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'Trapped': How federally backed financing is making mobile homes less affordable 

Low-interest loans supported by Fannie Mae and Freddie Mac have fueled a spree of acquisitions of mobile home parks where new owners drive up costs for longtime residents.
Photo Illustration: An aerial photo of a trailer park and a photo of hundred dollar bills
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WASHINGTON — It wasn’t long after residents of a mobile home senior community in Ohio were told that their property had been bought by a new owner, with the help of financing from federally backed Freddie Mac, that their costs started going up. 

Kathy Bebout, who at 66 gets by on her late husband’s Social Security benefits, said the rent for the small lot her home sits on at Navarre Village went up $55 last fall to $425 a month — far from the $5- to $10-a-year increases she was accustomed to under the family that previously owned the property. She said she’s had to pick up extra work cleaning houses to afford the bigger bill.

“Everyone’s scared about what’s going to happen, what’s going to come. It has caused so much stress,” said Bebout, who said many of the community’s residents are in their 80s and unable to take on extra work to cover the higher costs. “These poor people in here, they’re not buying food or eating properly, everyone looks terrible, they’re so worried about the rent.”

Adding to residents’ frustration over the rising costs is who helped finance the sale of the property to Legacy Communities LLC, which runs dozens of mobile home parks across the country. The loan for the acquisition was financed by Freddie Mac — a government-sponsored enterprise that has been mandated to help support housing for low-income Americans since it was taken over by the federal government during the 2008 housing crisis.

But rather than preserving one of the last bastions of affordable housing, the role that Freddie Mac and its peer Fannie Mae have played in the market has done the opposite in some instances, affordable housing advocates and lawmakers say. They say the access to relatively cheap, low-risk capital provided by the federally backed entities has contributed to a surge in mobile home park acquisitions where new owners are raising rents and fees.

“Fannie and Freddie have added fuel to the fire. There’s just no question,” said Paul Bradley, president of ROC USA, which helps residents finance the purchase of their communities. “This competition to provide the lowest cost loans to park investors and their grab for market share helped fuel this.”

'We're all trapped'

Acquisitions of mobile home communities have been growing over the past decade with private equity firms and real estate investment trusts acquiring about a quarter of the lots available for manufactured homes in the U.S. between 2015 and 2021, according to data compiled by the Lincoln Institute of Land Policy. 

But the activity has surged since 2020 as investors looked to mobile home communities as a relatively stable source of passive income amid a volatile economy. In 2022, there was $4.3 billion spent on acquisitions of mobile home parks affecting 60,000 units, according to real estate firm JLL. 

As a result, residents across the country have reported spikes in their rents after their communities were acquired. The properties have also become a target for investors looking to redevelop the land, like in Phoenix where three mobile home parks are set to be closed in the coming weeks after they were sold to private developers. Because mobile home residents often own their home but not the land it sits on, they have few options when their lot rents get too high or the owner decides to redevelop the land. 

At the Navarre Villages, Bebout was told it would cost $25,000 to move her 1,300 square foot manufactured home and then she’d have to buy a new piece of land to put it on or find an opening at another park.

“We feel trapped because we can’t even move our homes,” said Bebout. “We’d not only have to use the $25,000 to move it, but then you have to reconstruct it and you have to find a new place. I’m trapped, we’re all trapped.” 

She could also lose money by selling her home because she was told its value has gone down because of higher rents for new residents. For those moving into the community, the rent has doubled to $700 a month. That higher rent has driven down the value of the homes in recent months, said Christine DiSabatino, 69, a real estate agent who lives in Navarre Village. One home that recently sold for $40,000 likely would have sold for more than $60,000 a year ago, before the rent increases were put in place, she said.

Legacy Communities chief operating officer Andrew Fells said in a statement that the company considers a number of factors when determining rent increases, including the cost of investments in improving and maintaining the property, operating and supply costs, the cost of loan interest and principal payments, as well as rents and other fees at comparable properties. 

“The harsh economic realities of the past year have been particularly challenging," said Fells. "The interest on our loan has more than doubled as a result of the dramatic rise in interest rates. We are also facing a regional (consumer price index) above 8%, cost increases for labor, insurance, taxes, utilities, supplies, and vendors who pass through their own cost increases."

Legacy plans to invest $1.2 million in the Navarre Village in “capital investment to repair neglected infrastructure, add amenities and improve the community’s curb appeal” that could ultimately improve residents’ home values, said Fells. For those struggling with rent related to a job loss or illness, he said Legacy offers a catch-up payment installment plan.

“Rather than compromising on maintenance and allowing the community to fall into disrepair, we sought to lessen the impact of these increased costs on our existing residents by implementing higher rents on new residents entering the community," Fells said.

But so far residents at Navarre say they haven’t seen any infrastructure improvements since Legacy purchased the property last fall. Additional amenities suggested by Legacy, like a pickle ball court or community fire pit, would be of little use to the property's elderly residents, many of whom have difficulty carrying out basic daily tasks, said DiSabatino.

'An impossible situation'

While there are a number of players involved in financing mobile home park acquisitions, lawmakers have turned their focus to Fannie and Freddie, given their federal mandate to promote affordable housing. A group of 17 Congress members sent a letter in August to the Federal Housing Finance Agency, which has overseen Fannie and Freddie since they were taken over in 2008, urging the agency to require longer-term leases to protect against sudden rent increases, additional eviction protections and to provide more opportunities for residents to purchase their community. 

Sen. Sherrod Brown, an Ohio Democrat, sent a letter to the CEO of Freddie Mac in December about the rising costs at Navarre Village, asking for more details on how the firm goes about approving loans for acquisitions and what considerations it has for protecting tenants from rent increases. 

“These sudden and drastic rent increases are putting Ohio seniors, many of whom live on fixed incomes, in an impossible situation — they can’t afford the rent increases, and they aren’t able to sell their homes because few potential buyers can afford Legacy Communities’ new lot rents,” Brown wrote.

But a Democratic Senate staffer who looked into the issue said there didn't appear to be any violation of the existing laws or any clear legislative efforts on the table to strengthen requirements. 

Fannie Mae financed $11.5 billion in manufacturing housing community loans between 2020 and 2022, and since getting into the manufactured housing business in 2000 it has financed more than 1,700 loans covering 750,000 manufactured housing sites, a Fannie Mae spokesperson said. Freddie Mac has purchased the loans for about 1,400 manufactured housing communities since it got into the business in 2014, which accounts for about 3% of the communities nationwide.

“Fannie Mae has been a leading source of liquidity for Manufactured Housing Communities since the early 2000s, and we remain committed to preserving and advancing this vital sector of the housing market,” a Fannie Mae official said in a statement noting that it had no authority over rent decisions by the owner. 

Freddie and Fannie officials said they have been taking steps in recent years to help protect residents of mobile home communities as part of their federal mandate to preserve affordable housing. Starting in 2019, the entities began offering a discounted interest rate to borrowers who put specific tenant protections in place for their residents and since 2022, they have required all borrowers to put those protections in place. 

The protections require community owners to provide 30 days written notice of rent increases, a five-day grace period for rent payments, 60 days' notice before selling the community to a new owner, and measures to make it easier for people to sell their properties, such as the right to post a for-sale sign on their property. 

But those protections don’t have any limits on how much a new owner can increase rents, and housing advocates say they provide the bare minimum projections for mobile-home owners and should go further.

“It feels ironic in a very unfortunate way that Fannie and Freddie are actually, by purchasing these loans, they’re making this problem worse not better,” said Jim Gray, a nonresident senior fellow at the Lincoln Institute of Land Policy. “What Fannie and Freddie really should be doing is making it easier to help people buy their own community and yet what they’re doing is they’re helping these predatory investors buy communities.

Though putting too many restrictions in place for borrowers could drive them to other lenders outside Fannie and Freddie's network, where there would then be no tenant protections required, said a Freddie Mac spokesperson.

“We pioneered a requirement that all manufactured housing community loans we purchase include tenant protections, and we worked for years to get the market to adopt the standards," the spokesperson said in a statement. "Freddie Mac is committed to protecting as many MHC tenants as we can. It’s a balancing act, as owner/operators can always opt for financing that does not include our protections.”

Aside from limits on rent increases, housing advocates say one thing the firms could do is support mortgages for people looking to buy a manufactured home and make it easier for residents trying to buy their mobile home community to get financing via Fannie or Freddie, allowing them to benefit from the lower interest rates they provide.

Fannie and Freddie “are the most affordable market rate debt for manufactured housing communities,” said Bradley of ROC USA. “So it’s off the table for co-ops, but it’s what industry is leveraging left and right.”

In the meantime, residents at Navarre Village said they were anxiously awaiting what would come next for their community.

“The rumors are just flying and it’s sad," said DiSabatino. "Here are these seniors that really have no idea what they’re going to do or what they can do or how long they can afford to live here."