When I was driving in northern Maine recently, a maiden aunt who lives in Maine whom I see only on Thanksgivings, weddings and funerals called me. Looking at the caller ID, I emitted a low groan and let it ring. I was listening to a podcast that interested me, and did not want to be bothered. My son, who was sitting next to me, looked surprised. “You sent Aunt Hortense to voice mail?”, he asked (he is the well-adjusted family member). “I want to listen to this”, I said. Then, the aunt called again. Her persistence made me think that it might be serious. Maybe my father had fallen or one of our cousins had the clap again. So, I answered the phone.
“Turn on Maine Public Radio”, she said. “There is a podcast about mobile home parks.”
“I am listening to it now. Until you interrupted me, that is.”
“We need to talk about Thanksgiving.”
This time, my groan was inaudible.
“Later. I want to hear to this.”
The podcast was called Mobile Home Parked, and it was broadcast as a segment on the NPR show Planet Money. Since it was NPR, every source quoted and fact cited was true. However, – channeling my inner Donald Rumsfeld – it did not say what it did not say. And what it did not say is important.
Here’s what it did say:
- A woman named Mary Hunt lives in a double-wide that she owns in a mobile home park in Swartz Creek, MI named South Valley Estates. Until a few years ago, South Valley Estates was owned by a couple named Stan and Nancy. Mary’s lot rent used to be $350, and Stan and Nancy worked with Mary when she was paid late. Then, Stan and Nancy sold the park to an institutional investor named Havenpark Communities. Havenpark raised lot rent to over $400. The pet fee went up from $10 a month to $15 a month. Havenpark also started billing for water. According to Mary, “water’s about $35, sewers about $50”. When Mary is late with lot rent, Havenpark does not work with her. Because of the cost of moving a mobile home, Mary can’t move out of the park;
- Institutional investors like Havenpark increase the value of parks by increasing revenue and cutting costs, and then they monetize their investment by refinancing their parks. Many of the loans through which parks are refinanced are guaranteed by Fannie Mae and Freddie Mac, government agencies set up to guarantee home mortgages; and,
- One solution to the problems of outside ownership is for tenants to form a cooperative to purchase their park. For example, when the owner of Brookside Village, a mobile home park in Plainville, MA, received an offer to buy the park, the residents formed a co-op and bought the park. In order to fund the purchase, the co-op raised lot rent by $185 a month.
The second two bullet points are not controversial (although I disagree with the suggestion that there is something naughty about park owners refinancing with agency debt. The universe of agency borrowers should be expanded, but restricting access to agency loans for park owners would not further that purpose). The first bullet point, however, is misleading and incomplete.
Here’s what the podcast did not say:
- Fair lot rent is equal to half the rent for a comparable apartment When you rent a house or an apartment, you rent two things, i.e. the structure and the land the structure sits on. When a tenant who owns their home rents a lot, the tenant rents half of the property-rights bundle. Therefore, they should pay half of what they would have paid had they rented an apartment or stick-built home that is comparable in quality, location and size.
Since Swartz Creek is a small town, data regarding local apartment rents are thin. A quick Google search yielded four ads for local apartments going for “$700+” at the low end to “$990+” at the high end. Google images shows that South Valley Estates is very up-scale, with newer homes, concrete paved driveways, underground electric and curb cuts. Unlike apartment residents, mobile home residents receive the use of a yard, at-door parking, and in-home laundry hook-ups. Applicable comps should not consist of dreck. The average of the four comparable prices is $858, before extras, like pet fees and utilities (again, assuming that the four data points that we have are comparable in quality. I suspect that South Valley Estates is a better place to live than some of the comps.) That puts lot rent at $429 a month, which is what Mary is paying now at South Valley Estates. That is more than she paid during the Stan and Nancy administration, but it is a fair price.
I am not sure what to make of Mary’s statement that water is about $35 and sewer about $50 without more facts. Are the two utilities bundled together? Is usage metered? Is the cost per unit equal to that which Havenpark pays the town for water? I suspect that the park has town water, that Havenpark installed water meters when it bought the park, and that Havenpark sells water and sewage to the tenants at cost. That would mean that residents who economize on water would have lower bills and that the amount paid would be the same as what any resident of Swartz Creek pays. But with incomplete data, it is impossible to make sense of that part of the story.
- Maintenance cannot be deferred forever When mom-and-pops sell to investors, lot rents often go up because investors have to upgrade systems that have depreciated. Clay sewer pipes need to be lined or replaced; galvanized water mains need to be replaced; water risers have to be put into insulated pits and wrapped with heat tape; sewage treatment plants have to be replaced. In cases like this, reasonable lot rent increases are not predatory behavior; they are simply the bill coming due for decades of neglect.
Residents of Brookside Village learned this first hand when their co-op bought the park. After they closed, they immediately increased lot rent by a jaw-dropping $185 a month. This was done to service systems that had gone to seed under the previous owner. That bump in lot rent wasn’t the action of a greedy landowner – it was a decision made by tenants facing economic reality.
- Residents can vote with their feet. No, really – they can Mike, the manager at my park in northern New York recently had a falling out with his neighbor. This surprised me. The neighbor was a great tenant and the two had been friends. The tenant’s grandkids played with Mike’s kids and they shared barbecues. But some time during the early summer, the two of them got in touch with their inner Andrew Cuomo and Bill De Blasio. Mike said the neighbor shouted at him and threatened him. The neighbor got angry when Mike mowed too much of their adjoining lots. Mike put up a privacy fence. The neighbor put up cameras. After a while, the neighbor decided he had had enough and put his home on the market. His realtor says that his home has gotten quite a bit of interest, and that he will sell it for significantly more than what he paid for it.
I tell this story because the popular narrative tends to focus on the difficulty of moving structures, rather than people. Here is how the syllogism goes: (i) most mobile home park tenants own their homes; (ii) it costs up to $10,000 to tear down, move and set a manufactured home, (iii) most mobile home park tenants can’t afford the cost of moving their home, and therefore, (iv) mobile home park tenants can’t move when lot rent increases, water is metered, or rules are enforced. High transaction costs and inelastic behavior allow predatory park owners to squeeze tenants like diners in a Waffle House chained to their booths.
The problem is, that is not the whole story. Although statements (i) through (iii) are true, statement (iv) is rhetorical sleight-of-hand. Mobile home park tenants don’t need to bring their homes with them when they move. They can convert their home to cash and use that cash to buy a new home or to rent an apartment. That’s what owners of stick-built homes do. That’s what I will do when my crazy neighbor with the bamboo finally pushes me over the brink. And both of us – owners of manufactured homes and stick-built home owners – are better off than apartment renters. When they move, they leave with nothing.
So – mobile home park tenants can vote with their feet. The land-lease model leaves them better off than apartment dwellers. But you need complete facts to recognize that. And you need to pay attention to logos and ethos, as well as pathos.
- Rule compliance is a positive sum game – but only if everyone complies I won’t write much about this, because I have done so before. Rules about prompt payment and quality-of-life behavior have to be enforced because when one resident doesn’t comply, other residents suffer. You know the pictures of SEAL trainees carrying telephone poles? If one guy drops his section, the others have to take up the slack. That’s why park rules have to be enforced. If one resident does not comply, their neighbors suffer. It is true that some smaller mom-and-pop owners who sell to larger investors did not enforce the rules during their tenure. It is also true that some park residents have gotten used to lax enforcement. But then again, some people drink bubble tea and jump off the Brooklyn Bridge. That doesn’t make it right.
I once asked my father what made Aunt Hortense the way she is. His first response was a sigh and then, “Your aunt is a special case. Always was”.
“No, really. I’m curious. Did she ever-“
“Men liked her when she was young.”
“Did she like them?”
“Oh, yes. She had a serious beau for a while. We thought they were going to marry.”
“What did he do for a living?”
“He was slippery about it. When our father asked, he would say, ‘affordable housing’, or ‘land lease’.”
“Why did they break it off?”
“Our father didn’t approve. And your aunt is a very difficult woman.”