(Im)mobile homes: Part 1, owners and landlords
When is a homeowner less than a homeowner? When it is a mobile home, as this Modesto Bee story heartrendingly illustrates the Hobson’s choices, which face owners:
Judy Lawrence likes blues music and dancing. But the retired bartender and waitress isn’t doing much of either these days. She can’t afford it.
In fact, she can’t afford much of anything these days. She can’t fix her air conditioning, and she leaves the computer and television off to save electricity.
“I’m just at the point that I can’t pay my rent this month,” said
Rent? But she’s a home owner.
Judy Lawrence says she’s quickly running out of options at Coralwood Mobile Home Park in
Except that, like millions of other mobile home owners nationwide, she owns only her structure, not her land. That she rents from the operator.
At the north end of the
Think about that for a moment. Even if we assume that the utilities are $200 a month, the land rent is $600. That makes Ms. Lawrence’s land worth over $90,000 ($600 x 12 / 8% cap rate), even as her home has minimal resale value.
Look how tiny the spaces are … and every one is worth $90,000.
When she moved into the park in 1999, her income was just more than $1,600, and she paid cash for her home with $32,000 in savings. Her income qualified her for the $395 a month rent payments.
Today, her income is still about $1,600 a month, but the rent is $776.02 and utilities have been added, another $26.02.
In a little less than eight years, therefore, her rent and utility payments have more than doubled, an average 9.2% per year.
“If I didn’t own my home and car, I would have lost them,” she said. “I’ve got a ways to go before I become destitute.”
You’d think that, as a homeowner, Ms.
She wants to sell the 1979 model mobile home, but finding buyers willing to pay the $800 rent plus a mortgage is difficult.
And she’s landlocked, both by economics and land use:
(In addition to the economic challenges, as we’ve seen in previous AHI blog posts, most localities that once welcomed mobile home parks have now cooled to them, eying higher-value development.)
Vern and Sally Lewis live in Glenwood Mobile Home Park off
Glenwood (left of
Vern, 70, is a retired professional gardener with a variety of medical problems. He lost a lung and a kidney as a child, is diabetic and has a heart pacemaker. He recently had surgery to improve circulation in his leg.
The Lewises moved to the park in 1998 because they thought it would be cheaper to live there, but they have seen the rent increase from $308 to $450.
“It takes most of my Social Security,” Vern Lewis said. “I have very little left to pay hospital expenses. If they raise the rates again, we will be out on the street. A lot of people are scared.”
Mobile home industry representatives defend park owners’ rights to raise rents, and say the rents are market driven and reflect local property values.
Vern and Sally Lewis moved to
The Bee published a terrific graphic showing precisely what a mobile home owner gets and doesn’t get:
As these stories reveal, unlike owners of free-standing, fee-simple homes, owners of mobile homes have had the attributes of homeownership sliced up in economically unfavorable ways. As a previous AHI post has laid out, a normal homeowner benefits from six economic attributes:
1. Appreciation
2. Right to sell
3. Ability to finance
4. Controllable occupancy cost
5. Improvability
6. Secure tenure
Mobile homeowners are trapped. With rents rising at the landlord’s discretion, they lack controllable occupancy cost. This undermines their ability to finance, and their economic right to sell. Indeed, the mobile homes themselves seldom appreciate in value:
Economically, the best option?
Some have given up and simply walked away from their mobile homes. Others have filed bankruptcy, and some have chosen to draw a line in the sand and fight.
Since land value is a residual, a shrewd and unscrupulous landlord can simply raise the land rent now and then, calibrating to the residents’ pain point. Low maintenance, high negotiating leverage — it has an appeal. And just who is a major owner of mobile home parks (although not those featured in the Bee article)? One Samuel Zell, whom we saw previously founded one of the nation’s largestresidential REITs, now being taken private. As the Bee notes ironically:
Sam Zell has become the nation’s landlord.
The 65-year-old
ELS is one of the country’s largest operators of manufactured home parks, including a few in the
In 1997, it held 40 parks and 12,000 home sites. It finished 2005 with 285 parks, 106,337 sites, and on its Web site claimed a 24.8% shareholder return on investment, with revenues of more than $414 million.
Its properties include
Should the land owner jack the land rent, what leverage do the mobile home owners have? Precious little.
Hey, we each have a position, don’t we?
Small wonder that they are looking for legislative relief:
A group of people from several area mobile home parks have united to form the Stanislaus Mobilehome Owners-Advocates.
The group has appeared before city councils and the Stanislaus County Board of Supervisors in recent months advocating a rent control ordinance for mobile home parks.
The group wants an ordinance that rolls back the rents almost two years, and pegs annual increases to the Consumer Price Index.
An ad hoc committee of county and city officials has been meeting for the last several months to consider the problem. Committee members agreed at a meeting Wednesday that a rent control ordinance is necessary.
[Continued tomorrow in Part 2.]
