Issue link: https://read.dmtmag.com/i/205269
DEVELOPMENT MARKETING Ask Eddie BY ED HICKS Now that the market seems be coming back for m/h land lease community development, what can I anticipate. James W., Iowa City, IA While the development side of our industry has been sleeping, as you may imagine those traditional forces, which seem to always be our adversaries have been busy. So, be prepared to enter into battle once again. Our industry continues to suffer a lack of positive image as a viable housing alternative with the general public. Only in high demand housing markets is the general public willing to recognize the value of our industries contribution to affordable housing. Prices for entitled land have steadily been going up, and now that many jurisdictions have determined that lower density development is somehow better for the neighborhood, the cost of the land component for development has gone way up. Previously it was possible to get development densities of 5.5 to 7.5 sites per acre, some jurisdictions are lowering them to from 2.5 to 4.0 per acre, which is more in line with site built housing sites. This reduces the potential for bringing in our development costs low enough to make them "affordable". Requirements for site plan have been modified which now don't allow for less expensive utility distribution in the rear of the lots, in common areas of the community. Requiring construction of the electric, water and sewer lines in the street as site built housing development have traditionally been built, increases our construction costs high enough to make them less "affordable". And many jurisdictions continue to demand the expensive and unnecessary construction of a "utility" electrical pedestal adjacent to the home, rather than to allow the meter panel to be built on the home at the factory or after installation, directly on the home. Adding to the costs, and decreasing the likelihood of being able to produce a truly affordable home. NOVEMBER 2013 18 THE JOURNAL Building permits and fees have increased substantially, and now are applied to m/h communities in the same way as they are for site built housing, notwithstanding our use of public facilities, traffic and transportation, school impact (especially in age restricted communities) parks and recreation for public usage, traffic control devices, buffering and fencing setbacks and construction (meant to shield us from site built neighbors), etc. In fact, here in Central Florida, as of October 1, 2013 one small county now has a total fee package including building permits, utility tap fees, transportation impact, parks and recreation impact, school impact fees, are now in excess of $7,500 to $8,000 per unit. That doesn't impact a new $240,000 site built home much but it has a "heck of an impact" on affordability of new higher quality m/hs, which are selling for $85,000 to $90,000. All of which increases our total costs high enough to make them less "affordable". In the meantime many home manufacturers have decided to pander to the individual private property homebuyer, and add costs to make the home more "site built like", with many unnecessary features which greatly add to the cost, but have little if any effect on the safety and functionality of their homes. This has not been favorable for the m/h community developer who is looking for a more affordable home product. Less than 12 years ago, the wholesale cost of a 1,200 sq.ft. HUD code home FOB the factory was in the $22 to $24 per sq.ft. range are now in the $38 to $40 per sq.ft. range, an increase, which is faster than inflation due to the inclusion of many "site built home" and perhaps unnecessary features. "If we make it look like a site built home", they often justify, "we can sell to many more buyers, even if the price is higher". Wrong. Our industry was built on finding ways to provide safe, functional, attractive homes, which although they may not appear exactly like site built homes, they are truly affordable. All of which increases our total costs high enough to make them less "affordable" And finally, we have virtually no relief in lender's willingness to extend the same loan terms to m/h on leased homesites or on permanent foundations on the same terms as site built housing. Currently (Nov 2013) the monthly payment for a m/h home is approximately 156 % higher per $1,000 loan principal than for a site built home (6.9% 20 yrs, vs 4.5% 30 yrs). And to make insult out of injury we no longer can qualify our low and moderate income families with credit scores in the 580 to 620 credit score range. All of which increases the monthly payments for an equally configured m/h and create a more "affordable" housing choice. Affordability when measured in terms of down payments, lower qualifying credit score, longer loan amortizations, and comparable interest rates with site built homes, when coupled with our well built (not site built looking) homes, in selected market areas is still viable. Should you be discouraged? No. The concept of a Lifestyle Resort land lease community with "downsized" high quality homes is alive and well, primarily in seniors communities. Those communities which started the trend using HUD code homes such as Orange Blossom Gardens in Lady Lake FL, which is an example of a concept, which has now expanded to over 100,000 residents. T J Edward Hicks, Principal Consultant, CRG, Inc., Lic. Mortgage Broker, Lic. Real Estate Broker, 813 300-6150, with over 45 years experience as m/h retailer, manufacturer, developer, and RE Broker happily assisting clients with their property development, financing, or acquisition needs. easteddie@aol.com, www.mobilehomepark.com, www.factorybuilthome.com, www.fha207m.com