A 15 Year Look at Community Economies

by Steven Blank

II’ve seen this industry’s evolution firsthand through working as a community operator over the past 15 years. As we are amid an economic boom in our industry and everyone’s focus is on value addition, I believe it is important to understand how we got to this point by taking a holistic view of our industry since the 2008 recession. By understanding where we are coming from, we can make the best decisions on how to add value moving forward in this ever-changing environment.

The Old World

Flash back to 2006, when you could purchase a community with 90%+ loan to value, there were multiple non-recourse chattel lenders to finance new home sales, and very few operators were renting houses. As such, selling homes could be done at volume (and for a nice profit). Then came the Great Recession, with chattel lenders going out of business overnight, our resident bases losing their jobs, and community financing becoming more difficult to obtain. Communities lost occupancy through resident loan defaults with home inventories purchased, sold, and removed by third party home wholesalers. »

Community The Climb Back

Infilling communities with used homes and homes for rent became popular value-add business models in the years following 2008. Communities had large vacancies to fill, but selling new product was difficult. Rental homes allowed community owners to fill vacancies in short order by offering an alternative to ownership. Meanwhile, used homes offered a more affordable solution to home ownership (or rental) and removed the need for chattel financing, which for the most part, required community owner recourse.

The Boom (Pre-COVID)

Fast forward to 2019: communities are being sold at record high prices, the rental model is in full effect, the market and supply for used homes is dwindling and new homes are being sold again in markets that have struggled since 2008. The segment is consolidating as tremendous new tax benefits spur a flood of investment as the low cost of capital allows institutional investors to take advantage of large community purchases that would otherwise produce low returns.

The Boom Part II (COVID and beyond)

Since March of 2020 the industry has continued to see an increase in demand as rent collections and occupancy remain high through COVID and as the affordable housing crisis continues. Traditional housing prices across the country have skyrocketed in the wake of low inventory levels and worldwide supply chain issues, which have increased new home prices and lead times to new heights. Because of these real and enduring market factors manufactured housing has become an even more viable alternative. For an industry that has battled a negative stigma for years, a positive change is taking place with the future looking bright.

How to Add Value in Today’s Economy

Prices of communities and homes (new and used) have increased dramatically since the onset of COVID and getting those

homes onsite has become one of the biggest obstacles to overcome. Community owners and operators are faced with the same key questions as in years past related to one primary factor: How to best add value to our communities? • Do we hold and wait out the high home prices and lead times? Meanwhile, our communities lose the best opportunity in more than a decade to fill vacancies with qualified tenants. • Do we purchase new homes?

Pay the surcharges and patiently wait for new homes and hope that the increase in demand covers the increase in price for the homes and construction cost? • Do we purchase and rent new homes? Use the profit that we receive for home rent to offset the rising costs all around us? • Do we try to source used homes? Pay an increased premium along with a decreasing ability to find a good quality product?

The answer to all these questions is: it depends. Owning and operating a manufactured housing community is not a walk in the park. Selling homes as the primary/only business model used to be a no-brainer, but now with community prices being so high, the profit from a home rental program can become necessary for community success. At Blank Family Communities (BFC), we have been a strong proponent of the hybrid home sale and rental home model in the Midwest as it still yields the greatest absorption rate of homes and the net operating income bump. The rental model is especially successful in secondary and tertiary markets (most communities in primary markets have been purchased by institutional operators). Most community owners we meet now are newer to the industry and have paid a premium for their community, even the vacant sites. So, the pressure to infill homes is at an all time high.

Today, as president of Blank Family Communities, a third-party property management company based in Michigan, I see great opportunity, coupled with even greater risk. Managing our ever-changing environment in MH is critical. Ownership must possess the ability to properly budget; forecast new home availability and related costs and surcharges; model proper scenarios for the financial needs of a community; and gain and maintain occupancy to push NOI. These factors, and others need to be developed properly to ensure success today and for those to come. MHV

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for 2022 by Suzanne Felber

TThe new normal. The last few years have changed the way we live at lightning speed. Working in an office and fighting traffic has become an option instead of a requirement to many. As a result, our priorities have shifted like never before.

With rent costs outpacing home prices, more of us are working from our homes, and a staggering 45 million millennials are ready to become first-time home buyers. So now our industry has record opportunities ahead of us to sell more homes than ever.

The biggest luxury that most of us cherish is time. How we live to protect and celebrate this luxury is evident and will be even more so in 2022.

We have created a curated collection of the top 22 design trends that we think we will see in 2022. This list is going to be like speed dating — a short description of what the trends are, and if you find some of them interesting, we hope that you will let us know, and we’ll be happy to share more about them in future editions of MHInsider or online at mhinsider.com. »

Warmer woods and strong angles are part of the mid century styling that is quickly replacing the urban farmhouse look. (Clayton Homes Of Corsicana) All photos courtesy of Lisa Stewart Photography

A great hobby room that can be a retreat from the hustle and bustle of the rest of the home. (Louisville 2019)

1. Biophilic Design A big word and trend that may be unfamiliar, but it will become a household word in 2022. Simply put, biophilic design is when you connect people with nature in their homes using natural design elements. Consumers embrace gardening and indoor plants in ways that we haven’t seen in decades. Living plants add a sense of calm to a space and also help to naturally improve air quality — an issue that will continue to rise in importance as we move through the next few years. 2. It’s a Lifestyle For most of us, our lifestyles have changed drastically in the last few years.

With this comes how we live in our homes and our needs. Re-evaluating how consumers will live in our homes is a priority for the new year. 3. Less Isn’t Always More Now that many of us are spending more time at home, having suitable rooms and spaces has become even more critical. Open floorplans look like they are about to become a thing of the past, and consumers are now looking for more defined, intimate spaces that make it more possible to have to leave home less often. Bedrooms are about to become smaller, so square footage can be used for a home office, hobby space, or study hall the entire family can use. 4. Moveable Walls Urbaneer has teamed up with

Champion Homes to build compact housing, especially in the Midwest region. This compact housing is not only ideal for a second home or to use as an accessory dwelling unit (ADU), but it also features living space on-demand with

Accessory dwelling units and homes with moveable walls will be tending in the near future. (Urbaneer / Champion IBS)

moveable walls. The companies showcased this style of home at the 2020 International Builders

Show, and now we are seeing this moveable wall concept in luxury site-built homes. 5. I’ll Take Two: Vacation Airbnb Homes Consumers are more conscious than ever about the cleanliness of public spaces. Many are considering purchasing a second home they can enjoy and possibly use as an income maker as a vacation rental. This trend will open the doors to an entirely new buyer segment for our industry. 6. Accessory Dwelling Units With the massive affordable housing crisis we are now facing, more cities are becoming open to letting ADUs into their communities. Factory-built housing is the perfect solution for this construction need, and

I think we will be seeing more interest in this type of housing in the future. 7. Rental Home Communities Site builders are investing heavily in a new type of community: rental communities where single-family homes are only for rent. Many concierge-style services are available. This is an option for people who don’t want to live in an apartment but can’t afford to buy their own homes. If this sounds familiar to you, it’s because this is what our industry has been doing for decades in our land-lease communities, except in many instances, we also allow them to own their own homes while keeping their costs down by leasing the land to them. We have a perfect opportunity to introduce consumers — especially millennials — to our community living while there is so much interest. »

Color is back, and happy colors like greens and blues will be seen in more homes. (Clayton Homes Of Corsicana)

8. Spin The Color Wheel Color is back! Bold blues and greens will be back in living spaces, and simply put, consumers are attracted to colors that make them happy. You will be seeing a lot less grey, colorless interiors and exteriors in the year to come. 9. Going With The Grain Consumers again appreciate the look of natural woods throughout the home. Naturally, dramatic wood styles are at a premium, and customers prefer a natural finish instead of heavy stains. This is true with flooring, and patterns are becoming popular again, with herringbone being one of the favorites. 10. The New Entertainment Center Cooking at home is one of the hottest trends that we are seeing. People are spending a lot more time in this area of their homes, and they have discovered the Joy of Cooking like never before. With the money they are saving eating at home instead of dining out, they are more likely to purchase premium appliances and upgrade their spaces.

Don’t expect them to settle with an oven that doesn’t heat evenly or a refrigerator that doesn’t control temperature and humidity correctly. If you haven’t looked into offering a cook's kitchen as an upgrade, you may be leaving money on the kitchen table. 11. Behind Closed Doors Clutter is one of the biggest turnoffs to our new buyers, and instead of cabinets replaced with open shelves, they ask for their cabinets back. Now more than ever, people want and use air fryers, sous vide wands, and toaster ovens, so dedicating a storage space or appliance garage for these items to be stored is a must. A nice touch includes power in the back of these cabinets, so the appliances are ready to use. »

• Determine an accurate value of housing assets for sale, purchase, or lending decisions • Identify a fair market purchase price for retail or rental home inventory • Discover loan-to-value ratios and overall worth of housing assets • Flexible solutions customized to your unique needs • Market-based approach for the most accurate representation of value • Over 30 years of industry experience

Whether you’re looking to purchase a property with community-owned homes or rental inventory, or acquire a portfolio of loans, Datacomp’s valuation services can provide you the data you need to make informed decisions. Our experienced team of manufactured housing appraisers specializes in determining an accurate worth of housing portfolio assets utilizing our proven market-based approach to value, based on each customer’s unique needs. Our detailed reports provide the information you need to take the next step in your transaction with confidence and peace of mind.

12. Get Smart CEDIA, the Custom Electronics

Design and Installation Association, is a wealth of information about how intelligent design has evolved and where we go from here. The cost and size of the technology can help us control everything from the lighting and locks in your far-off vacation home to an alarm for the open freezer door in the next room. They predicted that this type of technology would be priced to be available to almost everyone within 10 years.

Smart Living Made Simple is what consumers now expect. If it takes someone more than three clicks to get a result, they won’t use it. 13. Power Up As a Texan, I learned firsthand how vital the power grid could be to my lifestyle.

With the weather becoming more unpredictable, consumers are more interested in solar and backup energy sources such as generators.

Electric cars have become mainstream and more affordable. Charging stations are now being installed at Walmart and your favorite restaurants. Providing options for power sources like these lets your customer know that you have done the homework and understand that you are preparing for the future. 14. Walk-in Pantries Having a pantry or laundry room that is large enough to house those extra appliances and bulk buys from Costco are becoming a must-have. These need to be located next to or adjoining the kitchen and should have a deep sink and possibly a dishwasher for cleaning up. Freestanding freezers are very much in demand again, and upright models like the one that Beko offers make it easy to enjoy produce and housemade sauces and meals all year long. 15. Zoom Rooms Rooms like the well-designed space at the Kips Bay Dallas showhouse are becoming more popular as we spend hours on Zoom calls or create our podcasts. Having the right sound-absorbing materials and correct lighting is a must. 16. Looking Up We also saw lots of rooms at the Kips

Bay showhouse with beautiful ceiling colors and details. This can be a great way to bring buyers’

Retro collections are trending in spaces like this great zoom room / dj booth that was once a closet. (Kips Bay Dallas 21 Showhome)

attention upwards and call attention to your higher ceiling heights. 17. Mid Century Modern Warm woods, restrained lines, and warm, saturated colors quickly replace the stark white farmhouse look that has been popular for so long. This look started and has always been popular in the Midwest, but you now see it from coast to coast. Greens and blues are the stars of this look as well, and it feels good to not only dress up and go out again ourselves but also to let our homes become a little more sophisticated as well. We love how this style feels all grown up, just like we do. 18. Thoughtful Design A place for everything and everything in its place. The days of clutter and having “stuff” for stuff’s sake are over. Homeowners are now collecting and curating items that mean something to them. Their spaces mirror their tastes and lifestyles, not what they are shown at a local big box store or website.

Mixing grandmothers china with a stunning acrylic dining table isn’t only OK, it’s preferred. »

This space off the gardens at the Kips Bay Dallas showhouse is the perfect place to daydream or to read a good book.

And if those items have some character and possibly some whimsy to them, they are even more in vogue. 19. Finishing Touches Metal and wood finishes are warmer than we have seen in the last few years.

Black windows, industrial styling, and shiny surfaces are replaced by unlacquered brass and mixed metal finishes. Faucets, hardware, and lighting look like they have been around for a hundred years but have a new, clean, modern style. 20. Seeing The Light LED lighting has not only become more affordable, it now offers so many exciting design solutions it is hard to know where to start. Flush ceiling lighting has evolved from extensive, protruding eyeballs to tiny square boxes that you hardly notice but can provide hundreds of lumens each. Single pendant lighting has lost its appeal, and we are now seeing oversized shades and lights that are more in scale with our larger open spaces and look more like a work of art than just a source of light. 21. The Healthy Home Consumers are more concerned than ever about how their home can affect their health and wellbeing. Companies like Beko, the new to the United States appliance company, have realized that healthy living is only

possible on a healthy planet and are creating extraordinary new appliances to help us live a healthier lifestyle. Other companies that follow this mindset will be at the forefront soon. 22. True To You: Being Genuine Now more than ever, earning a new buyer’s trust should be the essential part of your company's mission statement. With so much social media and untruths out there, customers need to know whom to believe and who will help them through the most significant investment they will probably ever make. When we design and sell a home, it is our reputation and the reputation of the entire industry that is at stake. If you are fair to the customer and lead with honesty, you’ll have a customer for life. MHV

Lifestylist Suzanne Felber has been active in the housing industry for more than 30 years. Felber realized that factory-built housing was the housing of the future, and has been actively working to promote the lifestyle ever since. She started American Housing Advocates as a way to share the great news about manufactured housing. To learn more about her work, visit www.lifestylist.com and www.americanhousingadvocates.com, or read her @lifestylist social media posts.