Five Point Plan for Affordable Housing and Manufactured Home Living Recovery

Preface. This article will first outline a five-point plan for affordable housing and manufactured home living recovery. Then, it will give some specific examples of why this plan makes more sense than others that are being discussed. Interlaced with that will be facts, evidence and specific examples of how the battle for affordable housing has been weaponized by some powerful interest groups in a manner arguably harmful to the vast majority of all but the wealthiest Americans.

 

The approach will be nonpartisan or bipartisan. The author has studied and lived these issues for several years, is considered by many as an expert on these topics and was invited to address the Federal Housing Finance Agency (FHFA), the Government Sponsored Enterprises (GSEs or Enterprises) of Fannie Mae and Freddie Mac in their recent Washington, D..C. Listening Session held on December 2, 2019.

 

 

I) The 5 Bullets of Affordable Housing and Manufactured Home Living Recovery.

 

1) Understand the issues from a holistic and historic lens that considers the various perspectives and groups that are impacted. The issues are non-partisan, a matter of facts vs. feel good fiction.

 

2) Promises of quick easy fixes have been made in housing polices for over 50 years. No matter how well intentioned, the quick fixes obviously have never worked, or we wouldn’t still be discussing these issues, would we? Affordable housing related challenges are faced by tens of millions of Americans today. It will take more than one casual reading about such issues and solutions to understand why this plan can be effective where others have delivered empty promises.

 

3) There are, however, surprising laws on the books that if good provisions in them were fully understood and properly enforced could begin to steadily improve the challenges that now exist. That bears rephrasing. There is no need to wait for studies or new legislation. The issues have been studied for decades and there is ample evidence for what follows. The laws needed to address these problems were passed by a widely bipartisan votes in the Congress. One of the two such bills were signed into law by Democratic President William Jefferson ‘Bill’ Clinton in the year 2000, while another was signed into law by Republican President George W. Bush in 2008.

 

4) There are fears and entrenched forces plus a desire to place blame that must been understood and navigated. The blame ultimately falls on a relatively few who have learned how to weaponize, distract, deflect and benefit to themselves from the divisions they foster. That’s not meant to inflame, it is an observation that politicians from both the left and the right have made summed up by this phrase – the system is rigged. While their approaches differ widely, they are demonstrably correct about the root cause.

 

5) Good information, proper terminology – education and information sharing – combined with sharing and diligent follow ups are necessary to be successful.  That information must be shared to be acted upon. People of good will ought to work in coalitions that navigate beyond the often artificial barriers that divide people into camps with the aim of insisting that good existing laws be fully and promptly enforced. Further, to keep what has occurred from re-occurring, those who have rigged the system should be held to account to the full extent of the law.

 

 

With those 5 points in mind, let’s turn to a series of linked reports. Each will be introduced in no particular order of importance. But what is important is that each of those linked reports be digested and are understood. Because those points will make the case for that 5 point solution above come to life.

 

II. Fear and a Lack of Understanding How Solving the Affordable Housing Crisis Would Benefit the Vast Majority of Americans of all Color, Religious, Gender and Other Backgrounds.

1) The report below, as are others that will follow, is based upon years of third-party research by experts in their respective disciplines. They may or may not have had in mind this particular 5 point solution. Regardless, their research and evidence logically apply.

First published in Value Penguin at this link here, the report linked below is illustrated with video and other graphics. It could be summed up like this. When affordable housing is located near where it is needed, that benefits the working, lower=middle and middle classes in a variety of ways. The positive economic impact of having affordable housing near where it is needed would according to two Obama Administration era National Bureau of Economic Research (NBER) experts boost the economy by some $2 trillion dollars annually. Rephrased, applying the proposed plan would benefit the vast majority of Americans, often giving people of color sustainable home ownership instead of renting, thus putting them on the path to enhanced wealth creation. Because as the Trump Administration’s Secretary of Housing and Urban Development (HUD) Secretary Ben Carson, M.D., has observed on several occasions, the average rental household has some $5000 in net worth, while the average household that owns their residence has a net worth of some $200,000.

 

 

2) The next report is a compilation of decades of research by nonprofits and university level studies. They demonstrated that manufactured homes are misunderstood and as in the case of so many prejudices are unnecessarily feared. A few pull quotes illustrate a flavor for what is found in those reports.

 

 

 

 

 

3) It is worth mentioning that the most proven form of affordable housing are modern manufactured homes. The illustrations below sum up some surprising facts. They are also an aid to using the proper terminology, because the terms ‘trailer house,’ ‘mobile home’ and manufactured home cover different eras of styles of construction. Today’s manufactured home is proven durable and has been proven to appreciate side by side with conventional construction.

 

4) As the report above outlined and linked up well documented evidence, the next report is by a panel of bi-partisan lawmakers. They are some of the many who have studied manufactured housing and found it to be the most cost-effective form of developing or redeveloping.

 

 

5) Antitrust – or anti-monopolistic practices – must be part of the solution. While our focus herein is the application of antitrust law with respect to manufactured housing, we would advocate that it is equally necessary in other segments of the economy. The more this writer has discussed issues with people in other industries, the more it has become clear that they are also often suffering the effects of consolidation that routinely has abused the political system. Again, the ‘system is rigged’ mantra applies. But specifically with respect to Warren Buffett-led Berkshire Hathaway, Clayton Homes, and their lending units of 21^st Mortgage Corporation and Vanderbilt Mortgage and Finance (VMF), which have often been accused of racial bias harmful to the interests of blacks, Hispanics, Native Americans and other minorities. It must not be forgotten that lower income whites are also harmed by these problematic business practices.   The report that follows lays out step-by-step the case for how 21^st, Clayton and Buffett-led Berkshire rigged the manufactured housing marketplace through “tying” and other purported violations of antitrust law. But it is also arguable that deceptive trade practices, RICO, and other violations of the law are also demonstrated based upon the evidence found in this report. Note that each of the sources are quoted in context and at length. Antitrust attorneys who have reviewed this information have found it compelling, so you should too.

 

 

6) The weaponization of nonprofits. Let’s begin by saying that this is not meant as a blanket attack on all nonprofits, they often exist for good reasons and much needed causes. On all matters, we have taken a prudential approach that advocates separating the wheat from the chaff. The same person or organization may well be doing some good work (wheat), but they may also be doing some things that are demonstrably harmful (chaff). That ancient principle of separating wheat from chaff – in our view – is a useful means of moving beyond the artificial barriers that often divide people. That said, we’ll name two names of nonprofits that have been weaponized in a fashion that is arguably problematic, but those two are not the only ones so tainted.

• The Manufactured Housing Institute (MHI) has been increasingly in the grip of so-called big boys that have twisted that organization into a tool for steady consolidation or monopolization. They have done so in arguably corrupt ways. One has to go back to the brief tenure of Don Glisson, Jr. as Chairman of MHI to find a leader who himself and/or his company has not been credibly accused of scandalous behavior in third party media, legal actions, by lawmakers and others. Put differently, starting with the top leadership of MHI, the organization has been led by men who have smoke rising around them, so why would it be a surprise that the organization’s goals and purposes have not similarly been corrupted? Evidence of that is found in the report linked below. Using the principle of separating the wheat from the chaff, the allegation that this is a corrupt body should not be construed to mean that every company or every person associated with it are corrupt. But when the shoe of corruption fits, that person must wear it.

• Equally important to grasp is the weaponization of other nonprofits. We’ll point to what the Golden State Manufactured-Home Owner League (GSMOL) pointed out to their members, that the group known as Manufactured Housing Action (MHAction) is funded by the Tides nonprofit.

• The Tides nonprofit in turn has had as one of its biggest donors a nonprofit funded entirely by Warren Buffett.

• While Buffett is admired by many for his business acumen, he is a classic example of why the principle of separating the wheat from the chaff must be applied with care. There are things he has said that he and/or one of Berkshire’s business units may arguably do the precise opposite of what he claims to advocate.

While he wasn’t necessarily referring to Buffett, the quote from actor Danny Glover can be applied to what this point is making.

• By weaponizing information, using nonprofits and other means, Buffett-funded nonprofits like MHAction are able to stir up bad news that ironically obliquely helps his business units. That doesn’t mean that MHAction isn’t making a valid point, they often are. But as the report linked below makes plain, that misnamed “Mobile Homes” video report produced by HBO’s Last Week Tonight with John Oliver uses correct information in a way that benefits Buffett and his allies. Oliver doesn’t mention that every one of the firms in his viral video has a direct tie to MHI.

• A core document in that report referenced by Oliver is co-authored by MHAction. MHAction has raised some genuine issues and has taught people who to organize to deal with those problems. But what MHAction is advocating for is at best an incomplete solution that will not work unless it is joined with other steps that this article advocates must be done.

 

7) The Question of Coordination or Collusion? As Kevin Clayton says in the video below, Buffett preaches to his unit managers to be a tough competitor and to deepen and widen their “moat.” Those who have studied Buffett often point to the moat and how it is at least unethical if not illegal. Direct or indirect mention of the moat and its impact on manufactured housing in leading to consolidation and creating a monopoly are found in these mainstream news sources that span the left-right divide. The question of if the coordination is ‘a wink and a nod’ or more formal is worthy of exploration by law enforcement and lawmakers who ought to probe these allegations using subpoena powers and testimony under oath. But let’s note that a relatively few people could be rigging the system in manufactured housing, with the rest being done by people who are merely doing whatever their boss told them to do.

Congressional representatives, several U.S. Senators, including presidential hopefuls, plus mainstream media have all pointed fingers at Buffett, Clayton Homes, and their affiliated lenders.

For example, representative Maxine Waters (CA-D) said a few years ago said in a letter that Clayton Homes was a ‘near monopoly.’  Since that letter, the evidence that they are a monopoly has arguably grown.

 

•  This list of linked mainstream media articles in a variety of ways supports the allegations made and linked from herein. What those sources didn’t do is show documentation of evidence of antirust violations, as is found at this link here.

• GuruFocus said “Warren Buffett Can’t Escape Unethical Strategic Moats,” their specific points are linked here.
• The Atlantic,without specifying how the monopolization was being accomplished, noted that the independent retailers in manufactured housing were being rapidly eliminated/consolidated, that report is linked here.
• The Nation called it “The Dirty Secret Behind Warren Buffett’s Billions…” and specifies Clayton Homes among those using the strategic moat in ‘dirty’ ways.
• The Jacksonville Florida Times Union summarized the connection between the John Oliver viral hit video dubbed “Mobile Homes,” MHI, Clayton Homes, and their related lenders. That op-ed was first fact-checked by an editor, before it was published not only in the one newspaper it was submitted, but at least in 5 Florida newspapers.
• Kori Hale from CultureBanx writing in Forbes called out Buffett, Clayton Homes, and their lenders in April 2019 for racial bias and other problematic business practices.
• Even Clayton’s hometown television news station interviewed a former team member that made such allegations, which of course Clayton and their lenders denied.

Then there is the problematic phrasing and framing, but nevertheless compelling insights into the business practices of MHI members, including Clayton, Frank Rolfe and others.

 

8. The quotes below help explain how apply good existing laws could overcome the barriers for placing more affordable housing now, not some time into the murky future. Given that the laws already exist, why aren’t they fully enforced?

III. The presentation as written for the FHFA listening session in Washington D.C. will become clearer in the light of the concerns noted above.

 

FHFA Listening Session Comments by L. A. ‘Tony’ Kovach, Publisher of MHProNews.com, MHLivingNews.com, Award-Winning Manufactured Home Industry Expert and Consultant (LATonyKovach.com)

 

The Duty to Serve Rural, Underserved, and Manufactured Housing Markets was enacted as part of the Housing and Economic Recovery Act (HERA) of 2008. The law passed by a widely bipartisan margin.

 

FHFA’s website says: “The Duty to Serve (DTS) requires Fannie Mae and Freddie Mac (Enterprises) to facilitate a secondary market for mortgages on housing for very low-, low-, and moderate-income families in: Manufactured housing…”

Over a decade later, there is little to no discernible support for the vast majority of HUD Code manufactured homeowners, those seeking affordable housing, or the retailers and others who sell manufactured homes.

Data supplied by the Government Sponsored Enterprises (GSEs) of Fannie and Freddie prove that point.

As a trade journalist who publishes the runaway largest and most-read professional media in our industry – MHProNews.com – and as someone who is also a multiple award-winner in history and manufactured housing, those opening facts beg several questions.

But let’s begin with statements instead.

• No person or organization is supposed to be above the law.

 

• We’ve spoken with lenders that entered the manufactured home market after DTS was passed. They’re successfully making sustainable loans.

 

• We’ve spoken with lenders who’ve made manufactured home loans – including personal property or ‘chattel loans’ – sustainably for a decade or more.
• Given federal law and that others made such loans successfully, why has FHFA tolerated the obvious foot-dragging by Fannie and Freddie to fully enforce and comply with federal law?

 

Years of research and reports could be boiled down to this claim.

Good federal laws are on the books that support manufactured housing on paper but are going under-enforced and/or are being ignored.  DTS is one of them.

A decade after HERA and DTS passed, where is that secondary market?

Interested parties should look at various letters submitted to FHFA about the current plans and proposed modifications requested by the Enterprises. The Manufactured Housing Institute (MHI) letter by EVP and CEO-elect Lesli Gooch makes some interesting and accurate statements, but also pivots to items that are arguably paltering.

Instead of Gooch making a case for robust support of all HUD Code manufactured homes – which is what one might reasonably expect of the trade association claiming to represent all segments of manufactured housing – instead MHI promotes their so-called ‘new class of homes’ recently dubbed “CrossMod^TM homes.”

Why didn’t MHI pursue robust lending for all manufactured homes, instead for only select “CrossMod^TM homes” backed by Clayton Homes, Skyline-Champion, Cavco Industries and some MHI member producers?

How did Fannie and Freddie magically establish a special program with specs for those so-called “CrossMod^TM homes,” reportedly developed in closed doors meetings with MHI?

Why haven’t the minutes for those meetings been released?

As MHI member-producers pointed out to MHProNews, there has long been lending on modular housing on par with conventional housing.

It was illogical and insulting, say those sources, to create a so-called new class of manufactured housing when some of those same factories already built modular coded units.

We have no problem with what products builders want to produce that comply with regulations. But we do have a problem with special lending extended to favored MHI firms by the GSEs with the FHFA’s consent.

HUD Code builders have always had the ability to build manufactured homes to minimum federal standards which provide durable, safe housing with consumer protections affordable for people with lower incomes, as well as more residential style-housing that has more features at a higher cost.

There was therefore no logical reason to create a new class that blurs the line between modular and HUD Code, including through the name of the product.

I’ve personally spoken with people at the GSEs and/or who performed contract work for the Enterprises. Some said the Freddie Mac Choice and MH Advantage by Fannie Mae plans are not how such lending programs are traditionally developed.

Of course not.

Do the GSEs tell site builders how to build their housing units?

Richard Genz did research for the Fannie Mae Foundation published some 2 decades ago. He made the case that manufactured homes were unfairly stigmatized.

In 2011, an Obama Administration era HUD PD&R documented manufactured homes appreciating side-by-side with conventional housing.

So why implement a scheme splitting higher cost ‘new class’ HUD Code homes MHI and the GSEs are pushing? Doesn’t that de facto stigmatize anew the vast majority of millions of existing manufactured homes?

This ploy purportedly fuels stigma, arguably benefiting lenders like 21^st Mortgage or Vanderbilt Mortgage and Finance, owned by Berkshire Hathaway.

MHI and the GSEs vaguely admit this new class of ‘CrossMod^TM homes’ is off to a poor start in the marketplace. New HUD Code production is also down year-over-year. Coincidence?

Given that FHFA as well as the National Association of Realtors in 2018 both reported manufactured homes appreciate, the lack of logic for plans developed by MHI, Fannie, and Freddie behind closed doors is stunning.

The Urban Institute said in 2018 that a lack of lending likely keeps existing manufactured homes from appreciating even more than they already do.

Rephrased, the status quo unduly punishes millions who currently own a manufactured home who could have higher equity and resale values if DTS were fully enforced. That’s billions of collectively lost wealth for manufactured homeowners. When more realize that, there are voters among those 22 million Americans and 111 million renters.

We’ve published an online version of this comments letter on the Masthead Blog on MHProNews.com. It includes illustrations, videos, links to comments, plus historic information by others and us.

We believe evidence and reason suggest that one or more at FHFA actively or tacitly allowed the law to be foiled in a fashion benefiting a few at high cost to the many.

That implies incompetence, collusion, conflicts of interest, and/or corruption.

Therefore, the FHFA has no legal or logical choice but to reject currently promoted plans and call upon Fannie and Freddie to immediately follow the DTS law, no matter whose deep pockets that may upset.

The FHFA and Congress should independently investigate how it’s possible that a decade after this good DTS law passed that it’s still thwarted from providing affordable lending to potentially millions of Americans during an affordable housing crisis.

The status quo is a scandalous disgrace. Thank you.

L. A. ‘Tony’ Kovach,
For Lifestyle Factory Homes, LLC
Parent Company to MHProNews.com, MHLivingNews.com, LATonyKovach.com.

No matter how well intentioned, rent control by itself is not a solution. Nor should creating more affordable rental housing be the goal. The goal should be to establish a path that gives the maximum number of citizens of all colors, religious, gender or other groups a sustainable path to affordable home ownership. As the National Association of Realtors (NAR) chief economist Lawrence Yun said, to mitigate housing cost, one must bring on more supply. Conventional builders can’t keep up with the existing demand. Only factory building can achieve that goal, and Congress after studying manufactured homes determined that it is a proven affordable, quality, durable means of building housing. It is done largely by private enterprises.

Dr. Carson has arguably done more to promote a better understanding of manufactured homes than anyone in his role in the 21st century. That said, he has not yet invoked the ‘enhanced preemption’ clause of the MHIA 2000. Why not? Some tell MHLivingNews that Secretary Carson doesn’t know about the issue, but sources within the government assert that HUD’s Brian Montgomery, a power behind the throne, does. So why hasn’t Montgomery pushed the issue? Fear of pushback? Corruption? Satisfaction with the status quo? What?

 

1. What is missing from the videos and speeches is a simple point. Good existing laws must be enforced. Those laws include, but are not limited to:

• Antitrust and other laws the prevent deceptive trade practices that manipulate markets and people.
• Enforcing the enhanced preemption clause of the Manufactured Housing Improvement Act of 2000. The reason that is important is detailed in other reports like the one linked here, but is summed up in these two quotes.
• Matchneer
• Weiss
• As my address to the FHFA, Fannie and Freddie above stated, Duty to Serve (DTS) must be fully enforced. So too must FHA, VA, USDA (Rural Housing) and other lending must be made as accessible to the majority as possible while maintaining sustainability.

 

8) Examples of why Rent Control Alone Will Never be Enough

In the state of New York, a rent control law was just passed earlier this year. The extended quote from WAMC reported as follows.

 

Democratic state Senator James Skoufis recently joined residents of Silver Stream Village Mobile Home Park in New Windsor, declaring that a nearly 6 percent rent increase over the prior year violates the Housing Stability and Tenant Protection Act passed in June and enacted in July. The law mandates that mobile home lot rent increases are capped at 3 percent, barring extenuating circumstances such as a significant property tax increase. Silver Stream Village is owned by RHP Properties. Skoufis says there were no extenuating circumstances.

“In this case, in Silver Stream Village, the town and county property taxes for this owner actually decreased from 2018, and the school property taxes only increased by 1 percent. There were no major capital improvements. There were really no minor capital improvements at Silver Stream Village over the past year,” says Skoufis. “And so a number of the tenants have already initiated their own private right-of-action lawsuits against the park owner vis-à-vis this new law that was enacted this year And they will be successful because this is a very clear violation.”

Skoufis cites a letter sent to residents by RHP, in which the property owner acknowledges the new law. Skoufis read a sentence from the letter that says the New Windsor mobile home park’s community is impacted by increased expenses, requiring a rent increase above the allowable 3 percent. Skoufis says the letter did not include justification. Joel Brown, president of RHP Properties, Inc. issued a statement saying RHP communicated rent increases to residents in a timely fashion and the increases are within the new law. His statement says that while the newly enacted law states that rents may not increase more than 3 percent a year, it also allows for up to 6 percent in increases when the landlord’s expenses have increased in certain categories such as property taxes or capital improvements. He says, “Unfortunately the community has been impacted by these increased expenses which has required a rent increase above the three percent. We have sent residents a publication from the Housing division [Division of Housing and Community Renewal] that explains the new law to prevent further misunderstandings.” Again, Skoufis:

“Let me be clear. RHP will lose in court. Let’s save the time and the energy and we are calling on them, we’re demanding that they withdraw this unlawful rent increase,” Skoufis says. “Similarly, I am calling on, short of a withdrawal of those rent increases, I am calling on the Division of Housing and Community Renewal to intervene immediately and negotiate a lawful rent increase with the owners of this park.”

— 30 —

 

As we recently reported on MHLivingNews, in a published transcript of an investor call, giant Equity LifeStyle Properties frankly stated that they know how to navigate rent control issues. MHProNews made the point previously that in Delaware, the passage of a rent control law was failing to produce the desire results there too. The only thing that will bring the law of supply and demand back into balance is to create more supply.

That demands that there be more communities built.

 

It means investors must not be confused by problematic news reports that the ‘big boys’ of manufactured housing are arguably creating on purpose.

 

 

Summing Up

We began with 5 bullets.

1) Understand the issues from a holistic and historic lens that considers the various perspectives and groups that are impacted.

2) Promises of quick easy fixes have been made in housing polices for over 50 years.

3) There are, however, surprising laws on the books that if good provisions in them were fully understood and properly enforced could begin to steadily improve the challenges that now exist. That bears rephrasing. There is no need to wait for studies or new legislation. What is needed is enforcement of the Manufactured Housing Improvement Act of 2000, notably its enhanced preemption clause. Also the Duty to Serve manufactured housing, underserved markets like rural housing and affordable housing preservation is needed. Tweaks to FHA Title I, Title II, VA, USDA (rural housing) and other lending could create a strong path to affordable home ownership for tens of millions. That need can only be affordably met by mainstream manufactured housing.

 

 

4) There are fears and entrenched forces plus a desire to place blame that must been understood and navigated. NIMBYites must be educated, but the must also not be allowed to win. A federal source has told MHProNews that some understand what enhanced preemption or rules like the Affirmatively Furthering Fair Housing (AFFH) mean. But they are afraid to push them. That’s an educational matter, which the FEAR report is meant to address. Once enough Americans understand that it is a choice between seeing what is occurring in Seattle, San Francisco, Los Angeles or other cities happen in their back yards, then the manufactured home alternative will be far more attractive.

 

 

5) Good information, proper terminology – education and information sharing – combined with sharing and diligent follow ups are necessary to be successful.

The last of the 5 points is a call to action. Education is the start, but action must follow. The talk of a need for studies or any other stall tactic is just that. The status quo is unacceptable. First dozens, then hundreds, then thousands, until millions demand that good existing laws be fully enforced, nothing will change.

 

The next step is up to you. Dig into the issues. It took years to compile this information. You could get a good handle on this in a day or two. But once you do, begin with your elected officials and your state and federal agencies to demand that:

Antitrust laws be enforced.

That good existing laws in the form of DTS, enhanced preemption, AFFH and more be applied promptly and vigorously.

It is our country, not that of only a relatively few who have manipulated the system.

You are either part of the problem or part of the solution. There is no middle ground.

 

 

 

That’s it for now. We’ll elaborate on this along with other reports in the days ahead. “We Provide, You Decide.” © (Manufactured homes, lifestyle news, reports, fact-checks, analysis, and commentary. Third-party images or content are provided under fair use guidelines for media.)

(See Related Reports, further below. Text/image boxes often are hot-linked to other reports that can be access by clicking on them.)

By L.A. “Tony” Kovach – for MHLivingNews.com.

Tony earned a journalism scholarship and earned numerous awards in history and in manufactured housing. For example, he earned the prestigious Lottinville Award in history from the University of Oklahoma, where he studied history and business management. He’s a managing member and co-founder of LifeStyle Factory Homes, LLC, the parent company to MHProNews, and MHLivingNews.com. This article reflects the LLC’s and/or the writer’s position, and may or may not reflect the views of sponsors or supporters.

Connect on LinkedIn: http://www.linkedin.com/in/latonykovach

Related References:

The text/image boxes below are linked to other reports, which can be accessed by clicking on them.