January 1, 2000 marked the beginning of the new millennium and a crossroads era for the manufactured housing industry. On one hand, we are poised to experience greatness. Many families need quality, affordable housing. Our past shows that we have been relatively successful. Nationwide, manufactured homes represent over 33% of all new housing starts. Today however, our industry is faced with numerous challenges, most notably of which is our poor image, that if not properly addressed, will make it more difficult to conduct business in the coming years.

It's no secret that the general public's "negative" image of our industry is a major factor that hinders our growth. Negative comments and "live" images of damaged or destroyed "trailers" presented by major TV networks and national publications every time there is a natural disaster (Where are the pictures and accounts of damaged or destroyed single family homes and apartments?) gives our industry a "black eye" in the minds of most Americans.

The manufactured housing industry can be compared to an automobile tire. Proper tire inflation and strong belts support the tire and provide a smooth ride. However, if a belt breaks or the tire looses air pressure, the ride becomes uncomfortable until repairs are made. The manufactured housing industry wheel includes the eight segments of the industry discussed below. Each segment is interdependent upon each other and must embrace the idea of change. This means modifying (and in some cases radically changing) the way we look at the industry and how we conduct business. If each of us does not change the way we look at the industry, how can we expect those outside the industry, including potential customers, to view the manufactured housing industry in a positive light? Let's examine the current "state of the union" of various industry segments and look at ways of changing our behavior and doing business.

Manufacturers play an integral part with other industry segments. Consequently, they can play a significant role in changing the way others look at our industry. They supply retailers with an affordable product, training and installation guidelines and promotional materials. "Shipments" are used to measure the movement of inventory to the retailers. Rising interest rates, ill-advised lending practices and too many retail locations with too much inventory will lead to a decline in the number of independent retail locations and the disappearance of marginal finance companies. Look for "Shipments" to be flat or decline for several months until inventories are reduced. Certain manufacturers including Fleetwood, Oakwood, American Homestar and Southern Energy Homes have announced plant closings to reduce the build-up of inventory at the retail level.

Manufacturers can be in the forefront of change by designing homes to fit smaller homesites in older communities and by designing homes with attractive front entrances, windows and shutters on all sides and optional one and two car garages. Further, manufacturers, working closely with Manufactured Housing Institute (MHI), the national trade association, can develop Web sites, informercials and videos that present a positive picture of new homes and their role in the communities of the future. These materials can be used by developers at zoning board hearings and public meetings to show the future direction of our industry.

Retailers, in many cases, foster the "trailer" image via used car type sales centers, poorly trained and unprofessionally dressed sales personnel, unimaginative product displays and inadequate installations. On the bright side, retailers can implement action plans that can have the greatest positive impact on changing our industry's perception. Here's what four industry experts have to say.

Robert Overend, in an article, "Retailers Find Good Displays Boost Image, Improve Sales" that appeared in the August 1999 edition of Manufactured Home Merchandiser writes, "Today, needless to say, things have changed. ........competition among independent retailers is growing exponentially. These days, more and more retailers realize they are also in competition with the site-built housing industry. They are selling much more than four walls and a roof. Rather, they are selling a concept of affordable single family dwellings that offers the best comforts and features of site-built housing at a fraction of the cost."

Keith Davis in a recent article wrote, "You (retailers) need to develop relationships with your homeowners and nurture them. Spend time with your homeowners before they move in. Educate them so that they have realistic expectations of what you can do, so that you will be able to professionally service them without overdoing it." He continues, "One of the first things that needs to be addressed is the difference between the dealers of today and the builder/retailers of tomorrow. Dealers, like the proverbial ostrich, stick their heads into the sand, obviously ignoring the evolution of this industry. On the other hand, builder/retailers recognize the value of providing more services to their homeowners, and gaining that enviable footing on the threshold of the future. Those who provide complete housing services to the full spectrum of homeowners, as opposed to those "middlemen" are the ones who will reap the benefits and profits."

Gub Mix, Executive Director of the Idaho-Nevada-Utah MHI in a recent article stated, "By far, the most glaring problem is our inability to properly sell homes to prospects who are legitimate buyers. Friends.....we need to change our ways and get this industry moving strongly forward again. We build the finest, most technologically advanced housing in the world, but we don't seem to know how to properly sell it. As I've stated many times before, let's learn a few lessons from our friends, the site-builders, and jump-start our future now."

Finally, the sales cycle is not completed until the home has been properly set-up. Installers who subscribe to the "one size fits all" installation mentality are doomed to fail. George Porter, a longtime industry consultant in a recent article wrote, "Homes must be installed to function as well-built structures that have no more warranty problems than their site-built cousins." Mr. Porter adds, "No one knows what the future will hold for this industry but it seems that we are at a major crossroads. Either, we will install these homes exactly as their designers intended, or we won't. "Almost right" does not count in the aircraft industry, nor does it when installing manufactured homes."

Lending institutions provide long term financing for community owners, developers and consumers. Historically, interest rates for the purchase or refinance of an existing community or the development of a new community are set by market conditions. Owners and developers can take advantage of favorable market conditions to secure long term financing at attractive interest rates. However, interest rates on loans for the purchase of new or pre-owned homes run well above the thirty year fixed interest rates for single family homes. The higher the rates, the more difficult it is for families to purchase manufactured homes (or to purchase the size home they need). Our industry touts itself as the "provider of affordable homes". Finance companies and lending institutions need to "jump on board" and create attractive financing for consumers who purchase manufactured homes that are either placed in land-lease communities or on private property. Interest buy-down programs are not the answer to lowering the interest rate and monthly payment.

Operations personnel wear the most hats and play a pivotal role in our industry. They are responsible for numerous functions including maintaining common areas, administering the community guidelines, leasing homesites, promoting the community "lifestyle", collecting rents and meeting, greeting and working with new and prospective customers on a daily basis. At the Community Management Expo held in Las Vegas last October, various ideas on how to improve the image of the industry were discussed. Some of the key suggestions include:

• hiring customer service oriented managers,

• annually invest capital to upgrade and modernize the common areas,

• get "life" back into the community clubhouses

• professional written communications including notices, community maps, brochures and residency documents,

• clean, no smoking offices,

• professional dress,

• vocabulary (home, community, resident, customer),

• answer the telephone enthusiastically "with a smile on your face",

• utilize customer service companies to conduct market research,

• offer ancillary services such as day care, computer access, photocopying, faxing, pet care and laundry pick-up, and

• participate in local housing related community service projects.

Acquisitions. Publicly traded and privately held REITS and a handful of aggressive private investment groups, all with an insatiable appetite for investment grade communities, scramble today to find "trophy" communities to add to their portfolios. Consequently, sellers create bidding wars that drive up the price of communities and portfolios and lower cap rates. Attention Acquisitions Personnel - Don't overpay for communities and expect existing and new residents to fund the purchase by paying higher "market" rents. Gub Mix, in his keynote address at the Community Management Expo held in Las Vegas last October stated, "Although there are a number of factors that have provided the fuel that has driven the growth of manufactured housing and its landlease communities, one stands head and shoulders above all others, and that's AFFORDABILITY. For millions of Americans, our homes and our communities matched both their income and their family needs. And even though the words AFFORDABLE and AFFORDABILITY have fallen on hard times in recent years, they still best describe the foundation that this industry was built on."

Our challenge is to maintain a 20% to 30% "AFFORDABILITY GAP" between living in a manufactured home placed in a landlease community and a comparable new or like-new single family home. When the gap closes or disappears, "something has to give". Just ask developers and owners trying to fill homesites in Florida!

Equity capital. Private individuals and companies who are confident that publicly traded companies, privately held investment companies and limited partnerships can produce satisfactory short and long term returns, provide equity capital. Thus, operations personnel, using sound property and asset management policies and procedures, are constantly challenged to produce returns on investment that will continue the flow of new equity capital to fund both existing community acquisitions and new community development. When returns do not meet expectations, equity capital may be directed into other types of real estate or other forms of investments.

Developers will have a significant positive impact on the industry during the next ten years.....if they are successful in securing zoning for new communities located in or near major growing mar-kets where there is a need and demand for quality, lifestyle oriented, affordable housing communities. Zoning issues rank at the top of the chart when discussing the long term future of the industry. In almost every market, developers battle local zoning boards and neighborhood resident groups, blinded with "trailer park mentality", for approval of new communities. Costly legal battles, even when won, result in adversarial relationships during the development and leasing phases. Over-coming ingrained prejudice won't happen overnight. Therefore each industry member needs to implement measurable action plans that will change the general public's perception of our industry. Industry leaders need to promote the industry via websites, infomercials and positive press releases. None of us can sit back and wait for someone else to take the lead. We need 100% participation from everyone. Jump on the bandwagon NOW!

National and local trade associations must take a strong leader role to make many of the changes discussed in this article "happen". MHI is lobbying for changes to the HUD building code in Congress (Manufactured Housing Improvement Act of 1999) and we applaud these efforts. As we move into the 21st century, now's the time for MHI to assemble key leaders from each industry segment to create a national working task force (assault team) committed to putting into action aggressive plans designed to improve the industry's image. "Actions speak louder than words." A national public relations company with excellent relationships with the major television networks, newspapers and weekly publications should be hired to "package the messages". The National Football League gains widespread recognition through their active participation in the United Way. Imagine the long term positive impact created by supporting a major national charity such as the Boys and Girls Clubs of America!

As we move into the 21st century, our industry is poised for greatness. "Greatness" however will not occur until we improve our industry's "negative" image. Adopt a "Pioneer Spirit" that over the long-term, will change the way others look at our industry.