Manufactured Housing: Underutilized and Misunderstood

Posted by Dana Hawkins-Simons on December 9, 2014

What will it take for manufactured housing, the principal source of unsubsidized, affordable homes in the United States, to reach its potential?

Limited and expensive financing options make life even more difficult for the financially vulnerable residents who live in manufactured housing (MH) communities. The continuing consolidation of ownership is taking a toll, and the industry just can’t seem to shake the outdated, negative stereotype of a rusted, flimsy structure with a dog chained to the front porch.

Manufactured homes, frequently mischaracterized as mobile homes or trailers—even though once placed, they're rarely moved—house over 18 million Americans. Most residents are just getting by; the median annual household income is $30,000. The homes are much less expensive to rent or own because they’re built in factories, so they cost less than half the estimated $94-per-square-foot national average for new site-built homes.

Not only is manufactured housing misunderstood, it’s underutilized. “We don’t have enough public housing to fulfill our needs,” says MH industry expert Lisa Tyler of Paris, Tenn. “Manufactured housing presents a solution. It’s inexpensive, energy efficient, and a great value. There’s a lot of opportunity for growth in the industry, but a lot of obstacles, too.”

One such roadblock is the way most MH is legally classified as personal property rather than real estate, according to a recent report on manufactured housing from the Consumer Finance Protection Bureau. That means MH homebuyers pay higher loan rates, 6.79 percent on average, and have fewer consumer protections than owners of site-built homes, who paid 3.6 to 4.2 percent in 2012 for a conventional mortgage with a 30-year fixed rate.

And then there’s the persistent image problem. Industry insiders are dismayed that manufactured housing continues to be stigmatized, despite the fact that factory built homes constructed after 1976 must adhere to the U.S. Department of Housing and Urban Development (HUD) code that provides guidelines and oversight relating to quality, safety, and durability.

“Today, manufactured homes are often built with higher quality, more energy-efficient and sustainable materials than site built homes, and many are set in lovely, tree-lined communities with responsible, hard-working residents," says Tyler. “The mainstream media tells us that people who live in manufactured homes are 'trailer trash,' drug dealers, or wife beaters. Sadly, many people still have trouble getting past that horribly unfair stereotype.”

Mom and Pop: Unsung Heroes

Residents and owners of manufactured housing communities are also grappling with a wave of consolidation that began in the 1990s, and continues unabated. Sun Communities Inc., for example, just announced it bought seven MH communities in the Orlando area for $257 million. So far, investors are mostly targeting larger communities, says L.A. “Tony” Kovach, publisher of leading trade publications and “But we’re going to see things evolve over the next five years, as investors come knocking and begin targeting smaller sites, those with 150 units or less,” says Kovach, who's based in Lakeland, Fla.

These sites are traditionally the territory of small, local owners and operators, informally called "mom and pops." “The majority of parks were created by private owners, who manage this valuable resource for low- and moderate-income people who want a home of their own,” says Paul Bradley, the founding president of ROC USA, a nonprofit based in Concord, N.H., that promotes resident-owned communities (ROCs). “But they don’t get credit for it. These stewards of affordable home ownership are unsung heroes.” While smaller owner-operators have their flaws, “most of them are truly decent people who’ve managed their communities respectfully,” adds Bradley.

Meanwhile, many of these MH owner-operators are looking to retire, or get out of the business due to economic pressures and shifts in the industry. As fewer of their adult children want to take over the family business, more mom-and-pop owners are selling to larger operations, which, in turn, sell to investors. That’s when the fortunes of residents can change quickly.

“The difference between how a consolidator runs a business and how we did is one of values, frankly,” says Marc S. Seigle, a retired attorney and former owner, along with his family, of a MH community in Elbridge, N.Y. Seigle says they raised rents on tenants from $190 to about $300 over 25 years—just enough to cover inflation, taxes, and insurance costs.

“There’s always a great deal of talk about the importance of quality affordable housing, but it’s pretty much eyewash—just talk,” says Seigle. “I saw an article in The New York Times about Wall Street investors making their fortunes in this industry. I thought, they suddenly discovered they could do what the rest of the world does with folks who don’t have much clout—gouge them. I’m saddened but not surprised to see it.”

A Better Way

Owner-operators of MH communities who are ready to exit the industry don’t have to sell to consolidators. There’s a better option, says Bradley. Residents can collectively buy the land, and create a ROC. Bradley’s organization, ROC USA, has helped secure community ownership for over 150 resident corporations to preserve and improve affordable communities, and help residents build their individual assets. Impressively, none of ROC USA’s communities have gone bankrupt, into foreclosure, or been resold.

Seigle’s family was the first to partner with ROC-USA, back in 2008. He says they received their asking price, and there was no downside to the deal. “I spoke with a consolidator, and it was quite clear to me they’d jack up the rents if we sold to them,” says Seigle. “The fact I was able to sell to my former customers, so they would have some control and I knew it would be well maintained, made it even a sweeter deal.”

Former MH community owner George Everett was also pleased with his ROC USA transaction. He sold the 32-unit Green Acres Cooperative, tucked deep inside the Rocky Mountains in Kalispell, Mont., to his residents in 2010. “I know many of those who live in the community real well. Ninety-five percent are good, hardworking people who didn’t deserve for a developer to come in and suddenly raise the rent so high they’d have to leave their home,” he says.

“I’m a conservative person, but I’d do it again,” says Everett, a former Realtor, and a Republican who served in the Montana legislature for eight years. “I still drive past there and talk with the manager sometimes. It seemed to work out well for everyone.”

(Photo of the Green Acres Cooperative by Lorie Cahill.)

About the author more »

Dana Hawkins-Simons directs NHI's Opportunity Housing Initiative, a project that supports the expansion of long-term affordable housing programs and policies. She is an award-winning journalist and former senior editor of U.S. News & World Report.

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Steve Lockwood
16 Dec 14, 12:51 pm

It seems that Rooflines, with a spate of recent supportive articles, has jumped in as a supporter of manufactured housing. I do think that some skepticism is warranted. Our experience—the houses are substandard and the land leases are suspect. The buyers tend to be undocumented Latinos who do not have other options. At the end of 20 years they own houses that are worn out, and are still paying rent on the land. I know there are other options, but this scenario is often the norm. In our market, they are not even cheaper than good conventional homes. This community has worked to resist manufactured home developments that we view as predatory.
Steve Lockwood, Frayser CDC, Memphis, TN

Doug Ryan
16 Dec 14, 5:52 pm


I’ve written some of the articles that have highlighted the potential and reality of manufactured housing as an affordable housing solution. I think if you go back to these, you’ll clearly see that we at CFED support resident ownership, such as promoted by ROC USA, high-quality homes, like Next Step uses, and are critical of the most common practices such as captive home financing, weak consumer protections and lack of secure land tenure. To this end, we also work with the National Manufactured Home Owners Association to expand homeowner rights.

Done, right, MH can be part of the answer. It may not work in every market – state and local laws are usually key - but I am certain it can in the Memphis area. Feel free to reach out to me at CFED. And, just as important, please let us know if you know of parties that are treating residents unfairly in lending, selling and renting of homes and lots. We can work with you on these, too.

Steve Lockwood
17 Dec 14, 11:08 am

Doug—I’m sure you’re right. I just think a dose of caution is called for.

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