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The high cost of houses and apartment rents has pushed more people with low incomes into mobile home parks, where surging demand is driving up rents in what has become the last housing refuge for those of modest means.
About 6 percent of U.S. residences are so-called “manufactured homes,” housing roughly 20 million Americans, according to the federal Consumer Financial Protection Bureau.
Those numbers are on the rise as more and more people, especially retirees and low-income earners, are priced out of other places to live.
Historically, prices for the homes have ranged from around $25,000 in parts of the central U.S. to more than $125,000 in Washington state. Generally, they tend to be three to five times cheaper than conventional single-family homes, lender LendingTree reported.
However, during the COVID War, prices for manufactured housing jumped an average of 50 percent across the country, according to Bloomberg, compared to an average 22-percent rise in the cost of traditional single-family homes.
People in the parks usually own their homes but rent the land the homes are parked on. In the past, rents have increased 4 to 6 percent annually.
Now, in many parks around the U.S., those rents are rising 10 to 25 percent, Bloomberg found, also some are doubling or tripling.
Bloomberg cited the case of a park resident in Washington state who lives on food stamps and $860 a month in Social Security benefits.
Her land rent just went from $350 a month to $1,000
“Land prices are going up, housing costs are going up, and that’s spilling into mobile homes,” Casey Dawkins, a University of Maryland professor of urban studies, told Bloomberg.
“There’s also an overall shortage of affordable housing, particularly in cities and the suburbs around them,” he noted.
Many residents bought mobile homes because they were priced out of other housing options, Bloomberg found after interviewing dozens of people around the U.S.
Many had used their savings or taken mortgages to buy manufactured homes, which often have less value at resale than they did at purchase.
Some residents now are considering moving to welfare motels, staying with friends, or living out of their cars while they look for something permanent that would be affordable, Bloomberg found.
Making things worse, private equity firms are sniffing around the parks.
The firms have grabbed hundreds of thousands of single-family houses during the past two years, turning them into pricey rentals as demand for homes and apartments has shot up.
We have documented this trend in articles including:
- “Real Estate Investors Choosing Single-Family Rental Homes” (13 Oct 2020)
- “Invitation Homes to Buy $1 Billion Worth of Houses This Year” (1 Jun 2021)
- “Rents for Single-Family Homes Reach 15-Year High” (1 Jun 2021)
- “Blackstone Extends Reach Into Housing Market” (29 Jun 2021)
- “Private Equity Partners Target $5 Billion in Rental Houses” (27 Jul 2021)
- “Residential Rental Rates Skyrocketing” (10 Aug 2021)
- “Rents Soar as Investors Buy Properties and Raise Rates” (14 Sep 2021)
- “Investors Now Targeting Off-Campus Student Housing” (14 Sep 2021)
- “Rents Soaring. What’s Next?” (21 Sep 2021)
- “Single-Family Rental Homes: Investments Galore” (16 Nov 2021)
- “Home Sales Up as Money Gang Gobbles Up Houses” (23 Nov 2021)
- “Rents on the Rise” (11 Jan 2022)
Now investment companies are looking to buy mobile home parks, either to turn them into condos or resorts or simply to squeeze more rent from the residents.
Apollo Global Management, Carlyle Group, and Stockbridge Capital, have been gobbling up the parks for almost a decade, often arranging financing through government-involved lenders Fannie Mae and Freddie Mac.
Often, one of the first things these new owners do is raise rents, Bloomberg said.
However, “when new owners come in, they’re doing infrastructure upgrades, they’re improving the streets, and adding amenities, all of which are very important as these communities age,” Lesli Gooch, CEO of the Manufactured Housing Institute trade group, told Bloomberg.
“When a community does change hands, often it’s because of a significant need for improvement and a lack of capital from the existing owners to make such improvements,” she pointed out.
Few municipalities and states regulate rent increases in mobile home parks, although the rising crisis has drawn some effort.
Vermont now requires park owners to disclose to residents any plans to sell the parks and offer residents a chance to buy the property. (Many parks around the country have turned into co-ops in recent years.)
In Oakland, Cal., city officials are revamping zoning laws to permit manufactured homes in more parts of town.
“Many municipalities continue to ignore mobile home parks, and that, in no small part, has to do with the stigma around them,” Katherine MacTavish, a professor at Oregon State University who studies manufactured housing, said to Bloomberg.
“It is one of the only forms of affordable housing we have, yet we don’t embrace it in ways that would make it work much better for families,” she pointed out.
TREND FORECAST: With rents now rising even in mobile home parks and low-income residents being forced to live in their cars or couch-surf with friends, the price crunch squeezing lower-income Americans from their homes will gain new scrutiny from regulators and lawmakers.
This is already beginning, as we report in “Private Equity Landlords Draw Regulators’ Attention” in this issue.