Mobile home parks are predatory. Unlike a traditional home, "owners" own only the home and pay an exorbitant land rent each month. So, unlike a traditional home where the land appreciates and you maintain the home, you get in effect, the worst of both worlds. You get zero land equity for rents approaching mortgages (YMMV. They are very high in desirable CA locations.), and still pay to maintain the home.
Of course, private equity firms love the idea. Price-fixing among park owners happens. [1] Some comments [2]
Pro's and Cons[0]
I live in a double-wide manufactured home in the country, and own the land, quite a bit of it (sharpens chain saw ) Spare you the details.
[0] https://www.luxwisp.com/pros-and-cons-of-land-lease-communit...
[1] https://www.classaction.org/news/class-action-alleges-mobile...
[2] https://www.reddit.com/r/povertyfinance/comments/s0jh8a/what...
> "owners" own only the home and pay an exorbitant land rent each month. So, unlike a traditional home where the land appreciates
Isn't this the same as many apartments with body corporates that lease the land they are on? Called "Stratum in Leasehold" in New Zealand (although uncommon except for some inner city - I think because riskier so harder to get a mortgage).
Leasehold isn't common for residential in New Zealand AFAIK. And mobile home parks are uncommon too.
In california I think these parks are fairly well protected from increases in rent, and the over-age-<nn> parks might be super-cheap. I remember seeing an over-50 park in the bay area was $300/month space rent.
But I don't know how change in ownership and/or tricks can figure into things.
Change in ownership is the magic trick, AFAICT.
How is this different than owning a house or a condo? A house you still pay property tax on the land. A condo you still pay an association fee. Both of which generally go up continually every year.
This is also not a surprise that they don’t own the land. At any time they can move their mobile home, unlike a house or condo. They fully know what they signed up for.
I pay about $2000 a year for property tax (It's in the boondocks). That's it. A land rent may be a big chunk of that every month. It varies a lot, so run the numbers.
A Condo owner owns the land and pays property tax and HOA fees, which can be steep, so there's land appreciation.
Why pay so much every month to get zero land equity and zero home maintenance?
Run some numbers. I did sometime back. And don't forget, these are microscopic lots. Barely room for a couple of storage shelves under a car awning.
The references say that the mobile homes depreciate, so they're not even worth moving, and landlords charge anyway. I linked to very short ones that bring up key issues.
The major difference is condominium associations are cooperatives, and mobile home parks are owned by a landlord while you are the tenant. The point that is being made is there's a trend for these landlords to become predatory.
In a condominium you are a member in the association that owns the common areas and have a voice. The board is other people who own condominiums there, and will at least try to do things in the best interest of the condominium owners.
Housing as an investment vehicle is ultimately the problem. Those who buy into it expect prices to keep going up, like any good investment. If rising prices falter, there’s big rippling consequences, especially for those whose net worth is mostly their house value, bought with debt.
On the other side is those who need shelter, who don’t have unlimited income to afford the price of something that rises faster than they earn.
It doesn’t seem like a sustainable system.
> housing as an investment vehicle is ultimately the problem.
No, lack of supply is the problem. If there wasn't a lack of supply then housing wouldn't be an investment vehicle. Nimbys and over regulation has made it impossible to build which creates the lack of supply which is what drives the price up and makes the incentive to invest.
Wow, you picked the one housing-related article I've read where supply cannot be the problem!
You could literally surround the PE mobile home park with new, available lots. But as the article states, it is prohibitively expensive for these current "mobile" home owners to move-- their abodes are no longer mobile in any practical sense. And, as the article also states, many have porches and other bespoke add-ons-- dismantling and rebuilding would add even more thousands.
This should be obvious on the face of it-- if those homes were truly mobile, like campers, the camper owners would just scoot (as camper owners do) when PE tried to jack up the rent.
I'll go further and speculate that a sizable portion of the owners are fixed income with very little savings. You could even offer free lots 500 feet down the road and some still couldn't take you up on it (at least without racking up some seriously predatory CC or other debt). No doubt these PE firms had a firm grasp on the owners income levels, home ages/prices, and all kinds of other data before they bought up the lots and jacked up the rents.
Unless your grand plan to flood the market with mobile home lots includes a "let's teach the users" campaign to tell everyone in the next generation to buy campers instead of mobile homes, adding supply won't help them, either.
Edit: formatting, clarification
They can’t sell the home where it sits and buy a new one elsewhere?
Typically it's the land that appreciates, faster if it has a house or other permanent structure, though that does include mobile homes.
If the land is rented, the mobile home will often depreciate, much like a used car. Nobody wants to live in a mobile home with 1970's decor. So those owners are likely going to take a bath.
Land Value Tax fixes this
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Lack of supply exists because housing is an investment. If you suddenly flooded the market with housing, prices would drop (see Austin) and this puts everyone from your typical homeowner to your friendly neighborhood PE firm in a difficult financial position. Ultimately this drives votes towards maintaining the status quo
There will be always lack of supply of housing. Its such an essential thing that it never becomes unused or unwanted. The combination of bad regulations where banks can give extremely high loans is the biggest issue. I would not be surprised if mortgages of 60 years will be possible where your total down payment is 4 times the actually price of the house.
Not true. As an overly simple thought experiment consider what happens to the market if a government were to dictate the construction of two units of housing per capita.
The issue is lack of supply. That is enforced by zoning, which is ultimately dictated by politicians, who know they won't get reelected if they make policy changes that gut a significant portion of their constituents' savings.
It's a fairly straightforward example of systemic dysfunction with no obvious solution.
Plenty of places in the world with an oversupply. Lots of examples in China
China (like the USA) didn't let the market handle it. China built without letting market demand dictate supply. USA did the opposite, didn't builders meet supply. They try, they try all the time to built more, they get stopped by nimbys and over regulation.
> Housing as an investment vehicle is ultimately the problem
I think this was best put into words in the form of "Houses are for living in, not for speculation"...
Although it’s mentioned in the article, I’m surprised that the author didn’t place more emphasis on the different set of state laws that typically apply to mobile homes given their status as (theoretically) moveable property. The relative ease of eviction compared to real property (houses, condos, things without wheels) is probably the primary factor for the private equity investment thesis. It’s a material driver of the economics of these investments and substantially reduces the risk profile of the generally marginal tenant base.
Anyone who has been under a mobile home will know that they pretty much only move once in their life.
This. Once they are on a property they aren't going anywhere until they get torn down and replaced. Mobile, they are, once.
It's hard for me to rag on the opportunists when the opportunity is there. PE firms don't magically make something profitable - they're just scooping up underpriced/undervalued assets and extracting the value off of them.
That said, the extent that PE firms are willing to scrape the bottom of the barrel for things to make a buck off of is becoming shameless. My dad ran a mobile home park for a while, and let me tell you - the idea that it's some sort of sustainable investment vehicle even at maximum extraction is ludicrous.
It's just further evidence that the markets are flush with more capital than they know what to do with. We have a massive savings glut due in no small part to inequality and our aging population. And failure to deal with it at a policy level will just continue to grow the affordability crisis.
> It's hard for me to rag on the opportunists when the opportunity is there.
Sounds good when your religion is money.
For the rest of us who don't prioritize wealth over all, this is undesirable behavior.
This article praises mobile housing too much. For a lot of people, this is substandard living conditions. Yes, there are nicer parks, but that’s not the norm across the country.
In my opinion, states should convert the zoning for all mobile home parks to multifamily (apartment complexes), and require developers to give each of the residents their own paid for unit. Then the land is more productive and the previous owners are upgraded to a higher quality living experience.
(I live in southern CA and many parks are located on land that would be very very well suited for large apartment complexes)
John Oliver, 6 years ago: https://www.youtube.com/watch?v=jCC8fPQOaxU
I guess PE firms have realized that putting humans into debt that they have to work endlessly to repay is very profitable.
20 years ago In my area, a an owner of a mobile home part wanted to kick everyone out, sell the land do developers. The land is worth a lot due to its location very near a "tier 1 city".
The residents contacted the AG and the AG and State forced the owner to sell to the residents. Which happened. When I drive by that park now, even now it looks 100x better then it did before they bought it.
Hopefully the same happens to these parks.
That's an incredible outcome. I don't think it'd be an option for every park in the country (tier one indicates they probably were better off financially).
Nothing in America is left un-exploited. Incredibly tragic to see yet another sizable contingent of Americans, often particularly vulnerable ones, squeezed by capital. What foes.
Private equity is such a vicious foe to mankind. Hostis humani generis: this profit motive corrupts our world, erodes at humanity, in every way it can. Just once, I'd like to see amalgamated capital try to improve the lot of the world, help humanity along. But no, never: always the swirling draining negative to suck life from the world.
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I was thinking about war-profiteering and the private companies that lobby for endless wars lately (think Du Pont, Rockeller, Halliburton, etc). It causes untold damage to humanity. It occurred to me that this sort of thing is absent in the Chinese economy as far as I'm aware. Yay capitalism?
Endless wars pre-date capitalism. Western defense companies are hardly capitalistic. They are as "planned economy" as it gets. China is wildly capitalistic in many aspects.
Maybe Chinese companies don't lobby for war because they are so bad at war that they can't see a route to profitability?
pretty cool to assume that china must be “bad at war” vs. thinking that you can be a lot more profitable in peace :)
It's a valid question. Presumably a given company will do what is most profitable for it whether that's lobbying for peace or war. It's worthwhile to try to understand what the differences in either circumstances or policy might be that led to an alternate outcome.
Bad reading comprehension.
> Private equity is such a vicious foe to mankind.
The boogeyman we have made out of private equity is pretty silly. It's not like being purchased by a publicly traded corporation is that much different, or even just a private buyer.
You missed literally the whole point.
Ostensibly, those directing public companies are beholden to shareholders to create a valuable company.
Those directing private companies can do whatever they want, including extracting all the wealth for personal gain and leaving a husk.
On the other hand isn’t the driver for “enshitification” the ever present chasing of profits for the next quarter
Quite so. Like most things, balance is required. Short term vs long term profitability is underappreciated in today's CEO class.
You have to beat inflation. It's not long or short term profitability, it's taking an asset and making it return more than inflation. Treasury bonds or stocks or mobile home parks or monkey nfts, it's all the same thing.
Again, that's with the mindset that the reason to own shares is because they're an appreciating asset.
If you study the history of what investing in a company via shares has historically meant, you'll find that it's only really in the last half century that the "appreciation game" came to the forefront. Dividends yields (or equivalent) were the evaluation criteria for these investments prior to our current era.
You speak about inflation and stock as if the cause/effect relationship is crystal clear and unidirectional, I wouldn't be so confident about that.
Another case of "Capitalism bettering the lives of everyone"...