In many locales, manufactured housing in mobile home parks is a good source of affordable housing. And not just in rural areas; also in metropolitan areas.
California is known for its sky-high housing and land prices. So, when land developers in Silicon Valley — specifically San Jose — see an opportunity to buy land and build high-end homes, they take it. When that happened recently, some 35,000 San Jose residents living in the city’s 59 mobile home parks were at risk of losing their homes.
“These are established communities and in many cases, people in these communities were aging in place,” says Jenny Nusbaum, a planner with the city of San Jose’s Planning, Building & Code Enforcement Dept. “It’s not just a bunch of trailers in one setting. These people have social ties and have connections to services and transit nearby.”
Nusbaum’s team went to the city council and presented some zoning code changes that streamlined the review process for the new permit applications to convert mobile home parks to another use.
“We proposed some additional general plan language to enhance the protection for current park residents,” she says. “We want San Jose to strengthen its policies to preserve mobile homes.”
Finally, in August 2015, the City Council voted to approve a six-month moratorium that suspends the closing of mobile home parks and selling the land to developers for other uses.
“Right now, we have to go back to the council with a proposal, do public engagement, and they want us to extend the moratorium through August 2017,” says Nusbaum.
Because land costs are rising so quickly in San Jose, landlords could technically raise rents to astronomical amounts. However, there are rent controls that don’t allow the landlords to raise rent costs. For manufactured housing owners in San Jose, “it’s hard to replicate the affordability of housing costs in our area,” says Cheryl Wessling, public information manager for the City of San Jose, Planning, Building & Code Enforcement Dept. “The land under manufactured housing is part of the rent control in our area. Even if space is vacated, there are regulations. This is a way to create some affordable housing and preserve what’s affordable now.”
A Major Problem
San Jose is struggling with a problem that’s happening all over the country — preserving manufactured housing communities, which includes mobile home and trailer parks.
“Manufactured housing is the largest source of unsubsidized affordable housing in the country,” says Mike Bullard with ROC USA, a nonprofit social venture to save manufactured home communities by helping residents purchase them. ROC stands for Resident Owned Communities.
“A brand new manufactured home probably costs half of what an equivalent site-built home would cost,” says Ishbel Dickens, Esq., executive director of the National Manufactured Home Owners Association in Seattle, Wash. “Plus, the homes built now don’t look much different from a site-built home. They are energy efficient and attractive.”
Not Just in the South
Seventeen million Americans live in manufactured homes and manufactured housing makes up 7 percent of the nation’s housing stock. They are a common sight in rural communities, where zoning and housing codes tend to be less restrictive than in urban areas.
There continues to be strong demand for manufactured homes as an affordable housing option, as it remains the largest source of unsubsidized affordable housing across the nation. Overall, the South contains 55 percent of the nation’s owner-occupied manufactured housing units, while the rest of the national manufactured-housing inventory is spread throughout the West (19 percent), Midwest (18 percent) and Northeast (9 percent), according to “An Examination of Manufactured Housing as a Community- and Asset-Building Strategy Report,” by the Neighborhood Reinvestment Corporation, in collaboration with the Joint Center for Housing Studies of Harvard University.
The study says that manufactured housing is an especially important homeownership option in rural areas. Manufactured housing is an especially important homeownership option in rural areas.
Fully half of all owner-occupied manufactured homes are located outside metropolitan statistical areas (MSA), where they comprise 16 percent of the stock of owner-occupied homes. By comparison, just six percent of the stock within MSAs is manufactured.
The Issues with Manufactured Housing
So, why isn’t this housing stock on policymakers’ radar as a source of affordable housing? It is, but there are issues. Typically, the owner of the home does not own the land under it. So, when the landowner finds a more profitable use for the land, the mobile or manufactured homes and their residents are evicted.
“These homes have always been on the margins of homeownership,” says Doug Ryan, director of affordable homeownership for the Corporation for Enterprise Development (CFED) in Washington, D.C. “I would argue that it’s intentional by the industry and policymakers. We have to overcome those hurdles if we want these homes to be a meaningful part of the affordable housing puzzle.”
That’s because mobile and manufactured homes aren’t considered real estate, so traditional mortgage products are not available for the majority of these homes. Most are secured using a chattel loan, where personal property is used as security for the loan. Ryan adds that interest rates for chattel loans tend to be higher than those for a traditional mortgage.
Also, security of tenure is a problem. The truth is mobile homes aren’t mobile. To move one of these homes is costly. “Plus,” says Dickens, “while the home itself is affordable, there’s no guarantee that the rent will stay affordable. A homeowner may pay off his or her loan, but, in most states, there is no rent control. In fact, in places like Colorado, rent can go up every 60 days. There’s no long-term security of tenure in a land-leased community,”
Of course, not all markets are like that. In California, there are rent-controlled ordinances. And, in New Jersey and Massachusetts, there are local rent-control boards, to name a few.
As part of the security issue, “A lot of community owners purchase the land on the spec market with the hopes that, in the future, the land will be more valuable for land development than it will be for the manufactured housing parks,” says Dickens. “When that happens, the land gets sold and the homes become valueless.”
She adds that most people can’t afford to move the home and even if they did, they don’t always have a place to move it. In addition, if the landowner plans to resell there isn’t a strong motivation to keep up the property.
“There’s a real disincentive to invest in the property and maintain the infrastructure because that takes away from your cap rate,” says Ryan. “It will be redeveloped anyway, so they want to extract as much as they can from current rent rolls and sell.”
Ryan says he would like to see a secondary market “to allow these homes to be titled as real estate so they would have access to mortgages and eligible for Fannie Mae and Freddie Mac financing. But, that would have to be done on a state-by-state basis.”
Efforts to Save the Parks
The good news is that there are efforts to try to save these trailer parks. Ryan explains that the CFED has partnered with ROC USA to transform many of these parks into resident-owned communities. ROC USA started in 1984 as a one-off project, but grew into the New Hampshire community loan fund’s largest program.
“Of the 450 communities in New Hampshire, 119 or 27 percent are resident-owned today,” says Paul Bradley, president of ROC USA. “As the program grew in New Hampshire, homeowners and others would ask for help in other states. In 2008, we launched ROC USA to make resident ownership a viable opportunity elsewhere.
We now have eight nonprofit organizations in our network of expert assistance providers which we coupled with a readily available source of financing. That’s made all the difference. We now have 187 ROCs that are home to 11,300 homeowners in 14 states.”
When a manufactured home community is for sale, ROC USA seeks to provide homeowners who are working together as a democratic organization with the opportunity to purchase their community, according to ROC’s Bullard. When a community is for sale, with the landowner’s blessing, ROC will assess the situation.
“If there is a viable deal, we will talk to the residents about resident ownership. If they agree, they form a cooperative,” Bullard says. Then, ROC and the regional provider will work with the cooperative. “We have a forgivable loan product for predevelopment that allows the resident corporation to take care of due diligence for the purchase and to hire an attorney and engineer to look at infrastructure and assess the deal.”
If they decide to move forward, ROC will work with them through the purchase and for 10 years after, providing technical assistance in running the corporation/ community. Members elect a board of directors to manage the community. Each home has a membership share that can be sold back to the corporation should they sell the home. Bullard explains that residents still pay a site fee or rent, which goes to the corporation to pay down the mortgage. ROC USA has a second division called ROC Capital that is the lender on about half of the resident purchases, according to Bullard.
Of course, in places like California, where land prices are high and getting higher, this option may not be an acceptable solution. In those situations, city planners are stepping in, such as in the case of San Jose. It’s also built into the comprehensive plan for Augusta County, Va.
“In the state of Virginia, manufactured housing has to be allowed in agricultural areas by law,” says Becky Earhart, senior planner for Augusta County, Community Development Department in Verona, Va. “It’s in our comprehensive plan. About 11 percent of our total housing stock in the county is in rural areas. We also have traditional manufactured home parks.”
In Augusta County, manufactured homes are acknowledged as affordable housing and thought of on a regional level. “The state code requires manufactured housing to be treated the same as stick-built houses. We acknowledge that and say that it’s part of what we’re doing to meet the regional affordable housing need,” Earhart says. “We want to encourage housing development where we have the public services designed to accommodate it. We don’t want housing for lower income people if those people can’t access medical services or the grocery store.”
New manufactured home parks are encouraged to locate in our urban area, where we can accommodate more units per acre. Our whole comp plan is to target growth in the areas in which we have the facilities to support that growth.”
In Florida, there are over 2,600 mobile home parks, according to the Department of Business and Professional Regulation. “But these mobile home parks are being lost at an astounding rate as local governments say “yes” to a change in land use/re-zonings as the park owners sell the land for high-end development,” according to Jaimie Ross, president and CEO of the Florida Housing Coalition.
The state has been pursuing policy changes to preserve the mobile home parks. In 2011, the Florida Housing Finance Corporation, with direction from the Florida State Legislature, expanded its Florida Preservation Fund (http://www.fclf.org), which helps preserve affordable rental housing. It now serves 26 Florida counties.
The National Manufactured Home Owners Association is working with the states to “ensure policy that gives stronger protections of new manufactured houses.” However, Ross says, in order to get any real momentum in the preservation cause, the states must take action.
“It’s an education process. We must remind elected officials that the people who live in manufactured homes pay taxes. They are your teachers, nurses, firefighters, accountants, etc. They have jobs like everyone else. They are homeowners.” Ross explains.
Ryan agrees. “It’s important that these families get a fair shake.”
He adds, “A lot of us who have been around in the ‘80s and ‘90s remember when the Section 8 contracts were expiring. Congress stepped in and saved them. There should be some urgency to preserve this type of housing as well. It’s the housing preservation crisis of today, and it’s cheaper to preserve than to build.”
Tracey C. Velt is freelance writer who specializes in the real estate industry. She has more than 25 years of experience writing for industry publications.