In the News: Manufactured Housing Investors Yes! Communities and Inspire Communities Seize on “Captive Market”
August 18, 2022
Private equity-owned companies Yes! Communities and Inspire Communities have been in the news recently for their activity in the manufactured housing sector.
Manufactured housing, also known as “mobile homes”, represents “the largest sector of non-subsidized affordable housing in the United States.”[1] Comprising about 10 percent of the nation’s housing stock, manufactured housing communities are home to 22 million Americans.[2]
Manufactured housing is one of the last forms of housing available to economically marginalized communities. Households living in manufactured housing have a median income of just under $30,000 per year.[3]
A previous report by PESP, Manufactured Housing Action, and Americans for Financial Reform revealed that private equity and other institutional investors are rapidly increasing their reach in the manufactured housing (MH) sector.[4]
According to researchers at the Lincoln Institute of Land Policy, parks containing about a fifth of mobile home lots nationwide have been purchased by institutional investors over the past eight years.[5]
Private equity’s expansion into manufactured housing spells trouble for residents. In this “captive market”, many residents own the home structure itself, but still pay rent for the land their homes sit on. When that lot rent increases, many tenants, especially those on fixed incomes, are unable to weather the cost.[6]
Furthermore, so-called mobile homes are not actually very mobile. Most often, “the structures cannot withstand the move, the costs of moving them are unaffordable, and finding a new spot is untenable.”[7] Private equity and other investors prey on this vulnerability to ensure steady revenues, squeezing fast profits out of low-income families and seniors.[8]
In addition to rising rents, tenants also can be subject to increased fees, maintenance issues, and additional rules that regulate day to day matters like street parking and clotheslines.[9]
ABC’s WCJB20: Residents upset with Yes! Communities property management
With more than 280 properties under management, YES! Communities claims to “create communities that [their] residents are proud to call home.”[10]
Yet earlier this month, Yes! Communities tenants at Hidden Oaks in Gainesville, Florida reached out to the media after they said Yes! failed to address housing quality issues including mold and cockroaches.[11]
Many tenants of Hidden Oaks appear to follow a more standard rental arrangement in which Yes! owns both the mobile home structure as well as the surrounding land.
One Hidden Oaks tenant of seven years reported that Yes! failed to renew his lease, instead pushing him to purchase his home despite it being infested with mold. Another tenant stated that after Yes! failed to remove derelict trailers, the community saw an uptick in trespassing and elicit activity.
What’s more, reporters from WCJB showed that many homes’ inspection stickers were expired.[12]
The story of Hidden Oaks reflects a common pattern of maintenance neglect in properties owned by private equity and other corporate interests. As firms seek to maximize revenue by cutting upkeep costs, tenants are left hanging.[13]
Yes! Communities has already experienced pushback for this management style. In October of 2021, Pennsylvania School Employees Board Pension unanimously rejected an opportunity to invest further in Yes! Communities after a board member grilled a company representative over Yes’s treatment of tenants.[14]
Inspire Communities expands Texas manufactured housing footprint
While some manufactured home communities are experiencing maintenance neglect, others are being upgraded with a bounty of amenities. But these upgrades are not planned with the typical manufactured housing resident in mind.
Inspire Communities made headlines this week when it announced “upscale” developments at two mobile home parks in Texas. Oceanway, an existing community in Beach City, TX, received new buildings, paved roads, Victorian-style street lamps, a park, and a 650-foot pier among other amenities[15]. A second community, a brand new “affordable luxury” community called Rockrose Ranch, is slated to offer pickleball courts, pools, and dog parks ready for its first tenants this fall.[16]
It appears that investors are taking advantage of a skyrocketing housing market in Texas, where the average home price is fast approaching half a million dollars.[17] Fewer people than before can afford traditional homeownership[18], making the “luxury mobile home” market an opportune new income stream.
The rising cost of single family homeownership itself can be attributed in part to the activity of private equity firms and similar institutional investors. According to the Harvard Joint Center for Housing Studies, corporate investors bought roughly 28% of single family homes on the market during Q1 of 2022.[19] In many parts of Texas, investor demand is even more outsized. The Dallas Observer found that in Tarrant and Dallas counties, about half of homes sold in 2021 went to institutional investors.[20]
“There’s a tremendous demand for affordable housing in the area. [Rockrose Ranch] and others like it, provides [sic] buyers with the opportunity for affordable home ownership in a highly-amenitized setting,” said Inspire’s senior vice president of sales and marketing to the Houston Chronicle.[21]
However, owning a manufactured home doesn’t offer as many benefits as traditional homeownership.
For one, manufactured housing is a poor way to build equity. Mobile homes are prone to structural degradation over time, leading them to depreciate in value as well. Furthermore, it can be difficult to secure a mortgage for manufactured housing at all, sometimes forcing residents into chattel mortgages with shorter terms and higher rates.[22]
And even with a new manufactured home secured, residents could still be vulnerable to increasing lot rents, fees, and additional lease terms if landlords decide to change these over time.
As homeownership becomes an increasingly distant goal for middle and working class people, many may see manufactured housing as the best viable option despite its economic caveats. Industry leaders typically discuss this shift in terms of choice, however, there is a clear economic downside for these potential new tenants.
Even more importantly, very low income people who have long lived in manufactured housing are now facing increased competition in securing a home. As the gentrification of manufactured housing sets in, it’s unclear where the millions of people who rely on it as the last affordable form of shelter will go. Construction is expanding, but increased supply isn’t always a straight path to lower rents.[23]
Very low income people deserve homes that are safe, affordable, and even beautiful. Instead, these residents are being used as a source for wealth extraction.
Solutions
Private equity and other investors’ expansion into the manufactured housing market is troubling. However, there are a number of policies that could improve tenant outcomes.
In Michigan, the state House of Representatives recently passed regulations on manufactured housing that would mandate that tenants be offered 1 year leases. Crucially, the law would also create a database of mobile home park owners and require landlords to obtain licenses. Those with “a history of unjustifiable rent increases” could be denied licensing. Though this initiative is currently stalled in the senate due to industry pressure, legislation of this sort could go a long way in protecting some of the country’s most vulnerable renters.[24]
Other states have considered placing blanket rental increase caps on all manufactured housing. Delaware passed one such law this year, but efforts in other states have so far failed.[25]
There are also policy solutions at the federal level. The Federal Housing Administration (FHA) could begin to provide funding for mobile home ownership so that residents wouldn’t be subject to treacherous mortgage agreements. Likewise, the Department of Housing and Urban Development should work to let tenants use Section 8 vouchers for manufactured housing.[26]
Fannie Mae and Freddie Mac, the federally backed home mortgage companies that often finance manufactured housing real estate acquisitions, also have some degree of leeway in requiring their borrowers to follow loan terms that protect tenants.[27]
In addition to policy changes, direct action from tenants is a promising source of hope. Recently, tenants at Ridgeview Homes in Lockport, NY joined together to launch a rent strike in response to unaffordable rent increases in their park.[28] Other tenants like those at Hidden Oaks in Florida have reached out to the media for support. As private equity encroaches on America’s supply of affordable housing, tenant allies must work to support the demands of those most directly affected by investor encroachment into manufactured housing.
[1] https://time.com/longform/affordable-housing-mobile-homes/
[2] https://mhaction.org/wp-content/uploads/2019/02/PrivateEquityGiantsFinal.pdf
[3] https://www.manufacturedhousing.org/affordablehousing/
[4] https://mhaction.org/wp-content/uploads/2019/02/PrivateEquityGiantsFinal.pdf
[5] https://www.beaumontenterprise.com/news/article/Rents-spike-as-big-pocketed-investors-buy-mobile-17326886.php
[6] https://mhaction.org/wp-content/uploads/2019/02/PrivateEquityGiantsFinal.pdf
[7] https://mhaction.org/wp-content/uploads/2019/02/PrivateEquityGiantsFinal.pdf
[8] https://mhaction.org/wp-content/uploads/2019/02/PrivateEquityGiantsFinal.pdf
[9] https://www.newyorker.com/magazine/2021/03/15/what-happens-when-investment-firms-acquire-trailer-parks
[10] https://www.yescommunities.com/
[11] https://www.wcjb.com/video/2022/07/16/tenants-complain-about-yes-communities-properties-living-conditions/
[12] https://www.wcjb.com/video/2022/07/16/tenants-complain-about-yes-communities-properties-living-conditions/
[13] https://www.propublica.org/article/when-private-equity-becomes-your-landlord
[14] https://www.inquirer.com/business/psers-fund-pension-investments-teachers-rebels-dissidents-profits-yes-communities-20210917.html
[15] https://www.houstonchronicle.com/business/real-estate/article/Developer-launches-700-unit-new-manufactured-home-17303639.php
[16] https://therealdeal.com/texas/2022/07/13/inspire-communities-bets-on-houstons-mobile-home-market/
[17] https://therealdeal.com/texas/2022/07/13/inspire-communities-bets-on-houstons-mobile-home-market/
[18] https://www.npr.org/2022/07/30/1114488555/new-fed-interest-rate-housing-market-homebuyers-recession-economy
[19] https://fortune.com/2022/06/26/housing-market-and-home-price-boom-made-bigger-by-investors-and-wall-street/
[20] https://www.dallasobserver.com/news/how-are-institutional-investors-affecting-the-housing-market-congress-is-investigating-14331313
[21] https://www.houstonchronicle.com/business/real-estate/article/Developer-launches-700-unit-new-manufactured-home-17303639.php
[22] https://www.newyorker.com/magazine/2021/03/15/what-happens-when-investment-firms-acquire-trailer-parks
[23] https://www.tonydamiano.com/project/new-con/supply-ppt.pdf
[24] https://www.mlive.com/public-interest/2022/07/michigan-mobile-home-park-residents-feel-stuck-as-rents-climb.html
[25] https://www.beaumontenterprise.com/news/article/Rents-spike-as-big-pocketed-investors-buy-mobile-17326886.php
[26] https://www.beaumontenterprise.com/news/article/Rents-spike-as-big-pocketed-investors-buy-mobile-17326886.php
[27] https://www.beaumontenterprise.com/news/article/Rents-spike-as-big-pocketed-investors-buy-mobile-17326886.php
[28] https://www.beaumontenterprise.com/news/article/Rents-spike-as-big-pocketed-investors-buy-mobile-17326886.php?
