Eastern Iowa mobile home bust causing affordable housing woes

IOWA CITY - One after another are the empty concrete pads where manufactured homes used to be.

There are 11 open spots on two streets in Bon-Aire Mobile Home Lodge in Iowa City. Four are seen within the first block of entering Western Hills Mobile Estates in Coralville.

It's the same thing at many manufactured home parks throughout Iowa and nationally, said people who track issues surrounding what are more commonly called mobile homes. The problem, they say, is that financing, always tricky for manufactured homes, has become increasingly hard to get.

Only getting worse?

And some people are warning that federal regulations will soon make the situation worse.

The ramifications extend beyond manufactured homes. If someone can't get into one of those homes, they'll turn to other forms of low-income housing, experts said.

“It's not just the lowest 10 percent,” said Mark Patton, executive director of Iowa Valley Habitat for Humanity. “It really squeezes the lower 30 percent to 40 percent of the rental market.”

Hanging over this issue is that people who live in manufactured housing often lack in resources, and there have been some high-profile examples of people being taken advantage of and deplorable conditions in parks.

“They're vulnerable,” said Jim Kringlen, managing attorney at Iowa Legal Aid's Cedar Rapids office.

And that means they have fewer options, he said. Title problems and not owning the land the home is on, which makes eviction easier, are issues he comes across.

But many affordable housing advocates say mobile homes remain an important source of low-cost housing. And Patton believes up to 15 percent of the pads in the Johnson County area are empty, although he acknowledges that's just a guess.

National figures

Data back up the claim that there is a decline nationwide. New manufactured housing placements decreased 90 percent between 1998 and 2012, hitting 52,000 units last year, according to the U.S. Census Bureau.

Fannie Mae, the government-backed mortgage lender, cited that stat in a report this summer calling manufactured homes “a shrinking source of low-cost housing.”

They also are a disproportionate source of cheap housing. Manufactured homes make up about 7 percent of all owner-occupied homes, but they account for 16 percent of such units with monthly housing costs of less than $500, according to Fannie Mae.

It doesn't see a rebound coming, either, with the report saying obstacles include competition from distressed sales of site-built single-family homes, low interest rates for those homes and pending regulations. Some of those factors are outcomes of the housing bust that contributed to the recession a few years ago.

“These headwinds threaten to prolong the depression in manufactured housing production and further diminish a significant source of low-cost housing,” the report stated.

Lenders consider manufactured homes a greater risk than site-built homes for a number of reasons.

Not like a house

The main cause is manufactured homes often are classified as personal property, like a car, rather than real property like a home affixed to the land it is on, said Ishbel Dickens, executive director of the National Manufactured Home Owners Association. Most people in manufactured home parks lease the land and often can be evicted with little notice, another red flag for lenders, she said.

Manufactured homes also depreciate like motor vehicles, rather than increasing in value like most site-built homes.

Interest rates are typically double a regular mortgage or more. Dickens said she has seen up to 17 percent for a manufactured home.

The financing problem is contributing to a “huge loss” in affordable housing, Dickens said. “It just becomes a shrinking resource”

She said a good solution would be for more manufactured-home communities to be run by non-profit organizations or set up as co-ops or land trusts so residents can get long-term leases and get banks more interested in loaning money.

With many buyers unable to get a traditional loan, owners of manufactured housing communities are buying used homes and bringing them to their empty spots and selling or renting them to people.

Ready to build more

Hames Mobile Homes Inc., which has five communities with 1,200 families in the Cedar Rapids and Iowa City areas, has been doing this, said Troy Hames, vice president for sales.

He said their parks are 90 percent occupied, but they work hard to maintain that.

“And I have room for another thousand (homes) if the market ever turns around,” Hames said. “I've got some vacant land where I can build some more home sites.”

Des Moines is seeing the same thing, even for units damaged in a flood, said Phil Delafield, the city's community development director.

“The rent-to-own, the contract purchase model seems to be very popular in the parks here,” he said.

Hames Homes hired a licensed mortgage loan originator a few years ago to get financing for people shut out by traditional lenders, he said. The company provides its own loans for up to 40 percent of the people they work with, he said.

Gale Gates bought a home in Hames' Sunrise Village in southeast Iowa City last year and financed it through the company. The 78-year-old said he paid about $21,000, with a 10 percent interest rate.

He said he liked working with Hames and loves his home after previously renting an apartment in West Branch.

“Everyone who comes in here really likes it,” Gates said. “And I really like it, too.”

There's been a slight rebound in the Iowa market, with orders for new homes through the first six months of this year up 29 percent over the same period a year ago, said Joe Kelly, executive vice president for the Iowa Manufactured Housing Association. But those 144 homes this year was a month's work a decade ago, he said.

His industry is sounding the alarm over a provision in national law that takes effect in January that would classify many manufactured-home loans as “high cost.” That would cause more regulations and higher costs, which make banks less likely to offer loans, Kelly said.

“It's going to get a lot worse,” he said. “That's what we're hearing.”