Tempering the influence of private equity in manufactured housing

From: Shelterforce

In March, C & C Community in Billings, Montana, became the 11th resident-owned manufactured housing community in the state. With technical assistance from ROC USA partner NeighborWorks Montana, the conversion from a traditional land-lease community to a cooperative took homeowners about six months to accomplish.

Manufactured homeowners are particularly vulnerable to market predations because they own their homes but pay a lot rent to the community owner. In nearly every state in the U.S., lot rents are unregulated. C & C Community’s transition to a cooperative helps secure the financial futures of the 60 families who live there; families who, when compared to the land-lease model that governs about 98 percent of all manufactured and mobile home communities, will not face the threat of excessive rent increases, closure, or displacement.

For owners of manufactured homes, the risk of onerous lot rent increases and the fear of eviction are more threatening than ever as private equity and other types of investors enter the market. The destabilizing impact of these new players has been raised by a few outlets, most notably on John Oliver’s “Last Week Tonight,” which recently aired a segment on this topic.

Investments in manufactured and mobile homes communities are among the most profitable in the real estate sector. While a relatively recent trend, most major investors have entered this market in the last five years or so. Wall Street’s increased investment in manufactured housing communities will lead to rent increases and reduce home values—major market players have said so themselves. On an earnings call in April, Sun Communities CEO Gary Shiffman stated, “some of the things that are taking place as the industry is attracting so much capital, driving the cap[italization] rates so low and we’d speculate that that is causing some of those new entrants to the industry to try and push up their returns on their investments.” Sun Communities is the largest operator of manufactured housing communities in the United States. There are approximately 45,000 communities in the country, and though no good data exist on national investor purchases, these new players are clearly raising community sale prices at the expense of homeowners.

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