The economics of mobile homes

From Alex Mayyasi:

…the problem is almost wholly that land is too expensive. Reduce the size of a new, modern house by 50%, Rybczynski notes, and houses in metropolitan areas will still cost over $200,000. 

That’s the secret to the extreme affordability of a mobile home—take land out of the equation.

…“a mobile home park is by definition a parking lot. Legally, our parks are no different from a parking lot by an airport.”

This is why used mobile homes only cost $10,000-$20,000. They make it possible for someone to buy a home but not the earth it’s parked on. As a Times profile of Rolfe reported, his average tenant pays $250 to $300 in monthly rent. If the tenant doesn’t own her home, she might pay another $200 or $300, with the option to apply half of that toward purchasing a mobile home.

“We’re the cheapest form of detached housing there is,” says Rolfe. “You can’t do cheaper.” 

In fact it’s an entirely acceptable way to live.

For the pointer I thank the estimable Chug.

Comments

You can do cheaper: live in a barrel like the ancient Greek philosopher Diogenes.

Bonus trivia: people don't live in their cars in Greece. I don't know why, but it's not customary and maybe the police enforce the law?

More seriously, it's hard in the DC area to get permits to set up a trailer park. I tried for some undeveloped land outside the DC area near I-95 and was met with stern disapproval by the bureaucrats.

When I used rented storage in Frisco, California in-between jobs, there was a guy living in one of the storage rooms, with the low-level front office employees aware of it apparently. He didn't bother anybody, though, since he was next door to my storage space, he used a mirror and coat hanger to steal some of my expensive ties (and resell them I think). It's OK, I'm in the 1% and it's a form of welfare payment to keep the underclass at bay.

If you ARE in the 1%, what are you doing wearing ties? ;)

https://www.youtube.com/watch?v=Yqyuo5SG9nc

There is no Frisco, CA. Cool story though.

Where did he clean himself? Storage units don't have running water or sewerage.

The author seemed more interested in trailer parks as an investment than in the value of living in one.

But if trailer parks are a good investment because "of the lack of supply and the expense of moving a mobile home to raise rents every year" then a development of owner-occupied prefabs on rented land must be an even better investment?

In fact it’s an entirely acceptable way to live.

That is an interesting use of the word "acceptable". Acceptable to whom? Why is there a conflation of "cheap" with "acceptable"? Yes, a lot of disapproval about mobile homes is snobbery. But snobbery is not always wrong. Is it in this case? Is it right to look down on people who cannot afford a real home? Is the low status of mobile homes simply down to the other people who live there?

Of course as this is the season of racial healing, I would like to know about the racial distribution of mobile home owners. I tend to think of them as poor White trash. I assume there are few Asian mobile home owners. But are there large numbers of Black residents? Do they take Section 8 vouchers?

Prof. Cowen has apparently, in all seriousness, advocated building favelas in the warmer parts of the U.S. in Average Is Over - 'What if someone proposed that in a few parts of the United States, in the warmer states, some city neighborhoods would be set aside for cheap living? We would build some ‘tiny homes’ there; tiny homes might be about 400 square feet and cost in the range of $20,000 to $40,000. We would build some very modest dwellings there, as we used to build in the 1920s. We also would build some makeshift structures there, similar to the better dwellings you might find in a Rio de Janeiro favela.'

"White flight" by mobile home would be an interesting thing to witness.

Well, I think in the UK (and definitely in Ireland), they would be called 'caravans' - and considering their size, there is nothing interesting being stuck behind one as it is being towed/transported.

And what is not exactly mentioned in the comments (I don't read the paywalled NYT) is that not all mobile homes are in trailer parks - they dot the landscape in rural Virginia/West Virginia - the white flight being more of a white staying put in such cases.

Though honestly, I have no idea if such generally dilapidated mobile homes were originally located somewhere else before ending up in what often seems to be something like an abandoned farm field.

No, Caravans are camp trailers. Mobile homes are much larger and seldom moved once they are set down in a park (usually they are resold in place ), but they are taxed differently because there are still wheels hidden away under the house. This is a mobile home:

http://www.escapehomes.us/gallery

We call them static caravans.

In the UK they tend to be found either on residential parks (year round residence permitted they are often retirement parks). Or on holiday parks which are permitted 9-11 months of the year, for the other 1-3 months they are closed and no one can stay there. Residential pitches tend to be considerably more expensive.

Thanks - the 'static' makes sense, since I do know that caravan is also the term used for the ones that can be driven from campground/parking spot to campground/parking spot.

Rare to have a chance to link to Slacktivist in relation to Prof. Cowen, as the two possess very different world views, particularly when it comes to the advantages of mobile home owners to own the land the mobile home sits on.

'I know I’ve written this same post every few months about manufactured homes (or “mobile homes” or “trailer parks”). But it keeps happening. It’s always happening.

All that changes are the names of the towns, of the parks, of the councils and legislatures, and of the desperate homeowners explaining to reporters that they just don’t know what they’re going to do.

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St. Johns’ initial point there — “mobile homes are not really mobile” — is why rent control is absolutely necessary for these communities. People like Walshaw have no recourse if park owners decide to hike the rent.

It’s not like an apartment building. If you’re renting an apartment and the landlord decides to hike the rent 10 percent, or 50 percent, or 40,000 percent, then you can simply move out. Tenants’ ability — at least in theory — to shop around for a lower rent exerts a market control on prices, keeping landlords from arbitrarily hiking rents or charging exploitative rates.

No such market control exists in mobile home parks. There, tenants invest in a lot and anchor themselves to it, unable to move away. They have no ability to shop around and no ability to constrain the landlord from whatever rent hikes he can bleed out of them.

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Both of those forms of legal protection are necessary — indispensably necessary — wherever there is this situation of immobile homes resting on ground owned by a rent-collecting landlord. But they’re not the best solution.

The best solution, again, is for the people who own the homes to also own the land beneath them — to convert every mobile-home park into a resident-owned community.

If you don’t like rent control, and if you don’t like regulation, then this ought to be your preferred solution too.

It works.

As Craig Welch reported last month in the Concord Monitor, it has worked dozens of times over in New Hampshire, as “In 100 parks, renters have become owners.”' http://www.patheos.com/blogs/slacktivist/2012/05/22/another-post-about-manufactured-housing/

Slactivist has been writing about this subject from a number of perspectives. This relates to the manufacturer that apparently owns half the American market in mobile home production - 'Warren Buffett hasn’t invested in manufactured housing. He’s invested in ripping off working-class and elderly people who don’t have the power to fight back. Buffett’s “Clayton Homes” is not a business that sells housing. It’s a pretext for high-interest loans to milk families dry before expelling their penniless husks and moving on to the next victim.

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Again, Clayton is not a company that provides affordable homes for low-income families and retired people. Clayton is a company that uses the need for affordable housing as a pretext for draining as much money as possible from low-income families and retired people before ultimately leaving them homeless. Warren Buffett did not invest in affordable housing. Warren Buffett invested in usury — in unaffordable, predatory lending.

How is the formerly respected third-richest man in the world responding to evidence that he’s an enormous sleazeball who’s been lying to his investors for decades with his bogus “value” talk?

By doubling-down on the sleaze. Just days after this report exposed the old vampire’s morally repugnant practices, his lobbyists got his congressional henchmen to push a bill through the House of Representatives deregulating the manufactured-home loans Buffett uses to fleece the poor.' http://www.patheos.com/blogs/slacktivist/2015/04/15/warren-buffett-slumlord-and-scurvy-little-spider/

Forbid lending, I say.

Jesus would agree.

But one of Prof. Cowen's GMU colleagues would be aghast - he can be reliably counted on to defend the credit industry, including 300% APR loans.

From wikipedia - 'Zywicki has testified on numerous occasions in his personal capacity before committees and subcommittees of the United States Senate and United States House of Representatives on issues of bankruptcy and consumer credit. In 2005, he wrote at The Volokh Conspiracy that "the growth in subprime lending is not creating overwhelming debt burdens for low-income households."

During the run-up to the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), a law that was heavily lobbied for by the financial services industry and that made it more difficult for consumers to discharge their credit card debts in bankruptcy, Professor Zywicki testified before Congress that the law was likely to reduce the costs of debt to all borrowers by reducing losses to credit card lenders:

"[W]hen creditors are unable to collect debts because of bankruptcy, some of those losses are inevitably passed on to responsible Americans who live up to their financial obligations. . . . We all pay for bankruptcy abuse in higher down payments, higher interest rates, and higher costs for goods and services."

"This bankruptcy 'tax' takes many forms. It is obviously reflected in higher interest rates.... It is [also] reflected in shorter grace periods for paying bills and higher penalty fees and late-charges for those who miss payments ... [R]educing the number of strategic bankruptcies will reduce the bankruptcy tax paid by every American family .... These reforms will make the bankruptcy system more fair, equitable, and efficient, not only for bankruptcy debtors and creditors, but for all Americans."

In his scholarly and popular writing, Professor Zywicki continues to write about issues that are of concern to the credit card industry, continues to suggest that the industry is price-competitive, and continues to argue that the interests of the credit card industry are closely aligned with those of its customers. He has recently argued against efforts to regulate the fees that credit card payment networks charge to merchants, claiming that such regulation will harm consumers because credit card companies will try to recover the lost revenue from them.' https://en.wikipedia.org/wiki/Todd_Zywicki

That law is to protect bankers and consumers from the Donald Trump's and Mitt Romney's who use bankruptcy to get rich?

Or is this protection to rent seekers who charge 35% and more but want to have a good market for the bad debt they sell to boiler rooms to harass the working poor to get money out of them after they finally get work again after not being able to work because of local recessions or a family illness or broken down old car?

"...rent control is absolutely necessary for these communities. People like Walshaw have no recourse if park owners decide to hike the rent.

"It’s not like an apartment building. If you’re renting an apartment and the landlord decides to hike the rent 10 percent, or 50 percent, or 40,000 percent, then you can simply move out. Tenants’ ability — at least in theory — to shop around for a lower rent exerts a market control on prices, keeping landlords from arbitrarily hiking rents or charging exploitative rates."

I can always tell someone who's never actually lived in a rent-controlled area. I grew up in New York City, and I offer you two (as Prof. Cowen might put it) "very good sentences" on the topic, both from Swedish economists who specialize in urban economics (and, sadly, whose names I do not recall):

"New York City does not suffer from a lack of low-income housing. New York has plenty of low-income housing: it's just that high-income people live in it."

"Short of bombing, rent control is the most effective means to destroy a city's housing stock, as the situation in New York City amply demonstrates."

There is quite a large trailer park in South San Francisco right next to the BART and the Kaiser hospital.

I think you could build a pretty nice building there, give everyone in the trailers a condo, sell the rest and make a tidy profit.

There's a trailer park in Malibu with million dollar properties for those looking for the "Rockford Files" lifestyle:

http://www.nytimes.com/2015/11/11/t-magazine/paradise-cove-malibu-million-dollar-trailer-parks.html

How often in Paradise Cove you come home to an intruder in your trailer who punches you in the face I can't say.

That's why Jim Rockford kept his pistol in the cookie jar.

==

"That’s the secret to the extreme affordability of a mobile home—take land out of the equation."

Then why are mobile homes generally a "depreciating" asset class, even with land ownership ... versus normal homes that generally appreciate in market value?

Must be more to the value equation differential than just land ownership.

Structural maintenance/repairs/renovations on mobile homes are more like automobile life-cycles ... they reach a point where it is more cost effective to junk them (zero value) rather than repair them.
Thus, value depreciates inherently over time.,, and initial "affordability" correctly reflects their lower market value.

Not to mention that land is not taken out of the equation - one owns a depreciating asset (which requires expenditure to resite) while also paying rent for a spot in the mobile home park.

Market value of houses increases because of the value of land. The property itself, the house, still depreciates, no matter what the tax man or accountants tell you about how to deal with it all on paper.

With a mobile home, there is no land value to appreciate, only the house itself which depreciates.

That sounds about right. A house depreciates rather quickly if you don't maintain it properly. It's all about the cost of land, as Mr Twain observed.

I don't understand the claim about "taking land out of the equation." The tenant is paying for the land, every month, in the form of rent. If the tenant is paying less for land than he would in a house or apartment, then that means either he has less land or the land is less valuable for some reason.

The land is not zoned for housing. It is technically a car park. Houses are expensive because the permit allowing you to build on that land is expensive. Everyone works together to make sure that the number of new houses is limited by limited the permits to build.

So they are paying for the land. They do not need permission from the local government to build. So they do not need to pay for that. That is why it is so cheap. All houses would be as cheap if local authorities did not impose massive costs on new homes.

But the article says that it's almost impossible to get permission to build a new mobile home park. You certainly can't build one as of right.

I agree. I experienced eminent domain confiscation and anyone who thinks their property rights are not subordinate to government interests (and especially egregious, private interests with political influence - thanks Supreme Court!) isn't being clear-headed. Try owning land and not paying your property taxes (some states have caps on rate increases but that protection isn't universal). The one who really "owns" the land is the guy with the largest army, all other rights are contingent on the ability & willingness to use force. Property taxes (not to mention non-monetary regulations on how you may and may not use your land) and Rent are indistinguishable, a cost for the right to use the property.
I guess TC finds living with relatives, in a group home/half-way house, in a boarding house, in a pop-up camper, on the beach, or in your car, or on the street are not entirely acceptable ways to live. He apparently is also unfamiliar with urban nomads, for instance Paul Erdos.

It is my understanding that underwriting or insuring mobile homes is more difficult than a typical house because a deadbeat owner can just up and move.

Does anyone have better info?

Interest rates for mobile home loans are higher than for standard homes. To begin, unlike the collateral for a mortgage, the mobile home depreciates. Next, due to low upfront cost and the negative status of mobile homes, there is certainly a selection effect resulting in a less credit-worthy pool of applicants. Last, the federal government and many state government offer incentives and subsidies for mortgages.

The underwriting process isn't necessarily more difficult; there is just a very clear line separating vehicles (mobile homes) from houses (manufactured or stick-built), especially after the financial crisis when many portfolio lenders who lent on mobile homes went to seize the securing asset and indeed found it had been moved. FNMA/FHMLC/FHA/VA do not purchase, endorse, or guarantee mortgages secured by mobile homes; the structure has to be permanently affixed to and secured by the real property beneath it and stripped of things like wheels and axels. Here are Fannie's guidelines on what manufactured/prefab structures are eligible for purchase: https://www.fanniemae.com/content/guide/selling/b2/3/02.html. Freddie's, FHA's, and VA's are pretty similar.

Portfolio lenders dealing with true mobile homes (structures that can be readily moved and aren't secured by or tied to real property) will treat those structures as vehicles. They'll be registered with the DMV as vehicles and the loans typically feature shorter loan terms and higher interest rates, like other automobiles, because they are riskier (can be moved) and don't benefit from appreciation of the land.

That would be rather cheap, perhaps the units are old and tired. Often space rental runs 2-3x that in major metro areas.

Or that is mostly long time residents whereas as new ones would be. Rents often discriminate against new entrants.

This seems to be the logical consequence of the American system: explore your fellow man until he can't afford a home, humble as it may be, and he must retreat centuries centuries and live like a nomad or like the wicked Wandering Jew, "eternal wayfarer of an infinite road, scared, running from tent to tent, running in vain from the avenging voice (God)", as a Brazilian poem says. What are their sin?

The only real problem with living in a mobile home park is that you have to live next to the sort of people who live in a mobile home park. It's like living in the crumbling urban communities, the problem isn't the house, or the streets, those can be fixed. You can't fix being the constant target of criminals, or being woken up dozens of times a night because your neighbors are nocturnal and noisy.

"The only real problem with living in a mobile home park is that you have to live next to the sort of people who live in a mobile home park." That's a variant of Sailer's Second Law.

I find Sailer's opinions to be perfectly reasonable, when they coincide with my own >.>

There's wide variation in mobile home park crime / criminality. I'm familiar with Western NY and the Tampa FL area.

There some very selective and upscale retiree mobile parks in the Gunshine state that are Swiss Village Safe. I think FL law gives park managers are lot more freedom to screen out scum than NY.

But NY has exceptions. The upscale Buffalo exurb of Clarence has a couple nice, safe mobile parks within a 1/2 mile of $million+ homes and state police barracks.

That said, there's definitely a bias against new mobile parks, especially in trendoid Politically Blue areas. And, at least in NY, there's a trend toward scum moving INTO mobile homes and away from apartments.

Better apartments now have easily installed and wikkedly effective and cheap surveillance and access control. Landlords who've installed / upgraded such systems have explicitly stated that many rat tenants flee afterward.

I don't know if that's a viable hypothesis; it should be only a matter of time before better private mobile parks are also wired to the nine's.

Maybe the trailer park that the Zappos CEO lives in would be more to your liking.

http://www.businessinsider.com/zappos-multimillionaire-ceo-explains-why-he-lives-in-a-trailer-park-2016-1

You forgot tornadoes and hurricanes.

The problem with Scotland is it's full of Scots.

Around here mobile homes are often placed on the owner's property, usually in rural areas or as second homes surrounding reservoirs. If there's a long term problem it's that the "depreciation" is real, the buildings are much harder to maintain and generally have the appearance if not the fact of looking rundown over time.

And, of course, in quantity they seem to attract tornadoes. Tiny homes are more fashionable than traditional mobile homes and currently in vogue, but while they can be appealing to those of us who admire efficiency, the thought of winding up in Oz stops many of us from being more than admirers.

There are two defences against tornadoes. (i) Storm cellars. (ii) Your country could adopt driving on the left.

Britain is one of the most tornado prone places on earth with around 34 per year. 95% are F0 or F1 with wind speeds of up to 112 mph. The scale goes up to F5.

http://www.bbc.co.uk/news/education-33136737

He is making fun of a statistical anecdote.

When the US built the interstate highways, there were more reports of tornadoes. Some hypothesized that the movement of cars in opposite directions was creating vortices.

In fact, the interstates merely brought more people into the countryside where they observed and REPORTED more tornadoes.

"the cheapest form of detached housing there is"

The key word there is "detached."

Apartments are very frequently cheaper. Living in a trailer park isn't a "good deal" and shouldn't be encouraged by policy, because it doesn't help the lower-income in any way: neither by saving money nor by building wealth.

Are apartments really cheaper? Mobile homes are mass-produced in factories, whereas apartment buildings are custom-built on-site. Apartment blocks usually have elevators too, which aren't free.

> nor by building wealth

That's not a matter of detached vs apartment; that's merely a question of land ownership. But every other commenter has already explained that.

Some people like living in detached homes. Trailer parks provide them very cheaply. If you also want to provide wealth-building / saving, mandate the option to buy the land under their trailers at fair market value.

Take the land out of the equation? You mean the land owner doesn't charge for the use of its property? A trailer in Manhattan would be charged a tremendous rent.
The point is that US mobile homes (Canada is different, see below) are destined as the favelas other commenters have mentionnned for the vast southern, appalachian and south-west third-world of the american dual economy.
In Canada, mobile homes are just that:homes that can be moved. The cold forces the builder to make them solid and insulated, so they can cost $100K

The bigger reason in many jurisdictions (ie Texas) is only permanent structures are subject to property tax. This tax can be quite large relative to rent, maintenance, land, etc. Tax code is essentially a subsidy on movable structures. In more urban areas this is largely responsible for the tiny home craze, in rural areas mobile homes.

Back in the early 1970s when I was going to school in New Hampshire, there were a noticeable number of trailer parks--and of course trailers parked there--which was--at least according to the people I asked--the dark side of having neither a sales tax nor an income tax: the state government at that time derived the bulk of its revenues from property taxes, which--unsurprisingly--were comparatively high...even compared to neighboring "Taxachusetts" as the locals called it.

However, as trailers were not considered real property, they were not subject to property taxes, except possibly what we call here in Virginia "personal property taxes."

And I'm guessing the trailer parks themselves were taxed at pretty low rates...

The decreasing cost of both solar panels and battery storage would presumably be making mobile homes effectively more mobile by making people less dependent upon the electricity grid.

Expect more homes popping up where there is a combination of wireless internet access and a water supply and beware of down stream bacterial contamination.

"In fact it’s an entirely acceptable way to live." Or let them eat cake.

I agree with the statement that it is the cheapest form of detached housing there is, apart from living in a car. This means that there is a relatively dependent market for this type of housing. Mobile homes are more an inferior good than a normal however. For low income individuals, if they are unable to afford a mobile home, they are usually unable to afford housing at all. This would suggest that below a certain income bracket, the only housing option would be a mobile home. However, this does not consider individuals who make enough money to afford a more permanent housing arrangement, but choose to live in a mobile home by choice. Whether to save more money, or for another reason is irrelevant. I would venture to say that aside from an undetermined number of individuals living in mobile homes by choice, the market is largely made up of individuals living in mobile homes by circumstance. Coupling that with my next point, one will begin to see my opinion.
Mobile homes, for most of their market life, have carried a stigma of being dangerous, loud, and dirty. This is usually fed by the stereotype demographic of majority white, low income individuals, with high crime rates. Due to this stigma, this would generally keep the amount of “by choice” mobile home buyers to a minimum. Mobile homes, as an inferior good, will see sales spike in bad economies, and slow down in good ones, while retaining a reasonably steady base consumer market.
In response to the statement that mobile homes are an entirely acceptable way to live, I would like to point out a comment made by (prior_test2) where it is discussed that mobile homes aren’t really mobile. This is why rent control procedures are absolutely necessary in these environments. Their comment illustrates by saying that a tenant could simply move out if the landlord decides to hike rent. Many cases in mobile homes, the tenant is not able to simply move the mobile home and shop around for better rates, and are somewhat bound to the mercy of their land owners. For this, (prior_test2) suggests that the best deal is to actually own the mobile home, as well as the ground beneath it, transforming the mobile home park into a resident-owned community. Mobile home parks as a system, may be “acceptable” forms of housing, but certainly not “entirely” when weighing out the costs and benefits.

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