MH Living

Affordable Housing: Doing the Same Thing Over and Over Again

Haunted TreeInsanity Is Doing the Same Thing Over and Over Again and Expecting Different Results.

The current Affordable Housing Crisis and the Homeless Problems will continue to get worse unless we do something different. Yet, at every level of the political spectrum, politicians continue to focus on repeating the same proposed solutions over and over again, in spite of the fact that they have failed to produce new results over the past thirty years.

In addition, that is exactly what major industry leaders are telling us to do. In the realm of Manufactured Home Communities, that is what Frank Rolfe and his investment partners are self-servingly advising others to do.

Tim Sheahan, when he was president of the National Association of Manufactured Home Owners (NAMHOA) noted in a document linked here that when there was plenty of competition and new land-lease manufactured home (MH) communities were coming online, the law of supply and demand kept site fees affordable. Unfortunately, there have been no new communities in California in the past thirty years and only ten in the USA since 2000. There is plenty of demand, but no supply.

“In 2016, more than three-quarters of low income older Californians whose head of household is age 65 or over are ‘rent burdened,’ and more than half are ‘severely rent burdened’.”

The UCLA Center for Health Policy Research Health Policy Fact Sheet, August 2018

Time to Change

Recently voices have begun to be heard, across the political divide, speaking up for change;

HUD Secretary Carson has been promoting the increased use of manufactured housing in speeches, in interviews, and in the June 2019 Innovative Housing Showcase sponsored by HUD and the National Association of Home Builders (NAHB). When NAHB is co-sponsoring factory-building methods, doesn’t that speak volumes?

Democrats, Republicans Agree – “Manufactured Homes Can Play a Vital Role in Easing the Affordable Housing Shortage”
“To construct a new single-family manufactured home development including all neighborhood infrastructure costs, the typical price per unit is $150,000. In comparison, a high-density apartment complex usually costs $250,000 per unit to construct.”

Look at those cost figures. I wonder what the current cost per unit is for the new site-built homes that are being developed in Sacramento County would be? Guaranteed, they will not be considered affordable. In fact, I see new senior communities that are being advertised with starting prices in the “high $500K”. Why aren’t there new Manufactured Home Communities with homes being advertised, starting “low $200K”?

Where to obtain Affordable Housing

The National Association of Realtors Chief Economist Lawrence Yun, Ph.D., has said that only by building millions of more homes can the affordable housing crisis be resolved.

Rent control might, in some cases, be a necessary band-aid until that housing gets built. But ultimately, more affordable homes must be constructed. Because construction labor shortages and local regulations are making conventional building slow and costly, site-built homes will not likely be able to keep up with the estimated eight million housing units needed nationwide. That means that only some form of factory home building can fill the gap. Those homes would obviously need home sites to go to for permanent installation.

HUD at the federal level and HCD at the California State level need to move forward, vigorously, with enforcing the federal laws related to federal Enhanced Preemption for manufactured homes. We need to be able to streamline regulatory approval for manufactured homes and manufactured home communities at all levels. That would lower the cost and time to market for new homes and communities that are affordable, without compromising quality.

I am talking about infill housing sites that are privately owned as well as those in Manufactured Home Communities. Do you have a vacant lot in a local neighborhood that can’t be scheduled for a new site-built home because of a lack of contractors? Why don’t you lay a foundation and bring in a Manufactured Home? Oh, that’s right. In most communities, contrary to the spirit behind Enhanced Preemption, the local zoning regulations don’t allow you to do that. This is why we need to enforce federal law on manufactured housing’s enhanced preemption under the Manufactured Housing Improvement Act of 2000.

How to Finance Affordable Housing

In addition to dealing with the regulations around building Manufactured Homes, we need financial agencies to actively follow the original spirit of “Affirmatively Furthering Fair Housing (AFFH)” and develop the needed financial environment to support this type of effort.

Contrary to the original vision, today it is the larger multi-million to multi-billion dollar investment companies who are buying up the manufactured home communities. They have no problems placing large, low-interest mortgages on Manufactured Home Communities. The payment for those loans is coming from the rent increases placed on low and middle-income homeowners who rent space in those parks. The residents, contrary to the spirit of AFFH, can only get high-interest personal property loans to purchase those homes. Why? The excuse is that they are supposedly movable. That may have been true decades ago, but some 80% of today’s manufactured homes have never moved from their original site.

Finally, a normal house can be refinanced easily, regardless of its age. I would argue that any HUD compliant manufactured home should also be eligible, regardless of its age, to have access to competitive refinance opportunities. Unlike a conventional house, the quality of a manufactured home is repeatedly checked at the time of manufacture by the producers and by third-party inspections. I refinanced my previous house with a VA loan. Although that site-built house was originally constructed in 1920, there weren’t any problems getting a loan. Yet, I could not get VA financing on the 1980 HUD compliant manufactured home I now live in, because it was classified as ‘too old.’ I have not had a single issue with this home that wasn’t similar to the ones I’ve had in previous site-built homes.

On top of all that, as the demand rises the quality of site-built homes appears to be falling; Foundation Failures…Why so many in Texas? Factory-built homes get inspected before they leave the factory.

As some 22 million Americans already know, manufactured homes are the most proven solution to cost-effective, appealing, and unsubsidized quality homes. Everything points to using some form of factory home building to fill the housing shortage gap. Just keep in mind that those homes obviously need home sites to go to for permanent installation.

With that preface, let me outline the two key points, and then deal with each systematically. This presupposes an understanding of the issues, which is research and historical in nature. Enforcing good existing federal laws that would deal with a large portion of the supply side of this issue.

Time to Focus

There is a need for a clear focus. We need to address the problem.

“In 2016, more than three-quarters of low income older Californians whose head of household is age 65 or over are ‘rent-burdened,’ and more than half are ‘severely rent-burdened’.”

UCLA Center for Health Policy Research Health Policy Fact Sheet, August 2018

That problem is playing out in various parts of the nation at different levels, not only in California. That same source said that in Sacramento County, CA, where I live, 63.7% of the Low-Income Californians Age 65 and Over were severely rent-burdened! This problem is real today and will get worse as the Baby Boomers continue to enter retirement age without sufficient retirement income.

Insanity Is Doing the Same Thing Over and Over Again
and Expecting Different Results.

The current Affordable Housing Crisis and the Homeless Problems will continue to get worse unless we do something different.

  1. By enforcing good existing laws, notably the enhanced preemption that is part of the Manufactured Housing Improvement Act of 2000, we need to remove all unreasonable administrative and regulatory barriers to the use of manufactured housing, both as infill housing and in the formation of new manufactured home communities.
  2. We need to ensure people can safely commit to moving their homes into a manufactured home community while ensuring that community management is financially stable and secure.

Let’s look at those two key factors in depth.

  1. By enforcing good existing laws, notably the enhanced preemption that is part of the Manufactured Housing Improvement Act of 2000, we need to remove all unreasonable administrative and regulatory barriers to the use of manufactured housing, both as infill housing and in the formation of new manufactured home communities.

“Contemporary American land use law embodies the bad idea that private land use ought to be publicly planned. In practice, these plans routinely exclude low-income families by indirect means, causing income-based segregation.”

Salim Furth: Housing Supply in the 2010s – Mercatus Center

This will probably be at the center of most of the angry discussions and debates, as this is where most of the toes will be stepped on. We need to get local communities to agree to relinquish control to a central organization, allowing us to enforce the good laws that are already on the books. We would then be able to streamline the processes needed to get more, affordable housing in place. This would need to center around the federal laws on Enhanced Preemptionfinancial regulations, and the antitrust laws.

The problem here is the establishment of trust that the central organizations will be balanced and fair in their decision-making process. We need clear checks and balances to prevent the rise of mini-dictators. Just like we need balance between the rights and needs of the manufactured homeowners and the owners of the community they live in. We also need to verify there is a balance between the central organizations and the smaller communities they are working with.

At every level, there needs to be a careful examination of the rules and regulations that aren’t covered by HUD to ensure they are clear, balanced and enforced. For example, HUD doesn’t mandate the installation standards for manufactured homes, allowing States to have their own guidelines. They have set up a program to monitor installation standards. Today I ask, is it working? Is it fair and balanced?

We really need to enforce good existing laws. Especially, the antitrust laws that need to be enforced. We need to break up and fine as appropriate consolidators under the antitrust laws. They often manipulate the system to their advantage and to the disadvantage of independent businesses, residents, home buyers, and taxpayers.

Finally, we need look at the costs of compliance that have been placed on small businesses. Too many small operations have been forced to merge into large companies because licensing and regulatory costs were putting them out of business.

  1. We need to ensure people can safely commit to moving their homes into a manufactured home community while ensuring that community management is financially stable and secure.

Initially, we will most likely need some type of Space Rent Stabilization Ordinance to protect the current residents of the Manufactured Home Communities. More and more of them are losing their only investment, their home, because of double-digit rent increases. We, as a community, cannot allow them to be made penniless and homeless because the verbal promises that were made to them when they moved in are not binding. We should explore sunset provisions, the use of rent controls tied to vacancy rates, or other similar methods to support the property owners while protecting the residents. One creative example is Florida’s Price Gouging law. The goal is to restore the free market balance when the free market is rebuilt.

Removal of Barriers

In the long term, we need to remove all of the barriers to using manufactured housing, both as infill housing and in the form of manufactured home communities. That is the only way we can dig ourselves out of today’s affordable housing crisis. We need to come up with some type of a contract where people can safely commit to moving their homes into a community. We also need to explore what is needed to help the owners of the community to be financially stable and secure.

We need to explore and document other options, such as the conversion of existing parks to Resident Owned Communities that don’t disadvantage the seller but give residents an opportunity to buy. Can we develop clear guidelines and tools for obtaining financial aid, perhaps with GSE, state, nonprofit or other housing agency supplying the needed management guidance and financing support?

The long-term vision should be to protect the innocent while allowing all the small businesses and community efforts to flourish. This will be needed to open things up in a way that is visibly fair and balanced while providing the much-needed growth in the availability of affordable housing.

We also need to create an environment where all levels of government and business put compassion at the top of their evaluation lists. We will not achieve our goals if we allow local pride or hurt feelings to dictate the fate of the severely-burdened members of our community.

We are better than that!

This was based on my article that was originally published MHLivingNews.comManufactured Home Community Leader Discusses – Manufactured Housing Insanity?

MH Living

The Impact of Manufactured Home Community Rent Increases

When we moved into a manufactured home community last year, we rejoiced over the massive reduction of our monthly housing expenses after getting rid of our mortgage.  However, since then we have come to understand that others in this community are not happy with the current state of affairs. Immoderate Rent Increases every December are destroying the lives of many in our community.

In 2017 the rent increased from $664 to $699, a 6.64% increase — Social Security 0.3%
In 2018 the rent increased from $699 to $749, a 7% increase — Social Security 2.8%
The 2019 announcement will come in August and everyone is bracing for another $50 increase.

The impact on our residents

In the fall of 2018, the Home Owners Association (HOA) put together a survey to see how residents of our community, commonly but inaccurately called a mobile home park by many, would be affected by the 2018 rent increase proposal. The response was about 25%.  From the answers they received, here is how our community, with over 400 households, stood based on HUD standards related to the percent of their income that is spent on housing costs.

HUD StandardHUD InterpretationPercentage in this Category
Under 30%Not Burdened11%
30% to 40%Moderately Burdened38%
Over 50%Severely Burdened41%

Of the 38% moderately burdened: 1/2 are in the 40% to 49% range. So one more rent increase will put them into the severely burdened category.   Of the 41% who are severely burdened: 1/3 are at 80% to 100% of their income!  If this year ends with another $50 increase, what will happen to these fellow residents? 

Because we own our homes, yet rent the land that our homes are sited on, the survey instructed anyone who had a mortgage payment to include that amount in the equation. We also pay taxes on our homes and pay for all repairs. Finally, we are expected by the community management company to improve the land around our homes, via landscaping, at our own cost.

The unique situation of MH Space renters

Because they rent the site or lot their home occupies, manufacturing home community residents are in a unique situation.  It costs several thousands of dollars to move a manufactured home to a new location.  Those thousand dollars are sums that these people cannot afford.

The community we live in is age restricted, you must be over 55 to own a home here. We are talking about seniors and veterans who are potentially being priced by site fee increases right out of their homes. They are being forced into an “economic eviction”.

We are not alone.

This scenario is not isolated to our community.  In fact, it appears we are luckier than many other people in our area.

GSMOL Report on Rent Increases
GSMOL Report on Rent Increases

This chart came from John Bertaut, GSMOL Vice President Zone A.

Can you imagine living on a fixed income and having your rent go up 62% in a five year period?  I don’t understand how the managers of the Placerville location can sleep at night.

But this scenario is unfolding in other parts of the U.S. too.  Senator Elizabeth Warren and Last Week Tonight with John Oliver’s viral, but misnamed video, dubbed “Mobile Homes” underscored similar challenges in other parts of the U.S.

Why is this happening? 

The answer is simple.  No competition.

I will have to address this in another post, but the bottom line is simple.  The zoning, regulatory and banking environments have made it difficult to open new communities.  Many of the older communities were family operated.  They are being bought out by predatory business enterprises that see quick easy money to be made.  Unfortunately, many of these amoral investors do not care about those they trample under their feet, as long as they get their percentage of the blood money.

Back in August of 2018, the acting President of the HOA asked a representative of the management team at our community about the next rent increase. He would only say that there would be a notice about the rent increase in September.  When she stated that the rent increases were making it harder for some of the residents, who are on a fixed income, his reply was, “It’s time for their kids or families to help them. The investors want their money.”  He obviously was only thinking about his job, his employers and not his customers, the residents of the community.

The solution, in short, is to address the market imbalance that exists between land-lease community operators and the residents who years ago could have turned to new developers as an exit strategy.  When new land-lease communities or homeowner owned site developments are opening, the developers of those properties are looking for new tenants. Historically, they offered residents of other developments an opportunity to move their home to the new development at no cost. If predatory community operators thought that raising site fees too dramatically would cost them more than it earned them, they’d have good reasons not to behave in that manner.

That is why the Manufactured Housing Association for Regulatory Reform’s (MHARR) initiative to spark new development and new siting options is arguably so important. Learn more at this link here.

Some comment from the residents:

I will close with comments submitted by some of our community members when they answered the survey.  As you read these, remember that we were one of the least impacted sites.  The situation in some of the other communities is much worse.

“My 401K has run out, living on Social Security.  After 23 years of rent increases, I think it is time for a break, I am afraid I am going to lose my home.”

“I’m not asking to lower my rent, just lower the amount of the increase to an affordable amount.”

“If I didn’t get help from a friend, I could not stay in the park. 100% of my income now goes to rent and utilities.”

“At 75 years old, I must find a job. I am on a fixed income. 75% of my income goes to rent/utilities”

“With the $50 rent increase, which we cannot afford, we will have to move. We have lived here since 1987.”

“Living on a fixed income and cannot afford these large rent increases.  Last months rent/utilities were $880, leaving $49 dollars to live on.”

“100% of my income goes to rent & utilities – I have no money to live on.”

“When I first moved in here, I was told rent increases would be $10 to $20 a month. Do not have the money to make necessary repairs to my home.”

“90% of my income goes to rent & utilities, even when I get a 10% discount. My son has helped me with food and repairs.”

What was once an affordable housing solution is now becoming a nightmare for many. It is important to look to long-term solutions, not band-aids.  That should start with immediate federal and state investigations into allegations of collusion that have led to these tragic situations.