Are mobile homes a good affordable housing option?

Mobile homes, or manufactured housing, have long provided shelter to low-income families in the U.S. The quality of these housing units has substantially improved since 1976 when HUD implemented industry manufacturing standards. In the midst of a rental housing crisis, mobile homes may look like a good alternative for low-income renters. But mobile homes can come with substantial hidden costs, depending on who owns the land where they are placed and how their purchase is financed.

Mobile homes are a type of manufactured housing, which means they are built in a factory and transported to a site, rather than being “stick-built” on the site itself. What makes a unit a mobile home is that it is built on a chassis. However, once installed at a site, most of these units are not really mobile. It can cost thousands of dollars to move them, and the owner risks damage to the unit during the move.

Is living in a mobile home less expensive than conventional rentals or homeownership? At first glance, the answer is yes. A recent study by Durst & Sullivan looked at mobile home affordability, where these units are located and what kinds of households live in them.

The study notes that there are approximately 7 million occupied mobile homes in the United States, about 6% of the occupied housing stock. Mobile homes can be found throughout urban and rural America, but they still remain more common in rural areas. More than half of all manufactured housing (54%) is found in nonmetropolitan areas. Half of all manufactured housing is located in the southeastern states.

The study divides mobile home occupants into those who rent the unit and the land on which it is sited, those who own the unit but rent the land, and those who own both the unit and the land. In all cases, households living in mobile homes on average had lower monthly housing costs than those living in apartments or owning their homes. However, how much households saved on housing depended on what type of arrangement they were living in.

Using 2013 American Housing Survey data, the study found that conventional homeowners had average monthly housing costs of $1,300 and conventional renters had average monthly costs of $1,000. In contrast, mobile home renters had average monthly costs of $700, mobile home owners who rent their site paid $670 and households that owned their mobile home and the land paid $530.

We can also look at housing cost burden to see if mobile homes are a more affordable option for low-income households. The federal government defines cost burden as paying more than 30% of monthly income for rent (or mortgage) and utilities. Families that pay more than 30% of their income for housing have little left over for other necessities like food, clothes or medical care.

Households that rent their mobile home and its site paid the highest average portion of their income for housing at 35%. Conventional renters had the next highest rate at 33%. Mobile home owners that rent their lots paid 27% and conventional homeowners paid 23%. Those who owned their units and the land paid the smallest portion of their income at 20%. The key observation here is that those who do not have control over their land have higher housing costs and likely pay a larger portion of their income for their housing.

Mobile homes can seem like an attractive choice for low-income renters looking to become homeowners. It costs a lot less to purchase a mobile home than to purchase a site-built house. The average sales price in 2013 for a new manufactured home was $64,000 (excluding land costs), compared with $269,000 for a new single-family home. However, although the initial purchase price is very attractive, how these purchases are financed drives up the cost.

In most cases, mobile home purchases are financed through personal property loans, also called “chattel loans.” These are the same kinds of loans used to purchase cars. These loans typically have shorter terms and higher interest rates than standard mortgage loans. Mobile homes are also often purchased at retail sales centers. Sales agents, or dealers, also often receive commissions, which can drive the sales price up. Like cars, mobile homes financed with personal property loans depreciate in value over time. This is especially true if the household does not own the land.

In a Last Week Tonight segment, John Oliver focuses on how mobile home park management can drive up housing costs. Mobile home owners and renters who rent their sites are often at the mercy of park owners. In some cases, they risk having to move because the land is being sold for redevelopment. Owners can raise lot rents. A growing number of mobile home parks are being purchased by investment groups.

Oliver highlights one investment recruiter, John Rolfe, whose company owns over 30,000 mobile home sites. He infamously characterized owning a mobile home park as like, “running a waffle house where everyone is chained to the booths.” In one of his seminars, he says new park owners can raise rents as they like because the customers are stuck there since they cannot afford to move their homes. If they abandon their homes, he says the park owners can seize them as abandoned property and rent them out to new tenants.

Mobile homes have a high degree of segregation from other types of housing, with 69% located within a half block of another mobile home. The Durst & Sullivan study found 39% of mobile homes are located in mobile home where the land is rented. Another 30% of mobile homes are clustered in informal subdivisions where occupants own both the unit and the land. While mobile home parks are fairly evenly distributed around regions of the country, 75% of informal subdivisions are found in the South. Informal subdivisions are also largely located in rural areas, compared with a more even distribution of mobile home parks in urban and rural communities.

What can be done to make mobile homes a better affordable housing option? Ownership of the land and management of the property are the main avenues to improve cost and quality of life. One approach has been to help mobile home park residents buy their parks. ROC-USA is a nonprofit organization that has taken the lead in helping park residents form Resident-Owned Communities. They help the residents organize themselves and purchase the park, and provide training on governing the community and managing the property. The ROC-USA Network includes nine affiliate nonprofit organizations working in 21 states. It has helped thousands of low-income mobile home park residents take charge of their communities.

The success of this approach is seen not only in park improvements and rent stability. It also impacts the value of each mobile home owner’s unit. The Carsey Institute at the University of New Hampshire did a study of resident-owned communities. It found that because park residents controlled the land and benefited from fair mortgage financing, their homes appreciated in value more like site-built homes. They also saw faster home sales and better prices. In addition, residents experienced greater stability in lot rents, control over their governance and worried less about being displaced because of a park closure. Resident-Owned Communities therefore also keep neighborhoods affordable and more desirable over the long haul.