People are entitled to their own opinions. But no one is entitled to make up their own facts. That’s a paraphrase of an insight from Daniel Patrick Moynihan which ought to be routinely applied to this industry’s opportunities and woes, and to every other area of living. Facts matter more than mere opinion. Facts and opinions are not the same things.
Build to rent is a trend that has been developing inside and outside of manufactured housing for several years. The left-of-center CNBC video does a decent job of teeing the topic up. We will examine next week specific ways that build to rent applies in manufactured housing. But today’s focus is to initially gain a 35,000 foot level perspective on this trend in housing via the video. Then we will see how it is or may play out in practical ways for manufactured and modular housing professionals, investors, and affordable housing advocates.
Rental Manufactured Homes
UMH Properties open a manufactured home community called the Mississippi Blues as a ‘rental community.’ When the demand for affordable housing is high, and the demand for rentals are high, the law of supply and demand suggests that producing HUD Code manufactured homes for rental purposes is prudent.
Showing this video should not be construed as any
endorsement of the organization whose logo is shown on the
closing screen. Note that there are apparent factual
errors in this video. White hat and black hat
companies should be carefully discerned too.
ELS Chairman Sam Zell told hundreds of manufactured home industry professionals that he believed that rental housing ought to be kept marginal. Hold that thought.
But you can see from Zell’s own words at this exclusive linked here. That exclusive report with Zell was made possible by the late Howard Walker, J.D., who was long-serving Vice-Chairman for ELS. Walker also severed on the Manufactured Housing Institute (MHI) Executive Committee. More on that another time.
When Zell said that rentals should be managed well and kept marginal plus more, that’s common sense. But in a world where many follow the herd, there are those who will go ‘all in’ on something that may create unwittingly lead to causing other issues.
Census Bureau and the National Association of Realtors (NAR) along with other data suggests that about 1/3 of new manufactured home shipments go into land lease communities. A look at some publicly traded company data suggests that a significant number – perhaps the bulk of those HUD Code units – are going in as rentals.
Analysis Introduction, Not Ivory Tower…
There is no mind-reading or projection intended or implied in what follows. It is this writer’s interpretation of what Zell said, viewed through a perhaps different but nevertheless manufactured home related lens. As an aside, it sometimes surprises me to learn that people that know and follow our work for years still may not realize that we do far more than publish or do marketing in manufactured homes. A message last night from a senior manager at a well-known and respected company reminded me anew that some think of us only as publishers, as useful and important as that may be. Part of what arguably scares Omaha-Knoxville-Arlington about us is precisely because they know that we know how to successfully recruit, market, and sell homes in a manner that results in satisfied customers who bring and send their friends. In a sense, the reason that this site is #1 in its category by a country mile is because we know the business from the ground up. But that is another story, for another time.
Segue Aside… The Risk from Rentals?
Let’s be blunt. Renting is easier than selling. Renting, as UMH and other community operators have learned, can get vacant sites filled rather quickly. When the goal is to get the meter running on a once vacant home site, many firms have turned to rentals for the speed it delivers.
The financial aspects of that rental model works too, once more, as Sun Communities (SUI) or UMH among others can attest. The cost of the rental can be paid off in a reasonable timeframe. The value of the property goes up as the occupancy rises.
But those factoids don’t mean that rentals should be the almighty goal of those who seek more than an affordable and appealing place to live. The American Dream is ownership, not rental receipts.
MHI member Don Westphal observed that there can be good that comes from rentals of manufactured homes. It may get people to try something and thereby discover it. That’s a valid point. However, the often low conversion rates reveal that there is a two edged sword there. Introducing people to a manufactured home that is the least expensive one that can be purchased may cause those who might someday buy far better to not buy any manufactured home at all.
Renting only homes built on the lower end of the scale, for reason like the one just noted, therefor has its own consequences.
The industry has been failing at a core raison d’être – reason for being. Yes, even in the mobile home era, there were some who invested in ‘trailers for sale or rent,’ as the old song goes. It has long been a valid model. But if the industry tips too far into the rental side of the equation, then reasoning behind Sam Zell’s motive may rear its consequential head.
As upcoming reports planned will reflect, Americans – despite the 111 million that are renting, per Apartment List – the vast majority want a home of their own that they pay for or can make monthly payments towards the home’s purchase.
The ‘easy way out’ on many things are often short sighted. Renting is quicker and easier. Why bother to sell? The answers are more demanding, but arguably are in the industry’s and companies long-term best interests. Why sell more instead of rent more?
· Because people want to own.
· Because ownership is social and economic glue.
· Because ownership is wealth creation for all who do, which may be of particular interest to minorities.
· The reasons to offer rentals are clear. But the reasons to learn or re-learn the art and science of selling a manufactured home have never been greater.
There are good trainers out there that have some useful points to share and are making the circuit of association meetings. That said, when the industry is in decline in new home shipments, what does that tell you about their net impact? If those trainers, or those marketers who tout this or that fancy new or proven thing so embraced by the ‘big boys,’ then why are manufactured home sales down 9 straight months year-over-year for the first time about a decade?
Manufactured home communities could be the retail outlets of the future. Some would argue that to a significant degree, they already are filling part of that role.
Be it developers, ‘street retailers,’ or land lease operators in manufactured housing, there is a need to develop and/or redevelop sales skills.
Part of the proof is in our historically low shipment levels. Trends are reversed by companies, which operate at the local level.
Where This Matters the Most
This lesson is especially important, but not limited exclusively to, the builders of middle or higher end homes. The ability to properly sell or market a more appealing HUD Code manufactured home is critical. Once more, facts being what they are – facts – the Louisville Manufactured Home Show declined in units on display for the first time since our organization helped revive the venue in conjunction with others in 2010.
Yes, we believe that there is strong evidence of market manipulation that purportedly has violated the law, as reports here and here indicated. There are also unethical, if not illegal, activities that likewise hurt the industry’s independents, as reports linked here, here, here, and here aptly demonstrate. Note that last link is MHI members blasting and/or publicizing MHI’s failure. Those so spotlighted have not filed a single word of objection, we’ve asked several times. They remain mute. In old England, ‘silence betokens consent.’ Thankfully, here in the U.S. we have the 5th Amendment.
Part of the solution to all such troubling issues are pragmatic. More independents must learn how to earn more by selling more homes in an honorable way that brings repeat business. They must also learn to team up with other white hats, while shunning the black hats. When multiple presidential campaigns are spotlighting bad news coming out of manufactured home communities – which often have MHI membership as a common point – that ought to be a serious warning flag for any white hat company.
Lessons Learned, Analysis
Absolutely, the industry’s and our homeowners best interests are served through the proper use of terminology. It’s arguably a disgrace that Clayton Homes is running ads online that say ‘mobile homes.’ That speaks volumes about what they are doing to this industry, doesn’t it?
Clayton Homes, Vanderbilt Mortgage and Finance, New Online Ad Campaigns Revealed
Yes, the Manufactured Housing Institute (MHI) is purportedly failing this industry on so many levels, that in a normal world, most of the senior staff should be fired. But instead, they are getting bonuses? That too should speak volumes.
Yes, data about manufactured housing that comes from MHI must sadly be viewed with skepticism. Why? The graphic linked here illustrates the point, and corrects a fact error in their video, posted above. They so lack humility that they won’t even say, ‘oops, we’re sorry to have goofed – yet again,’ and then fix what they’ve done wrong. The bulk of their staff should be ashamed at putting out sloppy data, more so for putting out spin, and so too should their puppet masters. The fact that several MHI executive committee members have past or current dark clouds hanging over head ought to be one more warning sign to independent thinkers.
But merely cursing MHI or their string pullers cures nothing. Identifying a problem is a start. Addressing it must be the next step.
Renting homes may be a reasonable quick fix, but the future ideally ought to be in selling more homes. Why?
· Because it is by selling more manufactured homes that the rate of home ownership will increase.
· It is by selling more HUD Code homes, and providing more placement options for those homes and their owners, that outrageous site fee hikes by aggressive property owners will be abated.
· By providing more and better financing options for all of manufactured housing – not only a select few – that will make the effective cost and access to HUD Code manufactured homes improve.
· More and better financing options should also boost the resale values of those manufactured homes, which will rise as a consequence.
Cause, Effect, Solutions…
Twisting, bending, and manipulating the system – including the law of supply and demand – has harmed independents as well as tens of millions of Americans.
A new paradigm is lurking beneath the water’s surface. It can and should be able to deliver what other industries routinely do. A more commonality of purpose between businesses and their customers.
People are entitled to their own opinions. But they are not entitled to their own facts. We follow the facts, evidence, and the money trails here, arguably more than any other publication in the history of our industry. When we goof, as have others, but when we error and realize it – we admit the mistake publicly, dust off, correct it, and then move on. That’s why reader input matters. It is readers and industry members who have often tipped us on topics that made the light bulb come on about Omaha-Knoxville-Arlington, their allies and surrogates.
Good media, and good organizations are supposed to make corrections when warranted. That’s what a good professional of any kind should do too.
By doing so, readers like you have rewarded us by making this the runaway #1 most read in manufactured housing. Thank you and we thank our sponsors and clients who make that possible.
There is a war between dark forces and lighter ones, even if the lighter hats don’t all or fully realize it.
You can bet that the proverbial black hats routinely know what they are doing. History shows us that some people can’t be reasoned with. Some people can only be defeated.
It is time for more of the white hats of our industry to work collaboratively. That should be done in a fashion that benefits manufactured homeowners and affordable housing seekers. It won’t be easy. But it is doable. Think Rocky Balboa. Think D-Day. Think putting a man on the moon.
More on build to rent and topics mentioned above in the days ahead, or in related reports, further below.
“We Provide, You Decide.” © ## (Industry news, commentary, fact-checks, and analysis.) (See Related Reports, further below. Text/image boxes often are hot-linked to other reports that can be access by clicking on them. Third-party images and content are provided under fair use guidelines.)
By L.A. “Tony” Kovach – for MHProNews.com.
Tony earned the Lottinville Award in history from the University of Oklahoma. He has earned multiple awards in manufactured housing, business, and in history. He’s a 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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Related References:
The text/image boxes below are linked to other reports, which an be accessed by clicking on them.
Multibillion Dollar Opportunities Knock in Solving Affordable Housing Crisis – Masthead L. A. ‘Tony’ Kovach
In a truly free enterprise system, various needs are identified. Then a means of profitably yet honestly serving those needs are established. Ideally, both the customer and product/service benefit. The happy customer(s) then tell or send their friends. That pattern repeated often enough yields success. For millions, perception is reality.
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