Link to full article at The Chicago Tribune
I was working in eastern Kentucky last fall when I received a call from a woman facing her second eviction. Months earlier, her apartment had been sold to a new investor, and rising rents forced her out. Now, nearing 80, she couldn’t find another place she could afford.
When we finally found her, she was sleeping on a couch in someone else’s cramped trailer, unsure how long they’d let her stay. Seeing us, she broke down sobbing — apologizing for losing the apartment we’d helped her get.
Like many in her situation, she blamed herself. But she wasn’t the only person I met who had lost their home after a corporate purchase and sudden rent hike. From Appalachia to Chicago, all faced the same harsh reality: There simply aren’t enough affordable places left to live.
In the past decade, institutional investors have acquired more than 800,000 mobile home lots — a fifth of the market nationwide — often hiking rents on residents with nowhere else to go. In Illinois for example, mobile home residents in Champaign have experienced sharp lot rent increases after their mobile home parks were purchased, with residents in one parkseeing rent increase by more than 50%.
In response, Illinois state Rep. Abdelnasser Rashid, D-Bridgeview, recently introduced a bill to cap rent increases in mobile home parks to 3% plus inflation. “In recent years, institutional investors have been buying up these mobile home parks, leading to skyrocketing rents for residents who have few alternative housing options,” Rashid told his colleagues at a March 20 Housing Committee session.
Radhid’s testimony was followed by Frank Bowman, executive director of the Illinois Manufactured Housing Association, who defended the industry by saying: “If a senior owns their home outright and lives in a manufactured home community, there is no more affordable way of living.”
He’s not wrong — but that’s exactly the problem. There often are no cheaper homes. Residents of manufactured homes are particularly vulnerable, not only because these residents — who often own their homes but not the lots under them — cannot easily move, but also because manufactured housing is banned in much of the state’s land, leaving it artificially scarce. Unlike some other states, Illinois does not allow manufactured homes on all residential lots, and some cities such as Chicago virtually prohibit them.
Manufactured homes are one the most affordable housing options we have, and yet we’ve made them extremely difficult to build. And when you keep any asset artificially scarce, you increase the market power of those who already own it. As Blackstone — one of the largest private equity firms in the country — wrote in a 2023 letter to stockholders, a “structural shortage of housing has resulted in pricing power for rental housing assets.” In a 2024 update, it described “declining new supply” as a reason for “optimism” for shareholders. When a landlord faces little or no competition, tenants have no option but to stick with them — leaving them free to raise rents or fail to provide essential services.
That’s why private equity’s manufactured home investments perform so well. As Rashid noted in his testimony, “From 2010 to 2020, manufactured home parks were the highest returning of all real estate asset classes, with a 22% average annual return for investors.”
Joshua Coven, a researcher who studies the entrance of large landlords into real estate markets, explains: “Institutional investors target assets with constrained new supply, because rents will grow by more when demand increases. Landlords can charge higher equilibrium rents when supply can’t adjust to increased demand.” Indeed, one paper by the Urban Institute found that institutional investors are most likely to invest in markets where population growth is paired with a lack of housing supply.
Invitation homes, one of the nation’s largest real estate investors, stated as much in its initial public offering filing: “We have selected markets that we believe … exhibit constrained levels of new home construction.”
Why do these supply constraints exist? Because our political system is built for gridlock. Local governments restrict mobile homes, multifamily housing and apartments alike. Local control of zoning means that there are a multitude of veto points that can stop homes from being built. And with affordable or non-single-family housing especially, there’s always someone who wants to stop the next home, the next apartment or the next mobile home park from being built.
In Chicago, for example, aldermanic prerogative has long allowed local aldermen to block housing projects at will. That practice led to a civil rights investigation by the U.S. Department of Housing and Urban Development that accused the city of perpetuating racial segregationby blocking affordable housing creation in white neighborhoods.
Illinois is uniquely fragmented with veto points. In fact, it has the most local governments out of any state in the U.S. Despite being backed by the governor’s office, a recent bill to consolidate local governments just died in the state legislature, and another bill to change zoning to allow manufactured homes in more parts of the state failed to advance out of committee.
Fortunately, there are other bills this legislative session that are promising. Beyond Rashid’s proposal, Rep. Bob Rita, D-Blue Island, introduced two measures this year aimed at increasing housing supply by easing zoning rules to allow more multifamily housing and accessory dwelling units statewide.
“The good news is multifamily construction is now down about a third,” the president of Blackstone stated in a 2023 earnings call.
If lawmakers fail to act, that’s exactly the kind of news Wall Street will be waiting for.
Eshan Dosani is a senior at the University of Chicago. He organizes the Appalseed Fund, leads UChicago Students Against Exclusionary Zoning and helps organize the IL Homes for All Coalition.