The Trailer Parks of Silicon Valley
WHY YOU SHOULD CARE
Because this is a side of the tech world you’ve probably never seen.
You might miss them, driving through the sprawling expanse of Silicon Valley, but they’re everywhere: low-slung roofs wedged a corner away from highways or wide industrial boulevards, behind gas stations and Vietnamese strip malls and grocery stores, and even, sometimes, next to fancy suburban mini-mansions.
The Valley: the richest place on earth, home to Google and Facebook and all that jazz. Yet walking distance from multimillion-dollar homes and shiny venture capital buildings, you’ll find thousands of people living in an alternate world: that of trailer parks, which, even here, are alive and well.
Well, sort of.
On a clear day at Sunset Mobile Manor, 80-something Francisco Pinera takes his morning constitutional around the neighborhood, curved over his walker. In Spanish, he tells me he has lived here for decades; he bought his trailer for $30,000; he and his children (there are eight kids — at least three stay in the home intermittently) pay $1,500 a month for their lot, not including utilities. We are in San Jose, home of eBay and PayPal, across the fence from some housing that’s perhaps more dilapidated than the park. This is one of the less desirable parks in the area, full of 1960s models. Wood peels. Steel side roofs extend from many homes as makeshift extra space. Not, to say the least, ideal.
The thing is, Sunset’s landlord wouldn’t disagree. “These places are slums,” says owner Kim Stoddard, a real estate agent based in wealthy Sausalito. There’s crime, and they’re “decrepit,” she says. She’d be happy to do an upgrade — something residents (who didn’t want to be named for fear of upsetting her) say is sorely needed. The plumbing and electricity could stand improvement. But, she says, she’s in kind of a bind: To fix it up, she’d need to raise the rent. And California has some of the “most punitive” rent control laws in the country, says Sheila Dey of the Western Manufactured Housing Communities Association (WMA).
“It’s absolutely not a good investment,” Stoddard says.
That’s not how the story is supposed to go for the Stoddards of the world. For years now, and especially today, in the midst of a housing market recovery, owning mobile home parks has been known as a paragon investment. Investors have myriad advantages: They get to be landlords without having to maintain a physical structure (paint, carpeting, etc.), so operating costs are low. Most transactions go down in cold cash. Residents are, ironically, a relatively immobile bunch, meaning landlords can enjoy, as trailer park magnate Frank Rolfe wrote in a 2011 column, “phenomenally stable revenues.” And landlords can play a delicate game, raising the rent slowly, $20 or $30 a month, and earning a healthy profit while keeping the homes just affordable enough for their residents.
Which explains why everyone from former Goldman Sachs bankers to Warren Buffett is getting in on the action. There are entire “universities” devoted to training new investors to enter this $7 billion industry, which, according to a report from the research firm IBISWorld, is projected to jump to $8.3 billion by 2019.
Cities use us to subsidize affordable housing.
Kim Stoddard, owner of Sunset Mobile Manor park
But come to moneyed Silicon and it’s a different story. Here — whether you’re renting, buying, selling, leasing, subletting or owning a crop of mobile home parks — well, it pretty much bites. Here the seller faces a kaleidoscope of issues, from rent control to tight eviction rules to local governments not devoting much to state-subsidized affordable housing. Indeed, you’d be smarter not to drink the Kool-Aid. Ask Missouri-based Rolfe, who with his partner is the country’s eighth-largest owner of trailer parks. He runs Mobile Home University, for which he serves as resident real estate sage for aspiring investors. He uses the California question as a teachable moment: “We wouldn’t do a damn thing in California.”
As they do throughout the country, the parks in Santa Clara County — about 130, by an OZY estimate — come in many forms, from neat manufactured home communities with clubhouses and a bit of greenery to poorly paved, shabby spaces where you can hear the clang of a neighbor’s dishes from your living room, even with the TV at full volume. You enter Sunnyvale’s Casa de Amigos by way of faux-Mediterranean archways, passing pools and a welcome center. Sunset Mobile Manor greets you with only a cheap, menacing sign: Visitors Park Outside. The names, sneakily, make them seem almost like cul-de-sac-type neighborhoods: Village of the Four Seasons, Monterey Oaks, River Glen. Many of them are quite lively during the workday; the people at home are the ones who work night shifts and pass odd hours.
The parks are here as a relic of the region’s farming communities. Most mobile home parks were built on the outskirts of cities almost as spring-up housing from the 1950s to the 1970s. Change and conversion, says WMA’s Dey, were expected — and to some degree are occurring here. In all, almost 5,000 lots have disappeared since 2005, according to some estimates. Mountain View — Google’s backyard — is losing them fastest, according to the same counts. In each town, they dwindle: Sunnyvale (Yahoo), Cupertino (Apple), Palo Alto (Stanford, Hewlett-Packard).
But given the real estate gold mine of this region, a surprising number of these parks remain. Because, for better or for worse, the continued presence of mobile homes is a symbol of California’s effort to maintain a social conscience, with cities enforcing strict rental ordinances as a last ditch precisely to preserve a semblance of affordable housing. By now, you’ve likely heard about the skyrocketing housing prices in the Bay Area and the nightmarish quest of many to find even remotely affordable living situations. Mobile home rental lots, which cost anywhere from $700 to $1,500 in the Valley, are Eden compared with the exorbitant cost of the rest of the region’s rental stock.
Stoddard, for her part, says she is sympathetic to the needs of low-income residents. “But come on, cities use us” — meaning private investors — “to subsidize affordable housing.” (In Santa Clara County, owners can’t up monthly charges by more than about 2 percent, depending on the specific city, experts estimate.)
Mobile home real estate lawyer Margaret Nanda, who has represented park owners for 35 years through everything from closure battles to more quotidian rent fiddlings, mentions another wrinkle. In most ownership markets, she says, when a tenant leaves an apartment, the landlord can raise the rent for the next tenant. That’s not the case in the mobile home market, which operates in a weird hybrid of owning and renting. (Residents generally own their structures but rent the land on which the home sits.)
So with that standard wiggle-up-the-rent model moot, landlords either do as Stoddard does and skip reinvesting in a park makeover — or eventually decide they want to move on. That’s what Joe Jisser attempted. He owns Buena Vista Mobile Home Park in the heart of Palo Alto, which sits on an enviable piece of land, in a hot city; it’s just down the street from a Tesla dealership, surrounded by neighborhoods where a one-bedroom will run you $2,500 to $4,000. For 15 years, Jisser says, he has been warning residents and the city of Palo Alto that since he can’t raise rents, the property is “falling apart” and needs to be phased out. He wants to convert the park into condominiums but has spent the past two years going through appeals and facing a crunch of negative media attention.
“I don’t know what to tell you,” Jisser tells me wearily. “I live down in San Jose. I mean, I can’t even afford Palo Alto.”
Of course, before your heart goes bleeding for these owners, you shouldn’t forget that few are losing money — they’re merely missing out on an opportunity to make money, to capitalize on an investment. But talk to anyone in this land of startup and billions in venture capital, and in some ways, that’s the worst sin you can commit. Jisser, who owns a diverse portfolio of investments, feels, simply put, gypped.
The end result of all of this: They may go east. They, as in owners and tenants alike. Take Mark Winner, who owns a number of lots in the state and is seeking a different gold rush — in the Central Valley, California’s oft-forgotten agricultural heartland, where he says young people and Hispanic immigrants are more willing and able to move into a mobile home. Some even make the commute back to the Bay for work, which can take anywhere from two and a half to four hours. Winner says he sees a new crop of potential residents every year.
For many owners, though, that’s not an option, stuck as they are with this distinctly useless plot of land on their hands. Nanda says that what Jisser is trying to do — convert — is relatively rare, thanks to those battles he faces; she says most landlords’ attitude is: Why bother with the worry? Which, of course, is ironic in this land of theoretically infinite opportunity. Jisser hasn’t totally given up on that classic Silicon Valley American dream, though. He hopes, after the next appeal, or the next, or the next, that Buena Vista will soon be history … and that a shiny set of luxury condominiums will tower.
As in so much of the Valley, this housing thing has been — still is — well, “a bubble,” says Jefferson Lilly, who runs a San Francisco-based real estate investment and advisory firm with expertise in mobile and manufactured homes. (He, too, laughs when I ask if he owns in the Bay. Obviously not. He prefers the Midwest.) The thing about California, though, is that it sure looks sunny — sometimes blindingly so. “Californians,” Rolfe reflects, with a hearty flyover-state laugh, “always seem to think things are continually on the rise. No matter what.”