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Can mobile homes save home ownership?
Home prices have gone up, and wages have stagnated. Home ownership the cornerstone of the American dream is flagging. Enter the manufactured home. It's half the cost, and it may be the new ticket to the American Dream. - photo by Lane Anderson
Colleen Preston lives in a manufactured home community in Cape Cod that's nestled into a pine forest that overlooks cranberry bogs. From her deck, she can watch the cranberry harvest each fall. It's picturesque, she says. It's peaceful.

"It's fabulous," Preston says of her 900-square-foot home. "It's quite beautiful here." It also helped stretch her retirement budget much further.

Home ownership has long been a cornerstone of the American Dream, and it is flagging. In 2013, home purchases fell for the ninth straight year, according to the Joint Center for Housing Studies at Harvard. The homeownership rate has dropped to 65 percent, the lowest since 1995.

Since the recession, buyers have grown skittish, even though experts from the Federal Reserve say that home ownership is still the best way to build wealth and equity.

The Federal Reserve conducted its own survey last year and found that the average net worth of a homeowner ($194,000) is still 36 times greater than that of a renter ($5,400). But the housing crisis has set off a trend for renting, bunking up with friends or moving back in with mom and dad.

At just $35,000, Preston's home is at a price point that would put homeownership within reach for thousands of Americans who otherwise couldn't afford it. Can manufactured homes be the future of affordable housing?

The road to ownership

Manufactured housing has not enjoyed a stellar reputation in the U.S., where it has been associated with hard luck, predatory lending and long been the butt of comic punch lines.

Insiders in the manufactured home industry are sensitive about stigma words like "trailer" and even "mobile home" will elicit a cringe from someone like Tony Kovach, editor of and manufactured housing marketer and advocate.

Before 1972, so-called mobile homes weren't subject to codes and quality could be shoddy but that changed in 1976, when HUD building codes began regulating design and construction, and quality has risen significantly. In 1994, those regulations were reviewed again and boosted for things like wind load capacity and insulation, significantly improving safety and comfort.

Many manufactured homes now boast energy efficiency superior to traditional homes, and some have snappy upgrades like breakfast nooks, sunken tubs and granite countertops.

Recent high-profile lawsuits have also given the industry a black eye, as residents in some corporate-owned communities have sued over steeply rising rents and declining maintenance.

Last year, San Jose residents in a park owned by the largest owner of manufactured home communities and RV parks in the country, ELS, Equity Lifestyle Properties, won a landmark $111 million lawsuit when residents said that they couldn't sell their homes because of deterioration of their community since ELS took over in 1997.

But Paul Bradley believes that done right, manufactured housing can be the future of affordable housing in fact, he believes it's inevitable. Bradley is president of Resident Owned Communities USA, or ROC USA, an organization based in New Hampshire that helps residents of manufactured home communities like Preston's go co-op and buy the community themselves.

"The subsidy pie is fixed, and the need is growing," says Bradley of the current affordable housing stock which is made up mostly of subsidized apartments. "People will start to look at low-cost production options, it has to happen eventually."

New Hampshire has a long history of resident-owned manufactured home communities, with over 100 in the state. State law gives residents the right to buy first when owners put their communities up for sale. Ownership gives residents the security that their rents won't go up and they won't get kicked out.

ROC USA works by identifying communities for sale and guiding residents through the process by helping them form a democratic leadership board, hiring lawyers and engineers to do inspections, and securing funding. By drawing on socially motivated investors, ROC USA capital is able to finance purchases, even for groups of modest means.

"At first it seems like it's too good to be true," says Preston, whose community went co-op three years ago with help from ROC. "You can't believe that people are going to loan you this money millions of dollars."

Over the last seven years, ROC USA has closed 90 million in financing for 51 transactions outside New Hampshire and many more inside the state.

Improving quality

Today's manufactured homes don't all look like double- or single-wides on cinderblocks, and many aren't located in parks. Many pre-fab homes look like traditional "site built" homes and are sprinkled in neighborhoods where you might not guess which ones were made in factories.

Clayton Homes, purchased by Warren Buffett's company in 2003, sells ranch-style homes with garages that are outfitted with breakfast bars, granite countertops and covered porches. These homes are still about half the price of a traditional home.

"I see the modern manufactured home as equivalent to a typical site-built home, at about half the cost," says Bill Matchneer, a lawyer who was formerly senior counsel with the Consumer Financial Protection Bureau (CFPB), and managed the manufactured housing division at HUD. "We're not talking about a mansion, but people would be surprised."

Matchneer points out that many of our high-quality goods come from factories clothes, cars, designer glasses and factory-made doesn't necessarily make it low quality.

Martin Lavin, who owns manufactured home communities in upstate New York and has been an outspoken advocate and critic of the industry, is more circumspect on quality.

"The industry can build fantastic homes, and often does," says Lavin, but consumers want square footage, and quality often gets sacrificed in favor of a big house, he says. For example, using cabinets that are solid wood stand up better, but often inexpensive particle board is used instead.

But that's just meeting consumer demand. "Everyone wants a bigger domicile," says Lavin, and often buyers will choose cheap materials in exchange for more square footage.

"Keep in mind that the average cost for these homes is $65,000, so there are going to be trade-offs," he says.

An affordable alternative

But that doesn't mean that manufactured homes can't be the right choice, especially for working class families that are otherwise priced out of the home market, says Megan Neff of NextStep, an organization that connects the manufactured home industry with affordable housing groups.

While the average price for a single-family home in 2013 was $324,000, according to the Census Bureau, the average price for a manufactured home was just $64,000.

Erika Ortiz, a widowed mother of two teenage girls, was living in a one-bedroom mobile home with her kids and her mother in Arizona when she applied for a program with a NextStep affiliate, called Primavera's Her Family Program, that helped her get into a spacious three-bedrom Clayton manufactured home with a full kitchen, dining room and living room.

The program included one-on-one financial counseling and education about predatory lending. She lowered her debt, raised her credit score and qualified for a $60,000 loan that allowed her to buy a brand new home for her family.

Primavera is building another house down the street, and Ortiz checks the progress every day. "I think about how another family will move in and be as happy as we are," she says.

There is still no guarantee that a manufactured home will appreciate in value. Datacomp Appraisal Systems recently completed a study of 185 manufactured homes in Michigan, comparing the average sale price and resale price. What they found was that some appreciate, and some don't, and that manufactured homes are subject to a lot of the same factors as other homes.

"The appreciation in value of manufactured homes comes back to the old real estate axiom location, location, location," read the study. "When properly sited and maintained, manufactured homes will appreciate at the same rate as other homes in surrounding neighborhoods."

As long as housing prices continue to rise and wages stagnate, manufactured homes might be the ticket to the American Dream, says Lavin.

"If your financial circumstances are such that you can't afford a $500,000 home on a quarter acre, a home $100,000 can satisfy your dream. That's a great thing for many people."
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