LESSONS FROM THE OLYMPICS

The 2008 Olympics in Beijing offers an important lesson to the manufactured housing industry. Here you have an event where athletes have taken a certain specialty, a certain strength, and turned it into an extremely advanced skill. Some of these people you and I could beat in at least a dozen parlor games, but in their specialty, they are the tops in the world. So that begs the question: what is the specialty that the manufactured housing industry has to offer – what can it alone focus on and excel at?

In my opinion, our specialty is affordable housing. That’s what we do well, That’s our strength. We can put a customer in a detached home for less money than anyone else on earth. So why can’t we accept this specialty and run with it?

I think it’s about time we stopped confusing the public with what our strength is. I don’t think it’s building the most attractive form of housing. I don’t know anyone who becomes breathless with excitement with a glimpse of our product. Those two story homes that sit on dealers’ lots are cool to look at but don’t sell that well. I never hear folks at the local country club talking about the latest manufactured home designs along with the latest Lexus models. Let’s face it. Our strength is not beauty.

Our strength is also not quality of construction. We all use the sales pitch that you can build a home better in a factory with factory testing and storing of materials, but every time I walk in a home and feel it jiggle and bounce, I am guessing that the whole “better quality” sales pitch is out the window with most customers.

So what do we excel at – what can we win a gold medal at? The answer is affordability. Nobody does that better than we do. Our cost per square foot is lowest. We are the national champion in that category. And we are the only form of housing that someone who earns minimum wage can actually afford. Or who retires on $1,000 per month in total monthly benefits. For someone on a low budget, we are the Michael Phelps of detached housing.

While most manufactured home community owners have realized and accepted out niche, and are moving away from overzealous attention to rules enforcement and landscaping that customers never cared for anyway, most manufacturers have still not taken the hint. Many manufactured home community owners have come to realize that the only way to fill lots in their communities is to buy homes, bring them in, and sell them on location. There certainly is no future in waiting for the local dealer to sell a home – and even then, you would be competing with at least 10 other properties trying to attract that customer to their manufactured home community. If your focus is affordable housing, and you are trying to buy and bring in a home, obviously your goal is to buy the least expensive home possible. Yet this concept is lost on most manufacturers. I have called to get prices to buy a home to fill a lot, and the manufacturers all want to sell you on the more expensive models – they want you to focus on upgraded drapes and kitchen cabinets. Instead, they need to focus on building the cheapest home in the universe, and marketing that to community owners. For over a decade, the manufacturers have been pushing the price point higher and higher and, let’s face it, it hasn’t worked. Sure, you can build a $50,000 singlewide, but will anyone ever pay it off? I think we all learned the answer to that question with the chattel collapse. Let’s focus instead on building truly affordable housing. Let’s cut out every possible upgrade and extra. Let’s strive to build an ever cheaper home; one our customers can afford and will pay off the mortgage on.

If you were to go door to door in any manufactured home community, and ask the residents why they live there, the resounding answer would be “because it’s cheap”. You won’t find a bunch of eccentric millionaires, and you won’t find retired symphony orchestra naturalists who want to commune with nature. Instead you’ll find men and women who have a limited budget and are trying to wring some sort of quality of life out of a small income. Let’s listen to this majority and get our heads screwed on straight. The customers want cheap – let’s deliver it!

This theme can also be lost on manufactured home community owners. While rent raises have driven many community lot rents to stratospheric levels, many owners do not seem to realize that there is a glass ceiling on how high they can go. When your sum of lot rent and home mortgage starts to break the $1,000 barrier (or even $800 level in most markets), you are no longer affordable housing. There are a million options at that price point; houses, condos, apartments of all types and locations. Nobody is going to live in a manufactured home community if they can own a brick house instead. I talked to an owner of a four-star community recently, and found he is having to buy out at least 10% of the homes in his property per year to keep the homes from being sold and pulled out. Why? His customers are leaving in droves. Why shouldn’t they – his lot rent is $600 per month, not including utilities. When you load in their home mortgage, they’d be crazy not to redirect that money to a better housing option. And this same guy is still raising the rents annually. Clearly, this is a flawed business model. Many community owners have apparently lost sight of the affordable housing goal.

So what can we, as an industry, do to win the gold medal – to have a thriving, successful business that revolves around our strengths and the strength of demand in the market? The answer is for all of us to focus our energies on doing things as cheaply as possible. We need to be thinking “affordable housing” 24 hours a day. We need to deliver a product that is cheaper each year, not more expensive. That’s what the market wants. That’s what we have the ability to deliver. Until we do this, we are not even going to qualify for the finals, much less win a medal.

 

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