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Executive Summary
Report
Solutions and Recommendations
Marshall Sidebar
Downtown Housing Improvement Corp.
Danbury Housing Sidebar
NDC Sidebar
Homesight Sidebar
Homebuyer Sidebar
New Hampshire Sidebar
Organizing Tenants Sidebar
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Proposed Housing Tenure Ladder
Single Family Fee Simple Ownership
Manufactured Home Fee Simple Ownership
Community Land Trust Ownership
Limited Equity Ownership
Condominium
Limited Equity
Limited Equity Cooperative
Resident Controlled Non-Profit Rental
Non-Profit Rental
For-Profit Rental
Manufactured Home Park Ownership
Rental with Support Service
Transitional Housing
Shelter Housing
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TENANCY
Mobile homes are
not really mo-bile anymore. Manufactured home owners who rent a lot in
a community or park have limited legal rights and face very high moving
costs if they have to pick up their homes and go. Over 50 percent of the
10 million manufactured homes in this country are on leased land.(12)
Few homes are ever moved from their original installation, but for those
that are, the moving costs can run thousands of dollars. This cost, coupled
with the added difficulty of finding a new location for the home, puts
such tenants in a disadvantaged position when negotiating with landlords.
Thus, manufactured home park residents often find themselves subject to
the whims and steadily-rising rent requests of management. Equity built
up by a family can be stripped by unaffordable rent increases. Many parks
require families with older homes (10 years or more) to move the home
out of the park upon resale. Since buyers prefer a home in a stable location,
such a requirement forces homeowners to sell at "fire sale"
prices. Placing a home in a park will reduce its long-term value.
Solutions
Housing counselors
should advise their clients about the inherent problems with ownership
of an immobile asset placed on someone else's land. Most clients should
be advised against locating their home in a private, for-profit park on
a short term lease. If clients choose to locate in a park, they should
be informed of their rights, as well as how to compare communities and
lease terms.
Advocates can work to strengthen landlord-tenant laws that protect the
residents of manufactured home communities, help them understand and assert
their current rights, and encourage them to organize to address problems
of common interest and push for legislative change.
Community lenders can help provide financing for the resident purchase
of parks through homeowner cooperatives. This can offer an opportunity
to address many of the problems of manufactured home residents. Successful
loan programs across the country have helped residents organize a cooperative,
then provided the financing to purchase the mobile home parks in which
residents live when the parks go on the market. Unfortunately, these deals
can be difficult for residents to put together without the participation
of lenders who are knowledgeable about the process of co-op conversion.
Developers can address problems with private, for-profit mobile home parks
by creating alternatives, such as parks owned by land trusts and resident
owned parks. Developing mobile home parks under these models reduces the
instability of rent and tenancy for the residents.
Further reading:
"Manufactured
Housing Park Tenants: Shifting the Balance of Power," AARP 1991,
(updated version forthcoming).
Paul Bradley. "A Fresh Look at Manufactured Housing," Communities
and Banking, Fall 2002.(13)
Does your state have an association of manufactured home owners? Contact
them for more information about tenant situations in your state.
ENFORCEMENT
When manufactured
home residents have trouble with their dealer, manufacturer, installer
or landlord, they often have few places to turn for help. Many manufactured
home residents are of limited means and can not afford to hire a lawyer
to get redress through the legal system. Many lawyers have no experience
with the layers of specialized laws pertaining only to manufactured housing.
The near universal use of binding arbitration is an additional barrier
to the justice system, even when consumers find a lawyer.
In many states consumers can turn to state agencies that specialize in
handling complaints about the manufactured housing industry. Unfortunately,
these agencies can become barriers to redress if they are beholden to
the industry they regulate. These low-profile agencies can be easily forgotten
by consumer and housing advocates alike. Only through vigorous enforcement
will this industry clean up its act.
On the federal level, the building code and its enforcement rests in the
hand of a small department of HUD with a small budget. Even after a recent
budget increase, the department administers the program on a fee of less
than $40 per home section. The industry has helped reduce funding to this
oversight agency, leaving it without adequate resources to aggressively
enforce violations and protect consumers. Most recently, a 2000 federal
law created a committee to make recommendations about the HUD program.
The Manufactured Housing Consensus Committee could be a venue for advocates
to monitor the process of changes to the federal regulations and provide
input.
Solutions
The problem of
insufficient enforcement of current law will only be addressed by direct
pressure from housing and consumer advocates on public agencies that are
shirking their duties. Advocates and organized residents can monitor both
the federal and state agencies responsible for enforcing violations of
the HUD code, finance, and consumer protection laws.
Pressure for increased funding for legal services for low-income consumers
with housing problems is needed to ensure enforcement of the laws that
are on the books. Training programs which expand the pool of consumer
lawyers knowledgeable about mobile home law will also help consumers find
counsel willing to take their cases.
Further reading:
"Paper Tiger, Hidden
Dragon: Poor Warranty Service and Worse Enforcement Leave Manufactured
Home Owners in the Lurch," Consumers Union Public Policy Series (v.5,
n. 4), November 2002
"25 Years of Federal-State Partnership to Fulfill the Public's Trust:
A Review of the States' Role in the Oversight of Regulation of Manufactured
Homes," The National Conference of States on Building Codes and Standards,
Inc., 1999.
ZONING
One of the most
contentious issues between government officials and the manufactured housing
industry is home placement. In 1976, the industry lobbied successfully
to pass a federal law exempting their product from local building codes.
However, courts have ruled that this law does not pre-empt local control
over zoning, as long as localities don't attempt to interfere with the
federal building code through the zoning process.(14)
The manufactured housing industry views pre-emptive zoning as a way to
expand the market for manufactured housing. They believe if they can bypass
the stubborn localities that block their product, they will become, as
one state association desires, "the primary and preferred source
of single family housing."(15)
Toward this end, the industry is constantly attempting - through litigation,
legislation, and advocacy - to lift zoning restrictions on manufactured
housing. In this regard, they view non-profit organizations as natural
allies. If industry can get non-profit organizations on board, they stand
a better chance of making inroads in currently off-limits markets.
Solutions
This is an issue
with which each organization is going to have to wrestle. On the one hand,
many zoning restrictions on manufactured housing are just manifestations
of deep-rooted NIMBY-ism that affordable housing advocates fight every
day. On the other, alliances with industry over local zoning will facilitate
the sale of a product that has yet to overcome its significant market
problems. Some states with pre-emptive zoning, such as California, have
found that widening the base of manufactured home owners has increased
the number of higher end manufactured homes in the marketplace.(16)
A wider constituency may also give manufactured home owners greater clout
and force the state to grapple with some of the problems that exist.
Further reading
Welford Sanders. "Manufactured
Housing: Regulation, Design Innovations, and Development Options,"
American Planning Association PAS #478, 1998.
APPRECIATION AND EQUITY BUILDING
In interview after
interview, consumers report "everybody knows" that mobile homes
depreciate like a car, while homes appreciate. In extensive research,
including reviews of previous reports and analysis of new original data,
Consumers Union investigated this phenomenon. We found that the answer
is not simple and there is a wide variation in the financial performance
of manufactured homes.
The capsule view is that a manufactured home placed on rented land is
likely to lose value over time in comparison to a site built home. Homes
packaged with land are much more likely to appreciate at rates comparable
to site-built homes. However, the returns to manufactured home purchasers
are strikingly more varied and less predictable than appreciation rates
of conventional housing, translating into a bigger gamble for consumers
who purchase this type of housing.
In general, the other factors driving manufactured housing appreciation
are similar to those in the site-built market, although our research indicated
that the industry does react to different demand and supply pressures
than the site built market. These factors include:
- Location. Mobile homes
are not very mobile, and the neighborhood and regional housing market
has a great influence on the value of a home.
- Purchase price. Consumers
who receive a good deal on their purchase increase their chances of
reselling it for more.
- Intensity of use. Overcrowding
increases wear-and-tear and reduces the value of a home.
- Age and condition of home.
Younger homes tend to appreciate more, but the effect drops after a
few years. Condition is a better predictor than age of appreciation.
- Maintenance. Money spent
on upkeep and repairs translates into higher resale value.
- New/Used status. Manufactured
homes can lose value when they are "unwrapped," due to reduced
demand (and financing) for used homes.
Appreciation matters because
it is an indicator of the opportunity for homeowners to build equity.
Equity can be lost through every one of the issues enumerated in this
report. High cost markups, fees and financing pull money out of consumer
pockets. Physical problems resulting from low quality materials or sloppy
installation that are not fixed under warranty damage the resale value
of the home, costing the consumer money. Unstable tenancy and rapidly-increasing
rents squeeze money from consumers who rent the lots for their homes.
Zoning can restrict the ability of homebuyers to place their homes in
the neighborhoods that are most likely to appreciate. Each and every one
of these factors collude to take money from the family and prevent them
from gaining wealth through their home purchase.
Solutions
Developers who
want to maximize their product's appreciation should maximize the appeal
of their developments for resale and ensure financing will be available
for secondary sales. Land ownership and home location are key components
that lead to appreciation of manufactured homes. Developers with technical
experience in evaluating construction quality may also find opportunity
in low priced used homes in good condition.
Lenders may find used homes to be an overlooked opportunity. Since it
is likely that new homes suffer instant depreciation once they are moved
off a dealer's lot, and depreciation tends to level off after a few years,
appraised and inspected used manufactured homes may actually be a better
investment than new homes. Transaction costs, such as appraising the value
of the property, may be higher relative to the property's value than in
the higher priced conventional market, but there is unquestionably demand
- and a need.
All of the recommendations in this report address problems that can strip
equity from consumers.
Further reading:
"Manufactured Housing
Appreciation: Stereotypes and Data," Consumers Union, 2003.
NOW WHAT?
In the best case,
manufactured homes can be inexpensive opportunities for homeownership
for families. In the worst case, they can be overpriced debt-traps that
fall apart before the loan is paid off, leaving a family in worse shape
then before. The difference is in the details of the deal.
Organizations and consumers that want to capture the promised benefits
of manufactured housing must separate the good parts of the industry from
the bad. Unfortunately, they are deeply intertwined.
Non-profits have a greater opportunity to take advantage of the promises
of manufactured housing than do average consumers. Developers can bypass
the high-pressure sales process of the dealer lot, and use the promise
of continued business to ensure follow-up warranty service after the sale.
Housing counselors can help consumers navigate the pitfalls that all too
often strip their potential equity. Advocates can take this knowledge
and push for badly needed reforms that will push the manufactured housing
industry to consistently deliver homes that serve the needs of its consumers.
Burlington, Vermont has created what they call a "housing tenure
ladder," ranking housing types by security and equity opportunity.(17)
If homeowners are consistently able to purchase fairly-priced, fairly-financed,
high-quality, properly-installed manufactured homes on land, these homes
should rank near fee-simple conventional home ownership on this scale.
Highly variable appreciation, limited renewability and stigma are deeply
rooted problems that will require both changes in industry practices and
time to confront. These issues keep manufactured homes today from matching
or overtaking the conventional market on the scale.
Nevertheless, Americans will continue to buy manufactured homes, with
or without non-profit involvement. Organizations with a mission to improve
either housing or the financial opportunities for low- to moderate-income
families have an obligation to address, in whatever way they can, the
issues enumerated in this report.
Further reading:
Genz, Richard "Why
Advocates Need to Rethink Manufactured Housing," Housing Policy Debate
Volume 12 Issue 2 2001.
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Notes:
12 Apgar, Calder, Collins and Duda. "An Examination of Manufactured
Housing as a Community and Asset-Building
Strategy," Neighborhood Reinvestment Corporation, September 2002,
p. 7. "2003 Quick Facts," Manufactured Housing Institute, Internet
Source: http://www.manufacturedhousing.org/media_center/quick_facts2003/index.html.
13 Accessible via the internet at http://www.nhclf.org/MHPFedResArt.pdf
14 Sanford A. Minkoff and Melanie N. Marsh, "State and Federal Preemption
in the Mobile Home Arena: What Can
Local Governments Truly Regulate?" State Bar of Florida, February
2003.
15 Texas Manufactured Housing Association Bylaws, as Revised, September
2001.
16 Jerry Rioux, City of Watsonville CA, Housing & Economic Development
Dept., Phone interview, April 7 2003.
17 http://www.cedo.ci.burlington.vt.us/legacy/strategies/08-subj-housing.html.
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