Duke University Economist Charles Becker’s Paper On Mobile Home Park Lot Rents

Charles Becker is a Professor of Economics at Duke University. He is also the first economist to ever study the mobile home park industry. His latest paper, which studies lot rent levels in the U.S., should be of great interest to anyone who owns – or is buying – a mobile home park. Interviewing Charles Becker is Frank Rolfe who, with his partner Dave Reynolds, is the 5th largest owner of mobile home parks in the U.S. and holds an A.B. in Economics from Stanford University.

Duke University Economist Charles Becker’s Paper On Mobile Home Park Lot Rents - Transcript

Frank Rolfe: Welcome to another MHU.com lecture series event. Got a very exciting topic for today. One that we've not ever talked about before and we've got a very exciting person here on the lecture bit with me. It's Charlie Becker, who's a research professor in economics at Duke University. Charlie are you there?

Charles Becker: Yes I am.

Frank Rolfe: Well great. We're very thrilled to have you. Charlie, you know we had some technical issues getting this together because Charlie is right now at the Stockholm School of Economics in Sweden, so he's taking the time at a very strange time of the day to be with us here. Charlie, let me ask you. Let's just start off with the basic. How did we get lucky enough as an industry to attract you to study us?

Frank Rolfe: Because you are the first economist that I'm aware of who's ever really looked at our industry and it's something that we've dreamed of because we sure need a lot of fact-finding. How did we get lucky enough to get you? How did you get interested in this industry to begin with?

Charles Becker: Well, the industry is an obvious one for economists because it's an incredibly interesting industry. There's the fact that a significant portion, over 10 million Americans, live in manufactured housing parks, and that for the best majority of cases you have a distinction between ownership of the parks and ownership of the homes makes this inherently interesting from an academic perspective. I guess the other thing is that I happen to know a bunch of people who live in parks. I have come to know a lot of park owners, so I find it very interesting on all accounts.

Frank Rolfe: Charlie, this as a recall you started to study the industry, was it two years ago? How long has it been since you started looking at mobile home parks?

Charles Becker: Well, it's been about five or six by now. I'm not getting any younger.

Frank Rolfe: Five or six by ... boy, time flies. All right. Tell us about ... You so far have done one or two papers on the industry, correct?

Charles Becker: That's correct. One or two papers and some that are at the point where I've put them online and letting people look at them. Submitted them to journals, which is unfortunately in academia fairly a long process. Although I must say they do improve when you get critical comments from a bunch of people.

Frank Rolfe: Sure. Tell people, for those who missed the first two papers, just roughly what those were about, what your findings were on those.

Charles Becker: The first one is out there online. You can find these. If you go and search for Duke University, Department of Economics and then look up my name, Charles Becker, you'll find my site and then you'll eventually find links to my ... you should find links to my various papers. If you don't, people are welcome to come and just send me a note. First one, we had data from, Colliers, Colliers International.

Charles Becker: They do obviously very detailed assessments of parks and Ashley Yeah, who's now at Freddie Mac, and I were able to look at determinants of both park rents and a particular interest to us in this case was the sale value of parks. We had data on about 500 parks that sold and we wanted to know a bunch of things about them. You know, to what extent did the characteristics of the housing units affect park value and vice versa. The answer, not very much.

Charles Becker: More importantly, what do buyers really value when it comes to selling parks? The answer that came out, it's not a real surprise to you all I suspect, but the answer that we got fairly loud and clear was that location, location, location really mattered a great deal, and that most of the park attributes, the kind of bells and whistles that you might put on, really didn't seem very important. I want to hedge that a little bit because it could well be due to the characteristics of the dataset that we had and some other statistical problems.

Charles Becker: This is actually ... I originally got into this I should say thinking, "Oh this will be low-hanging fruit, easy topic to get into." Then very quickly the statistical methodology we had to use took off and it became much more complicated than I'd ever dreamed. This is fairly sophisticated. We had to estimate a lot of things together and there were a lot of problems there, but on the other hand I happen to believe the results.

Charles Becker: The other thing we have in that that came out of that was that there is a difference between what corporate buyers are willing to pay and there's a difference between what I call a mom-and-pops, the non-corporates and the corporates on both sides of the market.

Frank Rolfe: Charlie, so tell me just out of curiosity, when you first started studying the industry, what were you thinking it would be like? What was ... You know, as someone who had some familiarity but not a huge amount with the industry, did you have the impression most Americans have of kind of be the 8 mile or the television show Trailer Park Boys or Saint Peter? What were your thoughts on the industry?

Charles Becker: I should say, I never let my research assistants watch Trailer Park Boys. I don't want them to see that. I don't even let them watch Myrtle Manor.

Frank Rolfe: Right.

Charles Becker: Because that does prejudice people. Having known a lot of people who lived in parks and such what I expected was that I expected the industry to be fairly heterogeneous. Having said that, I'm surprised at how heterogeneous it turned out. Again, another issue to me as an academic economist that I find just amazing is that in most industries you have typically a dominant management model. However it's going to happen, there's one management style that's more successful than the others.

Charles Becker: What I found in this industry is that there's about three different styles that compete with each other and none of them appear to be truly pushing each other out. That was a ... Boy, that makes for an unusual industry right then and there. The fact that you have people who are low heavily involved with their tenants, who are I would say fairly patrician, I think you have on the other hand people who are trying to extract as much surplus as they can get and they probably have very different clients, very different tenants.

Charles Becker: Then you have corporate management, the ones that benefit from scale economies and wants to minimize management expenses. They all seem to be coexisting and boy that makes ... You know, just as an outsider it's just fascinating to see that you have these different paradigms running at the same time.

Frank Rolfe: Charlie, tell us about how you got the idea for your latest topic that we're going to be discussing tonight. What was the background on that? You'd already studied the industry on some other items. Got more familiar and what heightened your interest in this?

Charles Becker: Well, in this case, actually I would say it's your fault.

Frank Rolfe: Okay.

Charles Becker: There's a question you asked some time ago, you said you'd been asking these questions about why don't you go study this, why don't you go find out how much ... what are fair prices? How much did it cost? I remember you also saying to me at one point that you thought that the absence of zoning was something that would drive down park rents and make it less profitable to enter. I thought, "Well, I wonder if that's true." I had a student, a research assistant go and create measures of stringency of zoning across North Carolina.

Charles Becker: We have about 100 and ... I forget the exact number. About 115 jurisdictions in 100 counties in the State of North Carolina. I tried to come up with measures of how strict or lax zoning was and then try and answer that question.

Frank Rolfe: All right. Tell people how you conducted the ... Well, first off, what was your topic? Not economics. I took economics. I can't remember the exact terminology but whatever your thesis, the topic was originally and then how you gathered the data, your methodology and then generally what your findings were.

Charles Becker: This is a paper we call Zoned Out because it's all about the impact of zoning. Originally, the impact of zoning on manufactured housing rents and that's what we were focusing on. Does zoning make rents higher or lower? Using data from North Carolina. We have DATACOM data. They were generous enough to provide for about 3100 observations in about 700 different parks in North Carolina over the past ... Basically just from the great recession on, and so we have a fairly large, not huge, but fairly large dataset.

Charles Becker: Covers most of North Carolina. We just went and tried to do a bunch of, again, fairly sophisticated statistical estimation to see, you know, to what extent it mattered. Then we also ... There's a lot of just factual data because I don't think the industry has it very well defined on what park rents in the State of North Carolina look like.

Frank Rolfe: All right. The general topic then was what should rents be or rents compared to other forms of housing? Is that the general overview?

Charles Becker: Exactly. Exactly. The first real question is in trying to analyze this, first question we had to ask is, to what extent is there a single manufactured housing park market in North Carolina? We pretty quickly concluded that there wasn't just one. We ended up diving into three different groups. I think you could slice and dice it a couple of other ways, but that's pretty much the way we came at it. The rural areas are very distinct.

Charles Becker: In North Carolina you have 100 counties and the ones that ... I live in Durham County which population is growing over 2% per year. Wake County where Raleigh is or Mecklenburg where Charlotte is. Those counties are growing at 3-4%, even higher sometimes. On the other hand, about well more than a third of all counties in North Carolina are losing population. So it's not surprising that the markets are going to be very, very different. People are not moving into rural areas.

Charles Becker: What's driving park rents there are likely to be quite different, especially the other thing is of course they're more distant from amenities and highways and things like that. We divided it into rural areas, the metro areas and then the fringe is the metro areas and smaller towns in cities. A place like Wilson, North Carolina or Jacksonville. Then some of the fringes on the outskirts of the Charlotte and triangle metro areas. Then things fit.

Charles Becker: Well, we found first indeed that what people were willing to pay there for their park rents, those things tended to vary across those different areas. To my surprise, park rents are fairly low in the State of North Carolina, but so we find that it's very distinct, and zoning matters in some places but not others. I think in particular zoning turns out not to be important in rural areas because people are leaving. No one is trying to zone anybody out.

Charles Becker: On the other hand, no one is thinking about putting in new apartment complexes and putting a new housing. Our second, I think the most important, this is something that this paper that we did in North Carolina it was myself and Tim Rickert, who's a student at Duke University. Our finding was consistent with that, with the national work with Ashley Yea that we have on using the Colliers data, which is that the major substitute for manufactured housing parks is rental housing and not owner-occupied stick-built housing.

Charles Becker: So that if you're looking at ... First it clearly focuses on the affordable housing side, but also if you're going to say, "What should we be benchmarking against?" The answer is local rental housing cost. We use the HUD 40% marker which is used in Section 8 housing because that's an obvious marker to use. It has some problems in its estimation but so does everything. I think it does a good job overall.

Charles Becker: We find it that rental housing, especially modest rental housing in manufactured housing parks very close substitutes. We've got the estimations that we ... the statistical estimates we got made a lot of sense to us.

Frank Rolfe: Charlie, why do you think that people who are residents, and/or potential residents of mobile home parks are not typically shoppers or buyers of owning their own home as opposed to renting? Why do you think that people that are in our industry are better served by studying against rental pipes than housing that is owned? Is that a credit issue, a down payment issue or what are your thoughts on that?

Charles Becker: Well, it is a credit and a down payment issue. This is something where if, again, if I were running America's housing policy, and I'm not, then I would be focused ... especially if you care about affordable housing, then making credit available especially to people who would like to purchase units and put them in manufactured housing parks is a really obvious way to go.

Charles Becker: What we're almost certain is the case is that the people who are purchasing manufactured homes and putting them in parks or they're already in parks and purchase them and use, are people who do not have access to the credit to buy a stick-built housing and getting FHA mortgage on their own property because then they have to buy the land that's much more expensive, and they have to qualify for an FHA loan or FHA-approved loan, and that puts them in a significantly higher socio-economic category.

Charles Becker: If it were the case that Federal Housing Administrations were to encourage people, make loans available, lower cost for people to buy manufactured homes and put them in parks, then A, I think you'd find an increase in the home ownership in the United States. B, I think you'd find a lot of people would be buying higher quality, more recent manufactured homes and putting them in parks because right now there's this divide.

Charles Becker: You can either get cheaper credit and put a stick-built house or a manufactured home on your own land or you're credit-constrained and you buy a lower quality used manufactured home that's in a park or you rent. That divide I think it's arbitrary. I think it's inefficient. I think the industry, manufactured housing park industry and production industry both get hurt by it, but I think the biggest losers in it are moderate, low to moderate income homeowners who would like to own better housing and put them in parks. That's what our data showed. That you come away from this.

Frank Rolfe: All right. So ...

Charles Becker: I don't think you can draw any other conclusion.

Frank Rolfe: Got you. Okay. Going back so mobile home park residents they have two choices really. Apartments or the rental housing in a mobile home park. Then going on with your findings and what you found as far as the rent levels between the two.

Charles Becker: We find it ... Again, it's not perfect comparison because there are things that when you rent a home or when you rent an apartment then the landlord is responsible for some cost, some upkeep, has some liability cost that you as a homeowner in a park would bear yourself. So there's going to be a slight gap, but by and large there's a huge gap that can't possibly be explained by that entirely.

Charles Becker: Buying a used unit, putting it in a manufactured housing park or having it in a park already, those monthly rents are going to be ... the monthly housing cost, even at CHAD alone rates, you're still talking about somewhere is about 40% less. Whether it's 25 or 45 given the hidden cost that we don't get, I can't tell you but that gap is just way, way, way too big to be explained by hidden costs. It's clearly much cheaper to reside in manufactured housing parks as an owner occupant and getting a CHAD alone.

Frank Rolfe: Got you. Okay. I guess what observation I would have on that in pondering the stats, a lot of the information you receive on lot rents is probably from those who answer the phone or provide data which are probably the larger owners and/or REITs, correct?

Charles Becker: That was the case in the case of Colliers. I suspect it's the case but much less ... I mean, yes it is the case almost certainly with DATACOMP data much less so. My guess is that a lot of ... You know, we have data on ... We get an observation whenever there's a home sale and those I suspect there's a lot of under the counter sales. There a lot of manufactured housing in North Carolina in parks where those units couldn't be worth more than a few thousand bucks. My guess is, I can't believe they're being picked up.

Charles Becker: The average transaction in our sample was about $20,000 and that's pretty high, even given a certain reasonable fraction or double wides, but these are all used units and so that's ... Yeah. There's a statistical bias here too.

Frank Rolfe: Sorry, I guess the reason I'm saying that is if you were to skew the members one way of the other and we're saying mobile home park lot rents are roughly 30 to 40% low, that's probably the top, and they could be even lower in certain markets, correct?

Charles Becker: Absolutely. Obviously, we're picking up on ... Even at ... These are relatively nice units. We're talking about average lot rents across the state of just over $200. We're not talking really high cost, at least in North Carolina.

Frank Rolfe: Right. All right. And ... Go ahead.

Charles Becker: The difference is that in the older ... the ones that were not captured then the quality of housing is much lower so the cost of living, cost of living in a pre-1976 unit out in the middle of nowhere is very, very low, especially if you don't have an air conditioner.

Frank Rolfe: Right. Charlie, we're starting to lose you. Can you hear me?

Charles Becker: I can hear you just fine.

Frank Rolfe: Oh good because we ...

Charles Becker: Do you hear me okay?

Frank Rolfe: Yeah. Now we're back to normal. Absolutely. Let me ask you, what do you think causes these rents to be so low? What are the various options that are causing lot rents to be so low in America today?

Charles Becker: This is like the economist explanation. Demand is limited. Demand is limited because credit is difficult to come by and because you have government essentially at every level discouraging manufactured housing parks. It's hard at the federal level then it's credit. Credit is not being made available to people who would naturally want to live in manufactured housing parks, so that there's a big gap between people of moderate income who might want to own 20/$30,000 worth of housing and be able to get credit for that at a reasonable rate instead of a chattel rate.

Charles Becker: Local governments tend to be incredibly hostile and have often forced manufactured housing parks to be located in relatively undesirable areas, and of course that bids down the rents that park owners can charge.

Frank Rolfe: Let me ask you two theories I have, neither of which are necessarily based in economics, and I know you couldn't study these. Let me get your just general impression on them. One is what I call mom-and-pop quantitative easing. In as much as many, many community owners of the past, not ones who buy them today, but the bulk of all mobile home parks, they deliberately set rents low because they are striving for the affection of residents of they have a nonprofit mentality.

Frank Rolfe: Did you see any of that in your findings or do you think that's a possibility that that helps contribute to the fact that rents are low?

Charles Becker: It's certainly a possibility. It's consistent with the findings that Ashley Yea and I have using the Colliers data across United States. We find that parks, rents and park sales by mom-and-pops non-corporates do tend to be a bit lower. The story ... I guess, just knowing people, having met people who were mom-and-pop owners surely this has got to be true to some extent. We can't prove it statistically because maintenance and park quality is almost certainly higher in corporates on average and in ways that are not observable in our data.

Charles Becker: So, yes, corporates will charge higher rents but they're also providing on average a somewhat higher service. I can't say ... The data don't justify an absolute conclusion on this, but I think there's clearly some of it. Obviously there's some people out there who do have this, what I would call ... I like your mom-and-pop quantitative easing line. In fact, that'll appear in a paper at some point. But I just call it a patrician attitude. People taking care of people.

Charles Becker: Their tenants who have become their acquaintances and maybe friends. Also, it also means especially as a lot of these mom-and-pop owners get older, then if they don't raise the rents then they have less hassle. It skimps on the administrative and supervision costs.

Frank Rolfe: Let me ask you another theory, although this one is even more impossible to prove and more esoterically, but do you think it's possible that part of the problem is that mobile home park owners never get reminded of what rent should be because there's no new construction? In other words, the apartment guys, the way they seem to price their material is there's always new apartments going up and the rents of those new apartments have to justify the debt and the debt is an algorithm of the cost of building the apartment complex.

Frank Rolfe: So in virtually every market, even in mid-sized markets, even smaller markets there are typically a new apartment going up and that's your class A apartment and it's very high, right? I mean in the U.S. the class A housing stock is ... I don't know what the average rent is, 1500 and 1400 whatever a month an apartment. Then the class B, class C guy says, "Well, yeah, so the new one is 14, come to me, I'm older but I'm only 1150," and the class C guy says, "Yeah, well, I'm kind of older and way more beat up but I'm only 920."

Frank Rolfe: But they always have some kind of pricing thing they can always refer to whereas since there have not been partly any parks built since the 70s, there never was anybody saying, "Hey, here's what the pricing is." Do you think that might have contributed? Because a lot of mom-and-pops have no idea what the price of their lots are. Even today, even us or any owner, what do we do? Well, we typically look at what the REITs or the largest portfolio owners are charging, but even then they're not even often in your own market, right?

Frank Rolfe: You have no way to possibly figure it out. Then the industry for the longest time said, "Oh well, just look at the two-bedroom apartment rent and half it," but I'm not sure that's very scientific either because the two-bedroom apartment rent it would depend on the class of the apartment, markets they're in and everything else. Is it possible that's how park owners lost their way? Was there just wasn't any indicator?

Charles Becker: I mean, in sync to it I think there's probably some of that, is there should be less today than in the past because there's a lot of sites out there where you can get fairly good real estate market information between ... First you have HUD providing their estimates and that's available online to anybody and they track it over time. You have a lot of both apartment real estate sites.

Charles Becker: You go out and find between Zillow and all the others, people should be able to track their housing markets fairly closely to the extent that they're segregated, yeah, it's going to be a little bit harder to do, but I ...

Frank Rolfe: Well, I was thinking Charlie, there's no website that shows mobile home park lot rents. In other words, we go to Best Places, it shows apartments and houses but there's nothing out there that shows you lot rents. It's pretty confusing in other words.

Charles Becker: That's right. That's actually one of the reasons that we put a lot data in this paper was that people can actually go and look. You want to see we have data for I think 11 different counties, major counties that are fairly representative not only of average lot rents but also the distribution across values, so you can just look at a histogram and say, "Okay, what are lot rents like?" Now, this is a one-time ... We only have it for aggregated overall time periods, it would make sense to keep doing it again and again, and collecting data, those sorts of data, incredibly valuable.

Charles Becker: That information we don't have now and that actually really limits a lot of the formal statistical analysis we can do as well. But yeah, clearly the industry as a whole it's almost undocumented.

Frank Rolfe: Right. Do you see ... You've talked to a lot of different people in gathering the information. Any ideas why the industry has elected historically not to document itself?

Charles Becker: Oh boy, you're asking ... I'm speculating now. That would be the ... You have this division and types of ownership. You have mom-and-pops are a world apart from the larger corporate owners who are highly sophisticated and they're also providing a different thing. It's like if you ask, "What's the average price of a car, of a used car?" It depends on whether you're talking about a used Ford F-150 or a used Yugo, right?

Frank Rolfe: Right. Absolutely.

Charles Becker: That's a lot of what you have here as well. The caliber ... What you're getting in different parks. Now, there's a ton of ... One of the things I'm trying to do is begin to provide the kind of information that would enable people to begin to make more sophisticated judgments, not because I'm paid for it by America's park owners or America's manufactured housing manufacturers, but just because I think this is an industry that if it grows up is actually providing a really important service.

Frank Rolfe: Sure.

Charles Becker: The more normal it becomes then I hope that there will be more acceptance of it at the local government level and less hostility, and ultimately that will lead to more normalized support for people living and being treated as a normal industry. Yeah. I'm sure that people don't really know what to charge, what's a fair rent. Frank, I was really surprised at how little variation there was across parks in North Carolina.

Charles Becker: In fact, one of the things that struck me the most was that the standard deviation, the measure of dispersion of stick-built housing sales was greater ... I'm sorry was less ... I'm sorry, I got that backwards. I apologize. Dispersion of park rents was less than that of other rents for home sales. That's like, why should there be ... In fact, it was about the same but I would expect there to be far more dispersion among home rents, but how close it was what really jumped out at me.

Charles Becker: It's almost like in the industry there's an eyeballing that's going on. The average rents in rural areas and in metro areas it was different. It's more expensive than metro areas, but not nearly as much more as I would have thought.

Frank Rolfe: Why would that be Charlie? What do you think?

Charles Becker: Well, it's consistent with what you're saying, is that people are eyeballing, not adjusting. On the other hand we do the statistical analysis and show that rents indeed do rise with economic conditions. If your location ... Location really, really matters. If I were to take the study that Tim and I did and take it to say county commissioners or county planning commission and say, you know, "You ... " I would say the first thing that it shows is that you all should be encouraging manufactured housing parks near intersections of major highways and freeways, because that's what people value in this.

Charles Becker: Don't try and make them put in anything fancy. Just and these are ... you know, the market is for people who want basic housing and preferably basic housing near a highway. That's a clear lesson from that. Then ultimately make being less hostile, making it possible for parks to expand and ultimately making some of the affordable housing money going toward expansion of parks as opposed to say in the thriving metro areas going into central city housing.

Charles Becker: That's I think hopelessly is way too expensive for ... You can buy three or four manufactured housing units in parks on the fringe and take some of that difference provide better public transportation. People don't have it. Than to try and buy ... or much less like in Durham build units in the center.

Frank Rolfe: Okay. Charlie, going back to the lot rents if the lot rents truly are 40% low or more, how do we fix that as an industry? In other words, because obviously our residents are financially constrained but at the same time all of their other options are significantly higher. Should we have this kind of stigma against raising rents? Every time that I've spoken on the topic I always get criticism from people saying, "No. You know, rents shouldn't be raised," but yet economically obviously it makes no sense.

Frank Rolfe: The largest owners are in fact raising their rents to market. So, is it okay to raise rents? I'm asking you the ... I guess the moral question in this case is, is it okay to economically adjust rents and keeping with other forms of housing?

Charles Becker: Well, I mean, economists don't think of prices as typically having much of a moral connotation. Maybe when you're charging $200,000 for a cancer drug, for your supply of a cancer drug, yes. For housing this is if you didn't have restrictions on entry then which of course I also as an economist don't like that idea either, yeah, I would say that if rents rise then supply will increase if you didn't have restrictions on it, and people would be better off.

Charles Becker: Park owners would be better off and low to moderate income people would be better off. It's not a either or. It's not a zero-sum game unless you have some kinds of restrictions. In this case, I would think that it's difficult to raise rents. Well, so in rural areas it's difficult to raise rents because the markets don't allow it.

Frank Rolfe: Right.

Charles Becker: At least in rural North Carolina, the rural south, I don't think you'd have ... You tell people they could raise rents to 4/500 bucks a month and you'd find those parks will just be entirely empty. There's excess housing. There's a lot of abandoned housing that's deteriorating and becoming abandoned. Places are losing population. You're essentially providing land that's worth very little and you're providing infrastructure services that's worth 150, maybe 200 bucks a month and that's what they're paying for.

Charles Becker: In the metropolitan areas in the smaller cities they're holding their own. Then you could raise ... if you can make credit available to people to purchase used manufactured housing in parks, if they could get credit at 6% or 5% instead of around 12 or more, then it would be much more affordable to raise rents. Right now what you have is people are paying a fair amount of the difference. The difference would be ... I mean, to put it differently. The difference is already large and I think a lot of that is that people are incredibly credit-constrained.

Charles Becker: If credit were more easily available, demand would surge and it would be easy for markets to support much higher rents. Which ultimately then some of that would be plowed back into park quality and you'd end up with ... You know, right now the stereotype certainly in the south is of parks that look like Trailer Park Boys except worse and yet parks owners while they're making money on it are not making ... especially if they're mom-and-pops are not making enough money to do substantial renovations, substantial infrastructure improvements.

Charles Becker: Yet, if you made it possible for people to afford the credit to buy units more easily, then the demand would support better housing.

Frank Rolfe: Charlie, let me ask you this because I know your study when you're comparing the two types of the apartments to mobile homes and mobile home parks obviously because you have to, you're looking at the overall cost of the housing unit, which is the lot rent plus mortgage, right?

Charles Becker: Right.

Frank Rolfe: But in most parks out there they're ... I'm going to estimate. Again, this is an estimate. This is not based on any form of economic study, but in our average property I would guess that at least 80% of all the units are owned out, right?

Charles Becker: Yeah. That's ...

Frank Rolfe: You know, because really anything from the 1990s and older is going to be paid for by definition based on length of mortgage from that era. Is the gap then not just astoundingly huge? In other words, then you have people who are paying in some markets, $280 a month for a three-bedroom, two bath, where the going apartment rent is, for the same unit, almost a thousand a month higher, so it is unfair.

Frank Rolfe: In other words, when we're talking even the 40% differential between complete package housing unit and apartment, or other rental housing, it's obviously much more vast for those people who own their own homes, correct?

Charles Becker: Absolutely. Yes. Yeah, and this is ...

Frank Rolfe: And in ... Go ahead. I'm sorry. So well so I guess ...

Charles Becker: Go ahead. No I was just saying ...

Frank Rolfe: Go ahead Charlie. I'm sorry.

Charles Becker: No. I mean, obviously you have this ... It's almost like you have the housing market being split. If you can get access to a conventional mortgage then you go one way and of you can't you go another. That division to my mind is largely, not entirely, but largely artificial. If you could bridge that then you would vastly improve welfare of Americas low moderate income homeowners or potential homeowners and at the same time you would raise park values enormously.

Frank Rolfe: Charlie, let me ask you, this gap, however big the gap is, which we're saying on the narrowest part of the gap may be 30/40% and the largest part of the gap, far more than that, right? It could be 80% in some parts where the people own their homes. When do you see that narrowing? I know this is not something you study. This is just from what you've seen in the industry as an impartial observer. You don't own a park, correct?

Charles Becker: Correct.

Frank Rolfe: And so you don't have any skin in the game at all as far as rent.

Charles Becker: Right.

Frank Rolfe: But does it make logical sense to you just as someone who is good at analyzing things that that gap will narrow as there's a transference of ownership from moms and pops to more professional owners? Do you see that happening? What do you ...

Charles Becker: Yeah. Yeah. I would expect as ... and there clearly is ... in the data there's clearly a transfer in ... there's clearly a trend where mom-and-pops are declining and corporate owners and larger parks among those who are ... there's ... non-corporates are rising. I think that's going to lead to a drift upward of park rents and probably park quality alongside it. I think if nothing else corporates are not going to allow major liabilities, dead trees and things like that are not going to be ... they're going to clear out the abandoned units that exist in many small parks.

Charles Becker: I think quality will increase, rents will certainly increase, but the real big deal is going to make it so that is ... and if a federal government really moves seriously in the next couple of years to allow credit access at FHA or FHA-like rates for homeowners in purchases of new and used housing they'll be placed in parks. That's going to sure lead to a surge in demand and that should lead to, I would think, a fairly rapid rise in rents across America's metropolitan areas and urban areas and smaller cities they're doing okay.

Frank Rolfe: Charlie, what do you ...

Charles Becker: I guess ...

Frank Rolfe: Go ahead. I'm sorry.

Charles Becker: I can't say what would happen in rural areas of the Midwest, New York State, the south where demand is really diminished. I don't think there's a whole lot that's going to change in those areas, but I think that there are a part ... You know, America's transforming. People are leaving rural areas, continuing to leave rural areas and I think a lot of manufactured housing parks are in the wrong location for the 21st century America because they were placed 50 years ago and they've been zoned out of moving.

Frank Rolfe: Right. Yeah. That's something we talk and write about a lot is the fact that there are a lot of parks that were built back in the 60s and 70s which today you would not want to buy really at any price because there's no future to them. They should not even be there. I will often drive down the interstate between properties we own and in the middle of absolutely nowhere along the interstate I will come upon a 150 space property with clubhouse, of course the pool at this point is filled in or is solid green with algae.

Frank Rolfe: Anyone who is not familiar with the industry would say, "Wow! What a great buying opportunity," but in fact, just like any form of real estate, right? There are in all forms of real estate things that are around that no longer need to be there anymore.

Charles Becker: Yeah.

Frank Rolfe: I could not agree with you more. A lot of the rural properties, I don't know what will happen to them because really they're of another era, half a century ago was the heyday. Obviously, I'm sure gathering your data you read a lot of articles and you've thought about the topic. One thing that always gets us is that to us if you do capital improvements in the property and improve it and make it a nicer place to live, obviously higher rents have to go hand in hand with that.

Frank Rolfe: It's the same thing that you see in apartments, in hotels and you name it, right? Someone buys an old beat-up hotel. The elevator doesn't work. They're charging $20 a night and it becomes a part of Historic Hotels of America. They rehab every room and put in new elevators and a nice restaurant and now it goes to 119 a night. On the surface you went from 20 a night to 119 but the people who stay there are much happier because it's nicer and cleaner and safer and better.

Frank Rolfe: What's unusual in the park business is that often you do those things and yet you get infinitely criticized even when doing those for raising the rent. Have you noticed that at all in your stuff? In other words, a lot of city governments, which I totally agree with you, should be way more supportive of the industry. You have Ben Carson who just gave a speech at the MHI event in Vegas saying that mobile home parks are a hugely important part of affordable housing.

Frank Rolfe: And they're doing different things to try and make things more affordable by striking down some of HUD's initiatives on installation cost and things like that. But it seems like there's no support from city government. That is just ... The federal government gets the picture. I think most Americans we get the idea, but city government seems a little blind to that. Have you seen any of that in your research or just things you've seen because it's just strikingly odd.

Frank Rolfe: Just as you said, I mean, even expanding existing parks which we've tried many a time and been shot down many a time, the city's opinion as far as mobile home parks and the whole affordable housing thing it's just kind of odd, don't you think?

Charles Becker: No. I certainly do. I think a lot of this honestly Frank is that at the national level there's a recognition that this is meeting an important part of affordable housing needs. You've had both Obama administration, now Trump administration as being reasonably supportive. I don't want to overstate this because there's not a big political constituency for it, but the problem has been at the local level.

Charles Becker: The local level this is all about zoning out what they perceive as being a population that isn't going to cover the cost of local services. That's much harder to break. Again, if I were running America's housing policy I would actually ... You know, every local community that has any population growth wants to zone out the poor and bring in high income people who provide more property taxes than they cost.

Charles Becker: If at the state to federal level having some subsidies to not aim exclusively at parks, but aimed at not restricting low income residents because that's what's driving that. Not a surprise there's every now and then it's bizarre that you have communities that will spend lots of money on affordable housing but actually that's what they're really talking about doing is doing something almost symbolic or that would raise the value of nearby more upscale properties.

Charles Becker: Actually providing affordable housing is not on the radar screen of hardly any community as far as I can tell. If they were ...

Frank Rolfe: ... Go ahead.

Charles Becker: If they were then they would be ... they far more then would be looking into supporting manufactured housing parks.

Frank Rolfe: Charlie, there was this article recently, Hawaii has built its first mobile home park ever. It's never had one in history. They did it as a state project and they got all this publicity. You read the article and the entire park is only 16 units. So first off think how meaningless that is. There are 16 units. Hawaii has some of the highest home prices in America, right? And I don't think 16 did much of a dent, but the crazy part is they spent $5 million building it so they spent $300,000 effectively per mobile home.

Charles Becker: Oh my God.

Frank Rolfe: In creating this 16 space park. I completely agree with you, it's mostly always symbolic and it just makes absolutely no sense. No one is ... apparently ... I mean, the federal government is now getting the picture but I guess the federal government will have to educate cities more on the benefits of our type of affordable housing and how they can help encourage that. I know that there are some great things coming from HUD.

Frank Rolfe: I think next year Fannie Mae and Freddy Mac supposed to start supporting mobile home loans, which is long overdue, and obviously based on everything you said, fits exactly with what you're saying as far as ways to help, but ...

Charles Becker: I think that's what should make ... My belief is that that'll make a huge difference especially if local communities can somehow be convinced with across some sort of incentives, probably from a higher level, to be supportive. You can't entirely blame them in that if you're a city manager or a county commissioner and you're looking at your budget. Someone says, you know, "You're going to have these costs if a community of 500 moderate income people move in," and they're not going to cover those costs and you say, "My budget can't afford that.

Charles Becker: I don't want to zone out low to moderate income people but until taxes so there's new revenue source I can't be supportive." Well, that's the sort of thing that at a higher level there should be support so that we don't have this zoning out of low income communities. Yes, obviously we haven't mentioned it but yeah, there is a stigma. The industry should be getting far more pats on the back than it is because it is providing low to moderate income housing.

Charles Becker: On the other hand, the industry does a lot of harm to itself by having some fairly quirky players who do ... and I think a lot of this is ... especially on the non-corporate side. I can think of at least one corporate than engages in behavior that I think is both economically irrational and pretty reprehensible, so...

Frank Rolfe: You think that case about people not making capital improvements, correct?

Charles Becker: Or trying to either ... Typically especially in the mom-and-pops parks not making capital improvements that involve ... that ... Yeah. Even though honestly our results show that people don't really value capital improvements very much. It's the location that really matters, so as long as you provide basic infrastructure then building clubhouses and swimming pools and stuff like that, I suspect is almost a complete waste.

Frank Rolfe: Right. Yeah. Yeah. I would support that based on our own observations of use of those items because they don't get much use.

Charles Becker: Liabilities. I mean, especially pools. Things that are liabilities without any revenue generated.

Frank Rolfe: Right. All right. Well, Charlie you know we promised you we'd try and hold this to an hour simply because I know you bent over backwards to be here because of the enormous time change there in Sweden, but let me first say that I really enjoy talking to you. It's always fun talking to someone who is on the outside of the industry, but yet who is looking at the industry because clearly you have no skin in the game.

Frank Rolfe: You're completely objective in what you do, and that's a very important part of the industry because so far all the data comes from people who are in the industry so therefore no one believes it or always looks at it saying, "Gosh, why is someone telling this? Well they must have some reason to tell me this." So it's great having you looking at the industry from an outside viewpoint so the information is fair.

Frank Rolfe: Then additionally, I really appreciate you looking at our industry and you didn't have to. There's lots of other things you could look at as an economist. We're thrilled that you chose us and not something different. I think I speak for the entire industry of everyone from salespeople to manufacturers to community owners, and even the residents that are really thrilled and excited that you're studying us.

Frank Rolfe: We're looking forward to more things for you to study and tell us about, because again today to my knowledge our industry doesn't have any of this data. It has never had any of this focus. I think it's awesome that we're finally getting a more mainstream approach to our data gathering and conclusions from that. We really appreciate that a lot. Any idea what your next paper will be on?

Charles Becker: Well, I need to move beyond North Carolina. The advantage with North Carolina was that we had this detailed zoning data and it took, what? It took a lot of effort to collect. I still feel guilty about the poor research assistant who had to do that because it took her a couple of months of sheer tedium to look through every website and every housing jurisdiction in North Carolina. What we'll probably do next is go to a ... outside or outside of the south especially ... You know, North Carolina has a limited number of corporate-owned parks.

Charles Becker: We do have some. I think there's about five yes communities and in the state and a few others, but going to ... We'll look to replicate some of this for another large state, probably Texas or somewhere in the Midwest, upper mid, that'll have more corporate ownership just because I want to get a better feel for the difference in corporate and non-corporate. We had that information in our dataset here but there just wasn't enough corporate for us to say anything remotely profound.

Frank Rolfe: Got it. Well, again Charlie, really appreciate you being here. For those who are listening in and say, "Hey, I want to look at the paper," you'll be receiving a link to the complete paper, all of the data, all the charts, all the graphs, everything that Charlie wrote. We wanted to get this discussion though also so people could get a three-dimensional look at the paper and understand its background and the findings and some additional concepts.

Frank Rolfe: Again, Charlie, we really appreciate you being here, appreciate everyone being here at this MHU.com lecture series event. I think everyone probably learned a lot. I know I did, and we'll be back with everyone soon with another lecture series event. Again, Charlie thanks a lot and thanks for being here despite the time complications in Sweden.

Charles Becker: Well, my pleasure. Thanks so much for having me Frank.

Frank Rolfe: All right.

Charles Becker: I'm always happy to be here.

Frank Rolfe: All right.

Charles Becker: Okay.

Frank Rolfe: Thanks a lot Charlie. Thanks a lot everyone.

Charles Becker: Thank you.

Frank Rolfe: We'll talk to everyone again soon. Alrighty.

Charles Becker: Okay.

Frank Rolfe: Goodbye.

Charles Becker: Bye now.