Modular Homes

In a recent article Ken Reinard of Professional Building Systems gave his take on the new growth being seen in the manufactured housing industry, and more specifically, Modulars.  Reinard said that over the past five years he has struggled to keep full employment for PBS’s work force and that the opening of a sister plant specializing in multi-family housing is what helped keep PBS floating during the over half decade of debacle left behind from the housing meltdown.  Reinard said that he is seeing people buying single family homes again, and this is apparent in PBS’s need to begin hiring fulltime positions for their single family plant.

Growth in the manufactured housing market is in large part due to a better economic position for most middle class Americans and to more favorable lending terms.  Further growth in Modulars is due to its own specific reasons, being the age of consumption for millennials, consumer education, and affordability.  While Singlewide and Doublewide consumers still consist of the same two groups of people that they always have, young people of low income and elderly people of fixed income, Modulars are beginning to break into new groups of consumers.

Thanks to increased affordability consumers who traditionally were looking into higher end double-wides are now breaking into the Modular scene and thanks to strategic marketing and consumer education, people who had the funds to buy an existing home or hire someone to site build are heading toward Modulars because they understand that they are getting similar and often better quality in a Modular but for 20%-30% less in costs.  All things considered the entire manufactured housing industry is seeing a period of growth, but Modulars are growing at an increased rate because they have been able to pull would-be site built and Doublewide customers away from those options.

How are you positioning yourself in the Modular home market?

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HUD Monitoring Contractor

In an article I recently read, Mark Weiss, President & CEO of the Manufactured Housing Association for Regulatory Reform (MHARR) raises his concerns about the HUD Monitoring Contractor.  Weiss’s goal is to demonstrate to consumers and federal regulators that the 2000 HUD reform law aimed at making homes more affordable and accessible is not being followed.  HUD’s inability to adhere to the reform law is, as Weiss argues, a direct result of the HUD Program’s contracting system which over the years has become excessive, unchecked, and expensive for State partners, the industry, and consumers.

As the HUD program currently works there is a privately operated Monitoring Contractor hired to oversee other privately owned third party inspection agencies.  In a perfect world this monitoring contractor would understand the HUD code and contract inspection agencies that can inspect homes and ensure their HUD code compliance.  Weiss claims that this perfect world does not exist.

The same Monitoring Contractor, though sometimes operated under different corporate names, has been the only Monitoring Contractor for the HUD code since its inception in 1976.  Do to its long running oversight of the HUD code this privately operated agency has become highly profit driven, for itself and for the other third party agencies it contracts for inspections.  Weiss argues that the Monitoring Contractor circumvents HUD’s consensus committee and has added new regulations and inspection policies not originally found in the HUD code.  These new regulations have become a time consuming financial burden on manufacturers while being extremely profitable for the Monitoring Contractor and the inspectors it hires.

In 2012 the MHARR under the Freedom of Information Act requested HUD to provide documentation showing the roles and responsibilities of the Monitoring Contractor.  In his article, “Monitoring Contractor’s Domination of Federal Program Must End”, Weiss sites 17 different responsibilities of the Monitoring Contractor that illustrate the power and influence it has over HUD.  Also the documentation stated that the Monitoring Contractor’s latest contract with the HUD Program is a 5 year 25+ million dollar contract.

Weiss and the MHARR have been lobbying against HUD’s conduct in hiring a monitoring agency for many years.  Weiss views the current relationship between HUD the Monitoring Contractor & third party inspection agencies has become an abusive, profit driven operation rather than a uniform way of ensuring consumer safety.

Commercialization of mobile home parks

Recently I’ve been reading a substantial amount of material published by Frank Rolfe.  Many of you have may have heard of him, but if not, Frank is on the leading edge of the commercialization of mobile home parks for the Great Plains and Southwest regions of the Country.  Frank’s park enterprise currently consists of more than 17,000 lots in 20 States.

Along with continuing in his own acquisition of privately owned parks Frank and his business partner travel the U.S. teaching courses from their Mobile Home Park University, a program designed to help deliver the tools for others to use parks as a lucrative source of income.  The University’s core platform is that mobile home parks have traditionally been privately owned by Mom & Pop style management teams, this type of management has kept park rental fees much lower than the rising rates of competitors such as apartment complex owners.  Over several decades of not increasing lot fees the average mobile home park rent is about $1,000 less than the average apartment (monthly).  These low fees have left the average mobile home park generating about $5 per square foot, lower than practically any other conceivable use for real estate.

The article covers several of the implications made by these chronically low rates, including why Rolfe sees such a great earning potential.  With roughly 44,000 parks in the United States and only 2,000 of them commercially owned, people looking to invest in the commercialization of mobile home parks are in a position to make a lot of money.  Rolfe explains that most of these parks could have their rental fees doubled over a period of time without having to greatly increase operating expenses.  The commercialization of these parks stands to create better living conditions for park residents as well.  Currently park managers earn about half of what apartment complex managers earn leaving the most experienced and qualified property managers headed toward apartment complexes.

It is a very logical conclusion that increased cash flow would allow for a park to dedicate a marginally larger piece of revenue to maintenance and grounds keeping, however this does not mean that all commercially acquired Mom & Pop style mobile home parks will result in better living conditions for residents.   I currently live in a park that was purchased by a commercial outfit and the first move they made was to increase lot fees.  Also, they have been less active and less approachable than the previous Mom & Pop management team.  This individual case does not discredit Rolfe’s hypothesis that commercialization will potentially lead to higher living standards; it does however demonstrate that lot fees can be increased without the commercial buyer having to increase operating expenses.

Click here to read the article.