Issue link: https://read.dmtmag.com/i/63983
DEVELOPMENT MARKETING When Should Investor/Developers Start Building New LL-Communities? BY ED HICKS In the Spring of 2012, nationally and locally, we are seeing a fairly rapid filling of site built apartments to capacity, with the result that many landlords are increasing rents, and elim- inating many of the incentives they were offer- ing just a year or two ago. This "surge" is due in part to a pent up demand for housing by those displaced from their defaulted mortgages, and an inability to repair their credit to former lev- els to qualify for the purchase of another home so soon after the foreclosure, and the general increase in employment due to an apparent in- crease in consumer spending, creating a (hope- fully) end to the long, long recession. Will the projected "overflow" from those seeking apartments be turned into new residents of our land lease communities? I think so. If we take a serious look at what we offer these prospective residents, the possibilities are clear. What will it take to get their serious interest? A serious plan to improve the image of m/h as a viable housing alternative is important to be sure. But that's another issue we need to ef- fectively deal with. Acquisition and development financing, non-recourse, at low interest rates and 40 year terms is available for new community develop- ment or rehabilitation of existing communities by private lenders using the FHA207m loan guarantee program. Several loans are now being considered byHUD staffmembers in sev- eral areas of the country, after being virtually dormant for the past 12 years. And, in some cases, where land costs provide for it, and rel- atively low cost municipal water and sewer are available, although not absolutely required. For those properties where the homesites are zoned for m/h, the similar 40 year FHA221d4 new apartment financing program which allows for site built or HUD Code homes as the dwelling unit may be available. We are already seeing interest by investors and developers in new m/h land lease commu- nities in spotty areas of the country, especially those where employment is strong, and other housing options are scarce and/or expensive. MAY 2012 20 THE JOURNAL In North Dakota and Texas and other areas near the new oil production facilities for exam- ple. The first and most important factor to build new communities is obviously the location, es- pecially in terms of proximity to community services, shopping, medical services, schools (except for seniors communities), parks and recreation, low crime areas, etc.,and all the other obvious factors. What is not so obvious, are other very important location factors in- cluding: being in an area where m/h communi- ties have a fair to good reputation (social acceptability), locating in amarket where there is a shortage of entry level affordable housing, where apartment rents are high, and where there is diverse and steady employment. Where incomes are sufficient to support the purchase of a home. Secondarily, and almost as important as lo- cation, is the availability of viable home fi- nancing options and terms for buyers. With the exception of limited FHA Title I home financ- ing options with GNMA as a secondary market for notes, the m/h industry has been virtually "locked out" of secondary financing markets such as FNMAand FreddieMac formany years, resulting in a shortage of investors at rates and terms which allow for competition with site built housing. As a result, the shorter term loans, and higher interest rates necessary to lower home payments for an offset have created a de facto "ceiling" on home prices, and therefore on the home quality and features. Investors and lenders for chattel mortgage lenders point to the old saw that "manufactured homes depreciate" and therefore can't be re- lied on as sufficient collateral necessary to sup- port longer term loans at lower interest rates. While not necessarily true (look at seniors com- munities for example), and what effect the home refinance options have on pre-occupied homes for another example, when a homebuyer goes to sell their home and the only financing available is short term, at almost usurious in- terest rates. So, pre-occupied home prices are often lowered to compensate, giving the im- pression that there has been "depreciation". Over the years, there have been several at- tempts by FNMA to find a way to include m/h in their "bundled" packages of loans to in- vestors, with little success. Now that they are under fire for reportedly irrational loan under- writing (as the result of Government sugges- tions), with a resulting devastating effect on investors returns, and seriously hurting home values all over the country, theremay be no in- terest in resuming the challenge for reasonable terms for m/h financing on a par with site built homes. Unlike factories building automobiles which can be absorbed on our nations roadways in vir- tually unlimited numbers, manufactured hous- ing needs homesites on which to site them. Without an adequate number of new home- sites, production is limited, as is evidenced by the fall from over 300,000 homes a year in the turn of the century to only 50,000 in 2011. In- vestors are buying existing communities at prices which are unheard of, but where is the stimu- lus to build new communities? With a properly selected location, and viable home financing options for home buyers, new community development should be on the minds of everyone in them/h industry, includ- ing but not limited to: manufacturers, suppli- ers, installers, community managers, investors. And most of all, happy, contented new community residents, living in affordable, safe, comfortable, quality housing. That's all have to say. T J Edward Hicks, Lic.RE Broker, Lic.Mortgage Bro- ker, located in the Tampa Bay area, and a 45 year m/h industry nationwide consultant with a history as a m/h manufacturer, retailer, developer, and mortgage broker. www.mobilehomepark.com, www.factorybuilthome.com, www.fha207m.com 813 661-5901