own. He’s also known for so-called ‘value acquisitions.’ To Buffett and his partner Charlie Munger, an acquisition is a value if it’s ‘intrinsic value‘ is less than he paid for it.
Clayton Homes, 21st Mortgage Corporation, and Vanderbilt Mortgage and Finance (VMF) are just 3 of many investments Warren Buffett led Berkshire Hathaway has made in manufactured housing starting in 2003. Berkshire has invested billions into manufactured housing since. Those actions by Zell or Buffett – their ongoing investments, despite negative headlines – speak louder than words.
Hang onto all of those points as we explore why manufactured homes are so misunderstood, and why the industry is underperforming. Because crisis spells danger, as well as opportunities in disguise. Before Buffett invests, he reads a lot. Some of what the ‘Oracle of Omaha’ reads is historic in nature, so let’s follow that cue.
Manufactured Home Policies, Realities Revisited Through the Lens of John Oliver’s “Mobile Homes” Video
The debate over manufactured home lending regulations was raging in July 2015. The Hill in the nation’s capitol published a column about the Preserving Access to Manufactured Housing Act, linked here.
The Manufactured Housing Institute (MHI), Berkshire Hathaway owned Clayton Homes, and their manufactured housing (MH) related lenders of 21st and VMF backed the never-enacted Preserving Access.
Stating the obvious, the need for affordable housing with reasonable, sustainable lending has grown. HUD Secretary Ben Carson recently praised the way the need can be met by the “amazing” evolutionary value of manufactured homes.
The Washington Post published articles about manufactured housing, linked here and here. The second WaPo link predated the satirical hit by Last Week Tonight with John Oliver’s viral video, errantly named “Mobile Homes.”
WaPo and Oliver’s video referenced a white paper co-branded by an activist group known as Manufactured Housing Action (MHAction). Oliver’s video obliquely spotlighted that each firm shown was a member of/connected to MHI, Berkshire Hathaway owned Clayton Homes, or 21st Mortgage Corporation.
Hindsight can be 20/20.
In retrospect, it made no sense for MHI, Clayton, and 21st to pursue Preserving Access. MHI’s own SVP said as much.
Before proceeding, some of what follows might appear partisan. Facts are what they are. We are non-partisan, and affordable housing ought to be bipartisan. Our platforms are frankly pro-industry as well as pro-consumer, and we will work with anyone that is keen on ethical practices and reality. Democrats and Republicans In Minnesota came together to praise in a bipartisan way the value of manufactured homes, which they first studied in depth.
That said, let’s look at some well-known facts.
> Berkshire Chairman Warren Buffett backed Barack Obama’s candidacy twice.
> Former President Obama vowed to veto any change to Dodd-Frank.
> Buffett backed Secretary Hillary Clinton’s presidential bid.
> She similarly pledged opposing changes ‘weakening’ Dodd-Frank.
That begs several questions.
- Why did then-MHI Chairman Tim Williams – President of Berkshire-owned 21st – spend years and millions pursing Preserving Access when it was doomed to fail?
- Why did Williams’ back a bill his boss Buffett effectively opposed?
- Why did Nathan Smith of SSK Communities, the prior chairman to Williams at MHI, back the opposition presidential candidate to Preserving Access?
Hold those thoughts.
MHAction activists disrupted HUD Secretary Ben Carson’s speech at MHI’s 2018 event. MHAction previously protested controversial MHI member Frank Rolfe, and other MHI member MHCommunity operators.
The Golden State Manufactured-Homeowner League’s (GSMOL) president informed MHLivingNews that MHAction was funded by the Tides nonprofit. Double-checking, the GSMOL claim proved correct.
Who’s funded the Tides? Buffett-funded NoVo Foundation was the Tides’ top donor for years.
Millions of Buffett’s bucks – via so-called ‘dark money’ channels – funded attacks by MHAction, plus other nonprofits on MHI and Berkshire’s manufactured home (MH) industry’s brands.
What’s Going On?
Let’s be clear. Several business practices alleged by Oliver, WaPo, and MHAction are troubling.
But why does MHI – the national trade group supported by Berkshire – tolerate members engaged in embarrassing business practices?
Meanwhile, Buffett-Tides-supported nonprofit MHAction attack MHI members for irksome practices?
Investigators use basic questions and principles. Cui bono? Who benefits? Plus ‘follow the money’ and evidence.
The Society of Professional Journalists (SPJ) code of ethical conduct encourages calling out the powerful. SPJ encourages public corrections as needed. This writer was technically correct in supporting Preserving Access. But in hindsight, my widely-read The Hill analysis was incomplete in the light of new evidence. The facts linked herein address amendments to correct-the-record, per SPJ standards.
Let’s step back to when Berkshire bought Clayton Homes.
Clayton’s production market-share of new manufactured homes was some 13 percent in 2003 when Buffett-led Berkshire purchased Clayton.
A 2010 letter from Williams/21st, Buffett’s annual letter that year, and a subsequent video interview with Clayton CEO Kevin Clayton are provided. William’s/21st letter went to thousands of independent retailers. cutting-off lending to independents that failed to buy Clayton Homes products. In the wake of the 2008 housing/financial crisis, that 21st letter’s impact devastated independents.
Thousands of independent retailers failed. Meanwhile, Clayton grew.
Depending on the source you cite, by 2018, Clayton’s market-share of manufactured housing production hit some 48-50 percent, which included using the undisputed tactics documented here.
I’ve asked antitrust and other lawyers to examine the linked evidence. An antitrust case could be forged. Investors, media, and public officials, please hold that thought.
Later, controversial MHI member Frank Rolfe accused the association’s former chairman Nathan Smith of “hypocrisy,” pointing to harmful mainstream headlines Smith’s SSK Communities sparked. Rolfe also alleged that MHI failed to defend the industry from bad news or to promote good news. Odd? Is Rolfe – who has his own vexing image issues – correct?
As noted above, Minnesota lawmakers decided in a bipartisan report that affordable housing and manufactured homes go hand-in-glove. Secretary Carson and former HUD Secretary Julio Castro both praised manufactured homes too. Why aren’t those items on the MHI website?
Why are there numerous third-party, university level, nonprofits, or federal research that praise manufactured homes missing also missing from the MHI website? The screen captures are collages from MHI’s search tool. They seem to support Rolfe’s claim.
Buffett gets into businesses he believes make sense. An arguably Machiavellian ploy is coming into focus.
It includes a ‘Rope-a-Dope’ ploy with respect to Preserving Access.
Berkshire machinations arguably includes Buffett’s minions deploying ‘Castle and Moat’ ‘sharks in the waters’ tactics in manufactured housing.
Complex:
- tax codes,
- regulations, or
- cutting off or limiting capital access,https://www.manufacturedhomepronews.com/masthead/rope-a-dope-preserving-access-to-manufactured-housing-act-mom-dad-you/
- zoning/placement issues, and
- stirring up negative media,
are all more difficult for smaller firms to navigate than a larger one with deeper pockets.
In hindsight, MHI’s “big boys” led-the-charge for a Preserving Access bill that was doomed to fail. The bill created the “Illusion of Motion.” But Buffett’s bucks funded both the pro-and-con sides of that effort. It was arguably a rope-a-dope ploy, another shark in “the Moat.” Wear out independents fighting a rigged match.
Using the logic of Secretary Carson and the report linked here, this scheme arguably harms millions, and costs our economy hundreds of billions a year – what researchers said is the harm caused by a lack of affordable housing. That’s an aspect of the opportunity in disguise.
Now, this same picture points to numerous opportunities in manufactured housing by using ‘white hat’ strategies vs ‘black hat’ ones. Meaning, Smith, Rolfe, Clayton, Williams/21st and others are going to be who they are. Use that by being different than they are. Think and be Contrarian!
There are good laws on the books that make manufactured housing so appealing. Those good laws are not being properly enforced or implemented. There is a case to be made that the industry’s Omaha-Knoxville-Arlington axis, there allies and surrogates have worked to suppress the usefulness of those good laws. If so, that’s a short term tactic. Once they’ve obtained their own perceived ideal combination of political and economic scenarios, they will take their foot off artificial breaks. At that point, the industry’s production could soar. Why? Because as the National Association of Realtor’s (NAR) Chief Economist Lawrence Yun told Forbes, there is a need for some 8.3 million housing units.
Only factory building can logically close that gap. For the reason, Yun asked Scholastica ‘Gay’ Cororaton – Certified Business Economist (CBE) – to research manufactured housing. She did. That expert NAR research, is linked here. In her first footnote, on page 48, she kindly named this writer in her acknowledgements.
The evidence for that is subtle, but real. For example, why doesn’t Berkshire use their dozens of newspapers to each do an article every other week that debunks the misconceptions about manufactured homes? Or why doesn’t Buffett allocate money for a real image campaign for Clayton, instead of fig leaf efforts or a continuing stream of controversies? Or why does MHI – on their own website – fail to promote the numerous good news reports about manufactured homes that could lead more to invest in the industry, or buy more homes?
Who will argue that Buffett, Berkshire, Clayton, or MHI have made 15 years of mistakes? Isn’t the more plausible argument that the axis are deliberately NOT promoting manufactured homes, so that they and their comrades continue to consolidate the industry at discounted values? How to explain that the savvy, connected Nathan Smith admits the association’s past mistakes, but they continued to make them? How to explain how he laughs as he says he wants others to stay out of the industry, so he can have all of the communities – his part of the industry – all for himself?
Learn yourself, contact or hire experts that can help you navigate the complex world of an arguably rigged manufactured housing industry.
Why bother chasing the manufactured home rainbow? Why go through the brain damage? Because the industry is underperforming. That’s proven by public companies investor relations packages. That means the upside is pretty obvious.
Each of these factoids paint a picture of an industry that should be roaring instead of snoring. The dark money trail of Buffett bucks fueling both sides of various fights – like Preserving Access – should tell the savvy that there must be something huge here, or why bother going to all that trouble?
Indeed, housing is a multi-trillion dollar field. How high might manufactured housing go? Consider what Harvard’s Joint Center for Housing Studies (JCHS) Eric Belsky said not long before Buffett entered the industry that manufactured housing was poised to surpass conventional building.
Was Belsky wrong? Or how about the numerous other third-party studies that came to similar observations? Isn’t the better argument that Belsky and others never imagined Buffett reversing growth, so they could consolidate the industry at a discount?
Why has HUD Secretary Ben Carson said it is time to take manufactured housing out of the darkness of limestone into the brightness of the limelight? Could it be that he gets it that forces within the industry have hobbled the most proven form of affordable housing?
Let me say that having spoken personally with a number of federal investigators, I have no doubt personally – speaking as a 25 plus year proven, award-winning expert in this field, long-praised by some of the very people we now critique – that manufactured homes are underperforming not due to the ineptness of MHI.
Rather, the evidence suggests that the Omaha-Knoxville-Arlington axis and their allies are behaving as they do as a subtle manipulation of the system. Only a handful of people need to be in the know to pull this off, so no grand conspiracy is needed. It is what Senator Bernie Sanders or President Donald J. Trump fans might aptly call, “a rigged system.” What’s this compared to what happened to Bernie in 2016? Or to President Trump in 2016-2019?
Even Clayton’s local home town media has been pushed into admitting their are several ongoing federal investigations.
We’ve had the slings and arrows of outrageous fortune flung at us. For example, MHI outside attorneys and other surrogates have threatened us in writing for publishing such revelations over time. But they’ve never filed suit. Why not?
We’ve given the Omaha-Knoxville-Arlington axis, their attorneys, and their allies numerous, documented offers to refute, explain away, or disprove any of those linked allegations. We’ve offered public, moderated discussions on camera – prove any of these fact elements wrong, or explain a different interpretation of these linked items. At each stage, they’ve declined. They’ve ducked it for some 2 years. Why?
Alan Amy essentially explains it in this short video. Manufactured homes are the future of housing. That why the billionaires and multiple billion dollar firms want their arms around this industry.
That should speak volumes to investors, as should this focus group. These participants almost all owned a conventional house first.
They love their manufactured homes. They were given $20 in gas money, and a meal to spend over four hours just so they could participate in this focus group. They had no other incentives, Dave their own self evident convictions. That too speaks volumes.
The video above and below are part of a series.
Advocates, lawmakers, and reporters should hold specific MHI-connected ‘Black Hats’ accountable, not the ‘White Hats’ of the much-needed manufactured home industry.
Let’s close by noting that some of the same people who’ve previously praised our work, have – perhaps understandably – turned on us since we’ve began exposing their alleged
It is also important to stress – not because of ego, but for outsiders looking in – that this is the largest, and most read medium of their kind in manufactured housing. We’ve been praised by the big and small, for years, and while they may now jeer, companies of all sizes read us faithfully. See the first of two videos that make the point, from those who’ve said so that were given no incentives to proclaim what they did.
A few deep pocket brands in the MH industry arguably rigged the system to the detriment of millions. Federal regulators – already investigating Clayton, 21st, and VMF – should investigate MHI and others for antitrust, fraud, and possible RICO violations.
And investors should consider the many ways how they could be a white hat brand that profitably performs a much needed service, while the black hats play their sad games.
See prior Masthead’s related to Buffett, Clayton, and the related reports below the bylines and notices for more details. “We Provide, You Decide.” © ## (Industry news, commentary, fact-checks, and analysis.) ##
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By L.A. “Tony” Kovach – for MHProNews.com.
Tony is the multiple award-winning managing member of LifeStyle Factory Homes, LLC, the parent company to MHProNews, and MHLivingNews.com.
Office 863-213-4090 |Connect on LinkedIn:
http://www.linkedin.com/in/latonykovach
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