By Sue Kirchhoff, USA TODAY Mon
Aug 8, 2005 6:46 AM ET
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After 15 long years, Richard Doherty makes the final mortgage
payment on his cheerfully cluttered manufactured home - don't
call it a trailer - this month. But ownership may not bring
longed-for security.
Doherty and 73 other families who rent lots in the Barrington
Estates manufactured home community, with its tidy gardens and
wooded avenues, received notice this spring that the owner plans
to sell. That has bred distress among tenants, who fear they
could be forced to move if a buyer redevelops the property.
"To know you have your own home, that's fine. But
knowing that you don't own the land that it's on top of, it
doesn't feel right," says Doherty, 53, as he prepares for
the 6 p.m.-6 a.m. shift at a nearby factory while his wife, who
works a different schedule, gets some sleep in a back bedroom.
Doherty's predicament illustrates the pitfalls and
possibilities of manufactured housing - an oft-maligned, but
important slice of the housing market that accounted for
two-thirds of all affordable housing built in the nation from
1997-1999 and 20% of all new housing in the late 1990s,
according to some studies. That figure has since dropped to less
than 10%, after bad loans to stretched buyers produced a crash
in the manufactured-home market.
Manufactured homes, which cost $58,000 on average, compared
with $267,400 for new site-built houses (the conventional home
price includes land), are a potential solution for millions of
low- and moderate-income families who otherwise can't afford to
buy in frenzied housing markets.
But the sector has been riddled with such problems as
high-cost lending that can leave borrowers owing more than their
home's value. Only about half those living in manufactured homes
own their land, though ownership is rising. Residents who rent
lots can be turned out if a park is sold - forcing some to lose
their homes, especially older units that aren't in condition to
be moved.
As lack of affordable housing becomes a problem for more
Americans, groups that once ignored manufactured housing are
giving it a fresh look, trying to soften the trailer-trash
stigma and make it a stable option for working families.
"Nine million families in the U.S. are living in this
housing stock. I've been working in the housing field for 20
years, and I'd never really even given it a half-a-second
thought," says George McCarthy of the Ford Foundation,
which plans to invest $10 million in the next several years on
efforts to turn manufactured housing into a secure, appreciating
asset.
McCarthy says the problem isn't quality of the housing -
better-looking, larger units are becoming the norm - but how the
market delivers and finances the product. "Those are
correctible things," he says.
The non-profit group HomeSight has developed two-story
manufactured housing in Seattle with pitched roofs and front
porches that blend with existing neighborhoods. More than 70 New
Hampshire manufactured-home parks have been bought by tenants
and turned into owner-run cooperatives, with rising values and
years-long waiting lists.
Interest from Warren Buffet
Super-investor Warren Buffet's Berkshire Hathaway has been
investing in manufactured housing, buying Tennessee-based
Clayton Homes. Berkshire Hathaway officials hope to bring
non-profit housing groups to a shareholders meeting to discuss
opportunities to work together on development.
"It has real potential for the industry. ... There is
wonderful financing available through those non-profits who can
help homeowners who would not have an opportunity to own,"
says Kevin Clayton, CEO of Clayton Homes.
Some states, such as Washington, are passing zoning laws to
ease the way for manufactured housing. Mortgage giant Fannie Mae
has tightened guidelines for the manufactured-housing loans it
buys.
Still, change is uneven. A number of states remain cool to
uniform zoning. The majority of manufactured housing is still
deemed personal property rather than real estate, forcing buyers
to take out higher-interest loans rather than home mortgages.
Many existing, older structures are past their prime, posing
problems, including abandoned homes.
"It has a lot of potential. It really meets the
affordable segment of the market, but it's got to be done
right," says Chuck Rumfola, vice president of manufactured
housing for Fannie Mae. "We're trying to build a solid
foundation, so you don't have the boom and bust."
The stakes are high, given that home equity makes up 80% of
wealth for very-low-income Americans. Dave Buchholz of the
Washington non-profit CFED, which helps lower-income people
build assets, is overseeing the Ford Foundation grant. He hoped
for a dozen proposals, but got more than 100.
Tenants no more
While Doherty has his headaches, he's still luckier than
many. New Hampshire law gives tenants in manufactured home parks
the right to make a purchase offer if an owner plans to sell the
land.
For the past several weeks, Doherty has been meeting with
other tenants to organize a cooperative to buy and manage
Barrington Estates, including figuring out the cost of repairs
or improvements, and a fair purchase offer. He'll know whether
he's a co-owner, or still an uncertain tenant, in a few weeks.
"All of us are pretty skittish, but we're pretty well
set that we need to do this," Doherty says.
Doherty's efforts reflect more than two decades of work by
the non-profit New Hampshire Community Loan Fund, which borrows
money from individuals, churches and financial institutions,
then relends it. The fund has been a leader on the issue since
1984, when tenants of the Meredith Trailer Park were faced with
the possible loss of their community. They worked with the fund
to form the state's first tenant cooperative.
To date, the fund has helped organize 71 cooperatives,
representing 15% of manufactured housing in parks in the state.
The co-ops generally own the land jointly, form a board that
sets monthly rents, votes on improvements and signs off on home
sales.
Paul Bradley, vice president of the fund, is a lanky bundle
of enthusiasm who appears to know the history, and residents, of
every manufactured housing park. He says anecdotal evidence
suggests homes in the co-ops are appreciating well, and monthly
rents are rising less rapidly.
Bradley sees other gains, as co-op members learn about
financing and management. There is determination to instill
pride of ownership, so much so that the state organization of
manufactured-home owners used to make people pay a quarter every
time they used the "T" word - trailer.
Lowering interest rates
Many owners bought their homes with high-interest loans. A
fifth of co-op members were paying 14% interest, with an average
11.8% rate. The situation got worse in the late 1990s after the
sector went bust and lenders went bankrupt or fled the market.
The fund initially made loans. As the co-ops got bigger, the
New Hampshire Housing Finance Authority, a quasi-public agency,
stepped in, followed by commercial banks. Starting in 2002, the
loan fund introduced fixed-rate mortgages, refinancing and
home-equity loans in tenant-owned communities, aided by New
Hampshire banks. Manufactured-home buyers in co-ops can now get
conventional mortgages at market, or even below-market rates.
Florence Quast, 68, a retired nurse and part-time Wal-Mart
worker, helped organize the second co-op in the state, which
celebrates its 20th anniversary this year. She got a 16%
interest rate on her first loan in 1978, above the average 9.64%
for site-built mortgages. Quast bought her current home, a
double-wide unit with a fireplace, big kitchen and wall full of
family photos, with a conventional mortgage.
"We're not looked on really as the best in society until
I say it's a co-op and we all own it. There's a little more
respect because you're a homeowner," Quast says.
While New Hampshire residents now must get 18 months' notice
before they can be forced to move, some states still allow parks
to be closed in 30 days. In regions where the housing market is
hot, and land scarce, a number of manufactured-housing parks are
being sold.
Officials at the Manufactured Housing Institute, which
represents owners and manufacturers, says owners, typically
mom-and-pop operations, are getting large offers to sell to
private developers.
Higher-quality homes
Which brings Bradley and other non-profits to the next
frontier - development. Fannie Mae is also interested in backing
projects that showcase the higher quality of new manufactured
homes, which can be fitted with front porches, garages, higher
roofs and other amenities to blend in to a community.
Bradley bounds around Pepperidge Woods, a 44-site cooperative
development (plus a community center) that's not your
stereotypical trailer park. The three-bedroom homes have
concrete foundations, energy-efficient appliances, drywall
rather than vinyl walls and granite stoops with cast-iron
railings. Some have pitched roofs with attic storage or full
basements.
Prices run from $147,900 for a 1,344-sq-ft, home to $174,900
for a house with a walkout basement. The homes - sold without
subsidies - are targeted at households making $35,000-$65,000.
"Traditional single-family starter homes aren't being
developed," Bradley said. "It's $350,000 for a starter
home, and families of moderate means can't get in."
Clayton, of Clayton Homes, adds that because manufactured
housing is built in a factory, it can be put in place faster
with potentially fewer cost overruns. In New Hampshire, zoning
laws allow higher density for manufactured homes, cutting down
land costs.
Bruce Ouellette, 36, and his wife, Rebecca, 31, were at
Pepperidge Woods watching workers pour the foundation for their
new house. The couple - she does accounting and he is disabled
after working in construction - read about the development in a
local paper. They call their new home a vast improvement over
what they saw during a year of hunting.
"Every time we tried to get a house, it's like a shut
door," Bruce Ouellette says. "I've always been
renting. I want to own. I want to have responsibility." |
