Private Equity and Manufactured Housing: a Crisis Fueled by Greed
by Isabel Cruz, Clifford-Cleckley Fellow ‘23
The lack of affordable housing is an ongoing crisis faced by millions of Americans.
From skyrocketing rent prices to a pure lack of access to housing, many struggle to find answers to this problem. West Virginians are no stranger to this issue; the state’s poverty rate is at 16.8%, which is above most recent national average (11.6%).
As a result, many West Virginians turn to manufactured housing as a low-cost option for living. According to the most recent Census data, 13.3% of West Virginians live in manufactured housing. Nationally, as many as 1 in 15 Americans are living in these communities, often surviving on minimum-wage jobs and making around $32,000 a year — sometimes less.
With an understanding that residents in manufactured housing communities are in many ways a “captive” customer base, predatory corporations hiding behind layers of shell companies purchase these communities, then raise the lot rent exponentially and force mass evictions. To date, Mountain State Justice has filed three lawsuits on behalf of residents in several different communities in Mercer County, West Virginia to combat these exploitative practices.
These Mercer County cases are just one example of many in America that shows the vulnerability of our low-wealth community members. In our plaintiffs’ case, an out-of-state private equity firm has purchased five different communities without being licensed to operate them, and has attempted to more than double lot rent for many residents since.
Those who make up these communities include single-parent families, individuals with disabilities, veterans, elderly folks with fixed incomes, and low-income individuals in general. Notably, however, many of these tenants own their homes that sit on these rented lots.
Although the homes are technically “mobile” homes, relocation is a difficult and expensive process — and that’s if the home can be moved at all. Moving manufactured homes involves a lot more than one might guess. Costs can exceed $13,000 — an often insurmountable challenge for individuals who have little budgeting power.
On top of this, moving the homes can result in severe damage to the structure of the house, such as misaligned doors and windows, insulation issues, and damage to the general foundation of the manufactured home. Moving the homes can also affect essential systems, such as plumbing, the HVAC, vents and drains, and wiring in the home. These factors shorten the lifespan of the home and decrease the value. With risks like these and the costs associated with repair after moving, this is typically not a feasible option.
Another issue in this scenario is finding a place to which to relocate. Many states have regulatory practices that control where manufactured homes can be placed. Often, law requires manufactured housing to be built away from “real” housing, resulting in communities being isolated from the general public. All of these factors, as well as a loss of neighborhood cohesion and a sense of belonging, all weigh heavily on individuals when considering a move.
It’s not just the increase in rent that negatively affects people, but the state of conditions to which they are subject in their communities. Sewage backups are a norm, with one Mercer County resident stating that they could “take a paddle boat” in their own backyard at times. How could one justify drastic increases in rent when owners turn a blind eye to issues like these? Not only is this an inconvenience for families with children and pets who use outdoor spaces recreationally, but it is a biohazard and a bother for those breathing the air into their lungs. Residents are at risk of developing gastrointestinal (GI) distress (nausea, diarrhea, vomiting), skin rashes, and skin infections from this issue, which is another bill to worry about if they are affected and need to seek proper medical help.
This issue isn’t just isolated to West Virginia, but is instead a nationwide crisis. In Indiana, a tenant has spoken out about investors establishing month-by-month rent and refusing to consider long-term leases, hinting at continuous rent increases and eviction notices. One Iowa resident has spoken up about other regulations that private equity has enforced: no swing sets, basketball areas, or baby wading pools. This takes away community bonding potential and negatively affects the familial charm that many manufactured communities have.
A Montana resident pointed out other regulations that result in fines, such as lawn care requirements, that landlords threaten to tack onto rent if residents don’t comply. However, this begs the question of what “proper” lawn care even is and leaves the resident at fault if these owners deem their care subpar. New fences also cannot be built on the residential lawns, which takes away an individual’s ability to call something their own in a world where they already do not have ownership of much. On top of this, cars cannot be worked on in community blocks, which is another way of community bonding and building relationships from a “neighbors-helping-neighbors” aspect.
Studies have shown that strong neighborhood cohesion has a positive relationship with good health, specifically lowering the likelihood of negative feelings like loneliness and isolation, and fostering connections between people. Manufactured housing communities are already built away from other housing subdivisions, so taking away the potential for connection within the community is unhealthy for residents.
Families with children risk cutting food budgets even though proper nourishment is essential in childhood and teen years for healthy brain and body development. And what is to happen with those on a fixed income who are dependent on a strict budget? Those with disabilities who earn Social Security and risk losing it if they work more hours than allowed when receiving such benefits?
This exploitative practice has been happening for years but has been exacerbated by the Coronavirus pandemic. Private investors saw the pandemic as a business opportunity when the economy was down. The government has also been playing a part in all of this, essentially enabling these private investors through the provision of certain loans.
Fannie Mae and Freddie Mac are federally-backed organizations which seek to help investors with mortgage loans. What’s happening is that the mom-and-pop owners of manufactured housing communities end up selling them to private investors who receive loans from Fannie and Freddie at low interest rates. They then upcharge the rent and add in fees to increase the value of the park’s land, making up another down payment for another loan to buy another park, and this process just continues on and on. This places the advantage in the hands of investors who seek the most profit they can receive from these communities, ostensibly with government support.
What’s surprising is that Fannie Mae and Freddie Mac highlight affordable housing as something they strive for, but they are enabling the exact opposite of that, in turn taking away some of the most affordable, unsubsidized housing available to Americans.
Although the pandemic resulted in emergency bans on evictions, such sanctions were only temporary, and investors patiently awaited deadlines for such the policies before purchasing. The worst thing about this issue is that there are few policies or legislative sanctions that protect tenant rights, with most favoring and protecting landlords. This leaves communities with a power imbalance on a legal basis. When issuing eviction notices, companies are usually within their rights. When accused of forcing people out of their homes, investors reason that in buying manufactured housing communities, they are attempting to keep housing affordable despite the 20%, 40%, or even 70% rent increases.
A good example of this is Havenpark, a company that’s bought several communities through these government-backed loans. They reason that their presence is positive because they stopped a community from being replaced with a shopping mall. But they are still forcing those same tenants out of their homes that would’ve been affected if the community had closed. One nonprofit aimed at advocating for these communities, Manufactured Housing Action, opines that if companies genuinely cared about keeping these communities affordable, they would be actively working with tenants to discuss new rent and regulations.
Mobile Home University is a defining highlight of this exploitative industry. This program was created by Frank Rolfe, one of the top five owners in this practice, who owns 250 manufactured housing communities. In his “university,” investors can learn how to exploit these residents and the best ways to raise rent and cut amenities with no regard for hurting people.
Priced at $300 to start, investors can learn which states have the fewest tenant protections — of which West Virginia is one, the psychology behind tenants accepting rent increases over moving, why they should remove playgrounds and pools (to avoid insurance costs), and more. The entire program is centered around the fact that manufactured housing community owners are only obligated to pay for the upkeep of roads due to the homes typically being owned by the tenants. The courses essentially teach capitalist ideals that maximize profits at the expense of human wellbeing, all within legal boundaries due to the laws that favor landlords over tenants.
Despite these tactics, residents still find it in themselves to band together, connecting with one another and advocating for their communities. As landlords hold an increasingly large share of the market, their impact also creates a large body of people who are equally aggrieved by the same issue, offering connectedness and comfort between neighbors. This enables communities to bring the issue to the attention of those who are actually able to advocate for them, such as Mountain State Justice, housing advocates, or to simply create coalitions amongst themselves from the ground-up.
There are an increasing number of communities that seek to purchase their communities, as co-ops, to control their own rent, fees, and regulations. In fact, Senate Bill 988 that recently passed in Connecticut would allow manufactured home residents the chance to purchase the community before other investors do. Other states such as Vermont, Massachusetts, Rhode Island, and New Hampshire also have similar bills, known as the right of first refusal, offering protection for tenants. Bills like these show promise as one way to remedy this problem, although it is only a starting point. It can be difficult to achieve ownership as a co-op because owners must match the asking price from private investors’ offers, which can be a hefty price in the millions.
As Fannie Mae and Freddie Mac loans are plausible for private investors, the same isn’t true for residential co-ops due to the large down payment required to take out a loan. Non-profit organizations such as ROC USA exist for the sole reason of combating this issue and helping residents find solutions to buy their land. So, although the fight is a hard one, connecting residents to organizations willing to help navigate the system is essential.
While the above is an impressive fight from residents, some communities may not be able to consider the possibility of purchasing their communities, or it is simply too late. As we can see from the discussion above, a variety of obstacles exist in the path of such a vulnerable population. Lack of access to capital is a huge one. With an increasing number of cases like Mercer County’s popping up nationwide, it is time to adopt federal legislation to protect our people. Until then, state regulations are necessary to protect the livelihood of these residents.
Requiring investors to renew leases instead of adopting month-by-month leases in these communities is something that states like Oregon and Delaware have adopted to protect tenants. More states are in need of legislation like the first right of refusal that Vermont and others have established. Accessible government-backed funds like Frannie Mae and Freddie Mac that residents can take out to save their communities are also necessary to even the playing field to investors. Without opportunities like these, those poor populations will certainly lose out to big investors who have more purchasing power.
One of the most impactful regulations that can be put into place is rent control for manufactured housing communities, which takes this predatory practice almost completely off the table. Some communities in New Jersey, Massachusetts, and California have established this provision, and Colorado has even proposed it as a state-wide protection. As the price to live in America increases and the value of the American dollar decreases, we need to protect our most vulnerable populations from being exploited into houselessness and all of the economic, health, and social issues that come with it.
