Some characteristics and trends pursuant to the MHIndustry renaissance? Well the HUD Code Mhomes are much larger and far less mobile than they were during the early 1970s. While the vast majority of homes thirty years ago were of single-section configuration; more than 60% (national average) are multi-section today. This trend affects the MHCommunity segment of the industry, having a lot to do with why only about 5% of HUD Code MHomes ever move once sited on private property or in a MHCommunity.

Then they're the house-like features now all but standard on new HUD Code Mhomes, e.g. siding material is oft lapped vinyl siding and not slick, shiny pre-finished sheet metal; roof systems are now pitched and covered with asphalt shingles, though rounded metal roofs are still common in some rural markets; attractive, contemporary interior decor options, as well as high energy efficiency has become de rigueur.

The HUD Code Mhousing product continues to be, by far, the most affordable housing option available in the U.S. today! However, as its' average price increases by about 10% each year, compared with site-built housing increasing at only 5% per year, this is an area that bears watching. Given local social, political and market acceptance, and as long as the total monthly cost of HUD Code Mhousing is 30% below the total monthly cost of competitive new housing options in the same locale, the factory-built product will generally sell well, if done so professionally, and new and enlarged MHCommunities will fill over time.

Major challenges facing the MHIndustry today? Several. Overcoming local political and social bias, usually manifested in pernicious regulatory barriers to all forms of affordable housing, continues to head the list. Then they're things the industry could do, beginning with ridding itself of the vestiges of a trailer heritage, manifested in the way the shelter product is marketed, sold, titled, financed, serviced and taxed. This will be a time-consuming and difficult task as the MHIndustry continues to market along two tracks: large, upscale housing units competitive with stick-built alternatives; and, smaller, less expensive models attractive to those in a lower economic strata. The answer? As has been suggested every year of late, MHIndustry leaders across the U.S. and Canada, representing every segment of the industry, should regularly summit and address this and other key issues affecting the future and health their common business interests.

Another case in point is the issue of new home installation. When the MHIndustry and state regulators were unable to standardize and enforce minimum housing production quality standards in the industry's heyday of the early 1970s, the federal government stepped-in with the HUD Code as we know it today. It appears history is about to repeat itself. At present, HUD Code Mhousing producers have been unable and/or unwilling to step forward and take full and final responsibility for the initial, permanent installation of their housing product, wherever placed in the United States. The current industry 'solution' has been to challenge states to regulate the installation process, and license and oversee trained installation specialists. That suggests fifty different answers to this important issue. So, in time or until 'the industry' learns from its' past, we will be destined to see the federal intervention lesson repeated at some point in our collective future. Is this really the best alternative for the MHIndustry?

Then there's the real estate investment segment of this dual industry. While there are two primary types of MHCommunity; the landlease and subdivision, the following paragraphs will address statistics and trends relative to the former. From an investment perspective, the landlease community is of the annuity type; homebuyers may or may not purchase their new home from the MHCommunity developer/owner/operator, but pay periodic rent for the homesite on which their single-section or multi-section Mhome is temporarily or quasi-permanently sited, until resold or removed from the property at some future date. The subdivision type MHCommunity is characterized by a fee simple land transaction occurring at the same time or before the new or resale HUD Code Mhome is purchased and permanently installed on the homesite. The resident of a landlease MHCommunity is unique among multifamily rental property dwellers; owning their own home and being responsible for its' upkeep inside and out, but paying ground rent fin exchange for the conveyance of that leasehold right, along with professional property management and variety of other services.

Best estimates suggest there are 50,000 landlease MHCommunities nationwide. An impressive number, until one realizes that in the dozen or so states where this realty asset class is regulated, a MHCommunity can be as small as three Mhomes on a single parcel of improved ground. With that in mind, it is understandable why it appears 85% of all MHCommunities are less than 100 rental sites in size; an adequate investment size for the young wealth builder or Mom-and-Pop investor, but not necessarily enjoying the residual economy of scale required to interest larger investors seeking institutional grade (i.e. larger) investments. It is further estimated that only 6% of U.S. MHCommunities are larger than 200 rental sites in size.

According to the 10th annual Allen Report (published in the 1/99 Manufactured Home Merchandiser magazine), national physical occupancy was pegged at 95.2%, based on a national pole of 700 portfolio owner/operators of the realty asset class. This was down 2-1/2% from a year or two earlier because so many new MHCommunities are being developed and existent ones enlarged.

According to the 2nd annual Allen Rent Review (published in the Spring of 1999 in Community Management magazine, the average national rent for the asset class was $244.00; representing a state-to-state range of from $107 to $429, though site rents are known to be as low as $85/month in several rural markets, and as high as $2,000.00/month in others.

Operating Expense Ratio or OER, for MHCommunities nationwide, during 1998 was determined to be 37.7%, versus garden style apartments at close to 51.5%. Why the significant difference? Far fewer on-site improvements to spend dollars on in a MHCommunity, and far lower turnover (with its' lower need for advertising and no need for preparing apartment units for re-renting) related operating costs account for the majority of the difference. This data too from the 10th annual Allen Report and the text, How to Find, Buy, Manage and Sell a Manufactured Home Community.

The 4th annual Allen Survey (published during the summer of 1999 in The Journal), finally nailed-down commercial real estate investment alphabetic property grades with average income capitalization rates. For example: an A grade MHCommunity could have a 'cap rate' of 8.2%; B grade @ 9%; C grade @ 9.9%; and D grade @ 11%. This was the first time in the history of the MHCommunity asset class that said data became available, as it's taken 25 years for the industry to wean itself from the long defunct Woodall Star System last updated in the mid-1970s. Laurence Allen, MAI, of Michigan, has been the lead researcher on this timely topic of MHCommunity 'cap rates.'

What about MHCommunity trends? Already mentioned is the widespread development of new rental properties and the enlarging of existent ones. Prior to 1994, development of the asset type was at a standstill, as it took a quarter century to fill thousands of vacant rental homesites built in the industry's heyday (remember 1972's half million plus new 'mobile homes'?) but lying vacant during the intervening years. Well, with the release of Development, Marketing and Operation of Manufactured Home Communities, by Allen, Alley & Hicks, during January 1994, the era of new MHCommunity development began. To date, that text continues to be the only one available on the subject, and the authors have conducted more than a dozen 'hands-on' development seminars, from coast-to-coast, based on the book, and usually to sold-out venues.

New MHCommunities are generally far less densely laid out than their counterparts of the early 1970s. 'Back then' singlewide 'mobile homes' were the most common size manufactured, and rental properties could easily handle 10-12 per acre, but not today. In order to accommodate contemporary multi-section and large single-section homes, 4 - 6 homes per acre is the common density guideline, along with curvilinear streets, green areas and other curb appeal - enhancing features, to give the living environment a conventional subdivision feel and appearance.

Professional property management has become a hallmark of MHCommunity ownership and operation during the present day spanning of the millenniums. As recently as ten years ago there were but a dozen Institute of Real Estate Management designated Certified Property Managers (CPM) active 'in the business' of managing MHCommunities; today they number well in excess of sixty! And the Accredited Community Manager (ACM) program is a helpful addition on the professionalism scene. It is this observer's considered opinion that far too few MHCommunity on-site managers will earn the Manufactured Housing Education Institute's ACM designation as long as the program continues to be so lengthy (three separate segments) and prohibitively expensive. It is also important that the ACM, and retail sales-related PHC (Professional Housing Consultant) designation classes be taught by individuals earning their daily living as on-site or property managers in the first instance, and successful retail sales persons or managers in the latter case.

From a property management operations perspective, two related considerations bear mentioning: increasing the scope and improving the nature of on site income streams, and enhancing operations expense efficiency. In the first instance, 'everybody seems to be doing it.' REITs and other portfolio owner/operators are aggressively seeking ways to serve their clients (i.e. renters) better and for an added price. The Alternative Income to Rent concept, popularized by west coast real estate consultant Allen Cymrot, was a keynote presentation at the 8th annual International Networking Roundtable in San Diego, during the Fall of 1999; this was supplemented by a 'lessons learned' seminar offering, on the same topic, by property management staff from one of our industry's largest REITs, Chateau Communities, Inc. MHCommunities have always been fertile ground for this sort of thinking, with their long-standing ability to sell new and resale HUD Code Mhomes into and out of the property proper, along with ancillary services (e.g. set-up and tear-down of Mhomes) and aftermarket products like steps, doors, windows, roof coating, and on and on. Then there's the operating expense side of the ledger. Submetering of utilities in general, water in particular, has already caught-on within the MHCommunity arena, especially as regulatory reporting requirements have tightened over the past few years. Competitive bidding, group purchasing and other such techniques have been implemented slowly, except in portfolios numbering several dozen or more like entities. But all this is somewhat part-and-parcel to the increase in professional property management cited in the previous paragraph. As more and more CPMs become active in the MHCommunity asset class, more and more attention will be paid to increasing the income stream via traditional and novel methods, and significantly decreasing operating expenses through the application of appropriate cost-saving measures, advanced purchasing techniques, and good old fashioned MBWA (per Tom Peters, in the nation's first business best-seller, In Pursuit of Excellence) ...'Management by Walking Around!'

Contemporary industry terminology. Yes, we've come a long long way over the past ten years. Even though the federal government went on record in 1976 as preferring the term 'manufactured housing', it wasn't until the early 1990s that any concerted effort was made re-educate thousands of MHIndustry executives, entrepreneurs, employees, even our customers. While in search of a major national publisher for the above-referenced development text, it became apparent the MHIndustry had to agree, once and for all, how it would collectively refer to its' product, related real estate investment asset class, and a variety of related and supporting business terms. Former MHI executive Dan Gilligan, along with the book's three authors, through polls conducted in Manufactured Home Merchandiser and the The Journal trade publications, finally, and with the assistance of MHAssociation executives nationwide, sorted out the terminology issue to give us the lexicon we commonly use today: manufactured housing and home, manufactured home community, retail sales center, single-section and multi-section homes, resident(s), guidelines for living, transporter, and several more. The only term continuing with any confusion has to do with the asset class. All the industry's trade publications write of manufactured home communities, and for good reason. Our industry sells the manufactured housing product. Once sold it becomes the customer's home. So, once sited in a landlease or subdivision environment among other homes, why refer to the property in toto as anything less? Why insult one's customer by referring to his or her home as a house?

You began reading this State of the Industry feature, learning - if you didn't already know it, that we are midway through the Decade (1995 - 2005) of Manufactured Housing and the Manufactured Home Community! Now familiar with where this dual industry has been, where we are today, and the trends that will carry us into the new millennium in January 2000, are you prepared to do your part to ensure and promote the continued period of business prosperity, the veritable renaissance, that has characterized 'our decade'? I surely hope so. Many of us have already so committed.

Want further information concerning MHIndustry statistics mentioned in this feature? Contact MHI via (703) 558-0400.

Want further information concerning MHCommunity statistics mentioned in this feature? Contact Community-Investor via (317) 888-7156.