Power to the People
Opportunity to Purchase (OTP) requires tenants of rental properties be the first to receive notice of sale of the property and have the first opportunity to buy it. Depending on the policy, the term Opportunity to Purchase can simply mean, a period of good faith negotiation between the property owner and tenants when the owner wishes to sell. Often with good faith negotiations, the owner has no obligation to sell to the tenants. Other policies have a Right of First Refusal condition which mandates that if the tenants are able to match a bid proposed to the owner by a third party, the tenants automatically win the bid. Regardless of which rights are outlined in an OTP policy, the primary merit of having OTP polices in place is to give at least some power, control, and assistants to the tenants.
With OTP, people are given time to organize and notify the property owner their intent to buy or not. If the tenants do express an interest, then they have a set period of time to form a tenant’s association, come up with the money, and purchase the property. If the tenants do not wish to buy, the property owner is free to sell to other interested parties.
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With OTP, the residents won't be completely blindsided when the property owner decides to sell. It brings the current renters to the table and into the conversation when it comes to the future of their housing situation. Once the property is purchased, the residents can make the conversion to a Limited Equity Housing Co-op (LEHC), which have been conducive to securing stable, long term, affordable housing. Residents can form a (LEHC) themselves or get help by assigning their purchase opportunity to a land trust, non-profit or government agency.
Not so mobile homes
In spite of their name, mobile homes are not all that mobile after they have been placed. Often, trying to move a “mobile home” after it has settled would cause server structural damage, making the home unlivable. Moreover, even if the homeowner were to have the means to move their home, the question then comes to where they can go. As more and more parks close to redevelopment, no new parks are created to replace them. Then, even if there was a place to move to and a means to move the home without damage, there is also the fact that cost of relocation is often greater than $10,000, making the cost of displacement more than the homes' value.
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In recent years, the Carlyle Group, Apollo Global Management and TPG Capital, which are some of the biggest private-equity firms, have been buying up MHPs. Carlyle Group bought Bow Lake in SeaTac for 20 million over market value. Carlyle also recently bought Friendly Village in Olympia. These groups can make a huge return on investment by significantly increasing rents or by selling the property for redevelopment a few years later.
In a Washington Post article, 'A billion-dollar empire made of mobile homes', residents report that the rent in their community has been rising 4% or more a year. The residents have no choice but to pay because they can't move. David Barrett, 62, an excavation equipment operator comments for the the article, “They prey on people who can’t afford land, people who can’t move.” A segment of Last Week Tonight with John Oliver also highlights these tactics and points out how there are institutions like Mobile Home University
that teach people these methods. The segment shows a class at Mobile Home University in which the instructor tells participants:
"They don't have any option. They can't afford to move their trailer...so the only way they can object to your rent raise is to walk off and leave the trailer, in which case it becomes abandoned property and you recycle it - put another person in it."
This kind of predatory tactic is what these communities are facing, forcing people out when then have no where else to go. For this reason, having OTP policies in place can be extremely beneficial in preserving these communities and in turn preserving affordable housing. With a policy in place, the residents have the first chance to buy the property. Investment firms and other developers will have to wait to see if the residents decline buying the property before they can make an offer.
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According to data collected by the Department of Commerce, there are 1232 MHPs on record, with 64,758 available sites and 58,960 occupied sites State wide. This is an undercount as some parks don't register with the Department of Revenue. The Association of Manufactured Home Owners (AMHO) estimates closer to 1500 parks. Preserving what already is in place is the most cost effective scenario. Every park that is not preserved is at risk of re-development, further diminishing affordable housing stock.
These don't look
very mobile...
Getty Images/iStockphoto
Affordable housing is on the decline
and has been for years
It’s not just MHPs in danger. Washington State has been under-producing housing stock by 225,600 units for 15 years. A report released in January (2020) by Up For Growth and ECONorthwest found that in 23 states, about 7.3 million units were under-produced between 2000 and 2015. Between 2000 and 2017, the national average for new housing units created per new household was 1.06. In Washington, it was 0.99.
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Rent in Washington state has been increasing faster than incomes and at least 30 % of all households in every county are paying more than 30 % of their income on housing costs. The US National Housing Act of 1937 states that for housing to be affordable, rent (or mortgage, utilities and maintenance for homeowners) should not exceed 30% of household income. To be paying more than 30% of household income puts one in the category of "cost burdened". An estimated 46% of Washington households renting are cost burdened. Moreover, half of this population is considered severely cost burdened, that is, paying over 50% of their income towards rent. The average rent for a one-bedroom apartment in Thurston County increased more than 25% since 2014. Michael Wilkerson, an economist with ECONorthwest, said for the Seattle Weekly “Those who can least afford it are those who are paying the most in rent.”. Rental housing available for less than $1,000 a month has been declining since 1990 and in Washington State, the loss of affordable rental property amounted to 76,865 housing units. Further, these units were either demolished or the rent was increased.
What other cities are doing
The cities of Berkeley, Oakland and Richmond California are currently exploring passing OTP ordinances based on DC’s TOPA policy. San Francisco has a policy they call the Community Opportunity to Purchase Act (COPA) in which qualified non-profits have the right of first offer, and/or the right of first refusal to purchase certain properties up for sale in the city. Seattle and Burien have passed ordinances requiring property owners renting low income housing to give tenants a notice of sale 90 days prior to the building being listed and also includes OTP options. The city of Tumwater has a Manufactured home park zone district code in which land can be zoned to be used only for MHPs, so even if a developer buys the property, it cannot be redeveloped for anything other than a MHP.
Partners in preserving affordable housing
In an earlier research project two fellow grad students and myself explored Limited Equity Housing Co-ops (LEHC/LECs) as a way to help preserve affordable housing.
The LEHC option was brought to our attention when we partnered with the Northwest Co-op Development Center (NWCDC). The co-op development center has experience implementing a co-op conversion process developed by Resident Own Communities, known widely as ROC USA. The process has been streamlined by the ROC organization, developing a national network of nonprofits and capital funds to facilitate manufactured/mobile home parks (MHP) conversation to limited-equity co-ops. When a park has been sold for development, the tenants have often have nowhere else to go. MHPs have been bought and redeveloped, but no new parks have been allowed to go up to replace them. By helping the residents buy their parks and convert them into co-ops, the housing and the community is preserved.
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Though ROC has a solid process and support for converting MHPs to LECs, those we worked with at the co-op development center had little experience for converting other types of housing to co-ops. Moreover, when trying to help MHPs, they often ran into the hurdle of being out bid by large investor groups. For our research project we explored the history of LEHCs and their claim of being a means to secure long term affordable housing. We found that LEHC can be a solid method of preserving affordable housing and especially strong when added with an OTP policy or partnered with a Community Land Trust (CLT).
For more information check out our Case Study.
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