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Although manufactured homes are not significantly different from homes built on site, they still carry the stigma of being associated with mobile homes. A manufactured home community is a typical residential subdivision, except the homes are all manufactured in a factory rather than being stick-built on site. The developers of such communities feel that they are pioneers because no one in the area has even considered this approach to housing. Their ability to deliver a high-quality product at a low cost, the increasing number of manufactured homes being purchased annually, and the market research that retirees and not just small families are finding these homes attractive and affordable may indeed show they are tapping into a future market.

What do you do with a 105-acre tract of land on the edge of town that has been vacant for decades? You build a manufactured home community, of course. So went the thought process of developer Ray Thurlow. Deciding how to use the land effectively started in the late 1980s. Over the last twenty-five years, the developers found there was a need for more affordable housing. Young families could not afford a typical site-built home and often purchased older homes needing repairs. Thurlow believed the property's good access to the interstate and shopping made a good location for starter homes. As Thurlow progressed in his plan, he asked Ted Neuburger to become his partner. Neuberger stated he wanted nothing to do with these homes but, by his own admission, had not been in a manufactured home for twenty years. After walking through several units, he changed his mind. This perception, or stigma, would show up again during the proposed zoning change hearings.

A manufactured home community is a typical residential subdivision, except the homes are all manufactured in a factory rather than being stick-built on site. Using manufactured homes has several advantages:

* They are built in a plant, a controlled environment, so the materials are not exposed or subjected to adverse weather.

* They are constructed with standard features and then are modified based upon the plan or model selected by the purchaser.

*There is a considerably shorter period between home selection and moving in.

New manufactured homes provide a maintenance-- free exterior. All homes have vinyl siding, insulated thermal pane windows, steel insulated doors, zone three insulation (a cold climate package), and 2" x 6" framing. The new home relieves the homeowner of facing immediate necessary major repair costs. The homes are built at the factory according to the Housing and Urban Development code that became effective in 1976 and then are inspected by the city building inspectors. City inspectors visit each site several times to approve the concrete, foundation, wiring, and garage, and then make a final inspection.

Highest and Best Use

Having driven by this property for the last sixteen years, the appraiser in me has often wondered why the land was not being utilized. Then came the question: What would be the highest and best use? Determining the highest and best use is one of the first steps in the appraisal process and can be the most challenging. Devin Sprecker of Robert Taggart and Associates conducted the appraisal for this project and shared the portion of the appraisal relevant to the highest and best use and the analysis of the potential absorption rate. Portions of the appraisal are excerpted below.

The definition of highest and best use is that use which at the time of appraisal is most likely to produce the greatest net return to the land and buildings over a given period of time. The steps which help the appraiser reach the conclusion are as follows:

1. Legally permissible usage-We have concluded the potential for zoning of the subject is broad with adjoining properties zoned residential, industrial and commercial.

2. Physical characteristics and limitations-The size, topography, location, visibility and access tend themselves to related uses in conformance to those that exist on adjacent properties that have been developed to the above uses.

3. Off-site facilities available-All utilities and arterial street improvements serve the property.

4. Most profitable use of the site-The subject site has no unusual restrictions. The zoning, TUD' Residential, is not broad enough to permit flexibility in use. However based on the zoning of adjoining property and previous zoning of the subject it is our opinion a change of zoning to industrial or commercial could be obtained. The site size is large enough for most; if not all permitted uses. There is abundant industrial zoned land in the area with limited new development due to difficulties in attracting industry to Topeka.

There are large mobile home parks in the immediate vicinity supporting a trend to average or below quality development and middle income residents. The subject development as proposed will market to middle income families with modular home improvements on crawl spaces or basements with attached garages. This is the type of development the area best supports.

We have concluded the highest and best use of the land, as if vacant or as improved, would be for a single family subdivision of fair to average quality improvements, marketed to the lower middle income sector such as the proposed use.

Absorption Rate

The independent appraisal reviewed other single-- family residential subdivisions to establish an absorption rate for the subject. An analysis of five other subdivisions indicated an annual absorption rate from 12 to 50 lots. The higher absorption rate was a subdivision with lower improved property values. "The estimated property values as improved in the subject subdivision are to the low end of the range from all subdivisions considered." Based upon this analysis, the projected absorption rate for the subject property was 35 lots annually.

An option was taken on the land in the spring of 2000 with a contingency clause based upon successful rezoning and the availability of financing. The purchase was completed in January 2001, and the plat of the land calls for 340 lots to be developed, or approximately 3 lots per acre. Raw land costs were $4,000 per acre, and the developers chose to pay for the site improvements instead of having special assessments. After constructing the streets, curbs, and all site improvements for the first 35 lots (Phase 1), their investment was at $15,000 per lot. The standard lot frontage is 75 feet, and the depth, 125 feet. There is a 90-foot greenspace between the city street and the first row of lots.

Phase 2, containing 22 lots, started in February 2002 and will be ready by mid-year. Phase 3 will then start in the spring of 2003. The subdivision started sales in November of 2001 and in the first four months had sixteen sales. They had planned during the start-up period to sell two to three units per month and have a breakeven point of three units per month. The developers believe they are ready to turn the corner and that sales will increase and the project will sell out in five years, or an absorption rate of 68 lots per year. This rate exceeds actual absorption by comparable subdivisions and is almost double the appraiser's projection. Currently there are ten to twelve couples per week visiting the sales office. The anticipated net return for the project is 4 percent, which they state is the national rate for builders.

Property Restrictions and Building Types

Typical for most subdivisions, there are restrictions on how the property can be used and what can be built on the lots. Each dwelling must be a minimum of 1,300 square feet with a minimum 28-foot width. The homes must be ranch style, all with detached garages, and outbuildings must have the same exterior siding, colors, and roofing material as the residence. No used materials or buildings are allowed.

Finding a manufactured home builder that would work with the developers was difficult. Manufactured homes typically have a two-car attached garage, so these would require some modification by the home builder. Approximately 90 percent of all floor plans would not fit the building restrictions of the subdivision. It took several modifications, but a potential home purchaser has eight options (see www.grandoak.net). The homebuilder has now started to offer some of these modifications to dealers.

Original plans were for all the homes to have a crawl space. All purchasers want a full basement but only about half can qualify for the additional financing. Calculating the purchase price is very simple. Each of the eight option sheets shows the price, monthly payments (principal, interest, taxes, property insurance, and mortgage insurance), and the basement cost if chosen. Home buying made easy!

Financing and Market

Financing of manufactured homes has changed in the last few years. Historically, not all lending institutions would lend on this type of home, and if they did, the down payment was larger, the loan rate higher, and the loan term shorter than those for stick-built homes. A large share of the loans was through the home dealer. The developers, working with a local lending institution, used an FHA loan of thirty years with 3 percent down and the same interest rate given to stick-built homes.

Based upon market research, the anticipated target market was for young families. Although the young families are indeed buying, a large market is semiretired and retired persons wanting to downsize.

Information provided by the Manufactured Housing Institute (MHI), states that 29 percent of retirees reside in manufactured homes. The manufactured home industry believes that with the future retirement of the "baby boomers," this percentage will increase. MHI statistics also state that 17 percent of all new homes built in 2000 were manufactured homes. This percentage is up from 11 percent in 1996, and 13 percent in 1997 and 1998.

Considering that a manufactured home community is not a typical land use, the request for a zoning change met with opposition. The ninety days projected for the zoning change turned into almost a year. The east side of the manufactured home community abutted a fifteen-to-twenty-year-old subdivision with home values in the range of $150,000 to $225,000.

Adjacent property owners were not receptive to having a "mobile home park" as their neighbor. The stigma of what a mobile home used to be, versus what a manufactured home currently is, had to be overcome. Often adjacent property owners complain that manufactured homes close to their property create a loss of value. "Manufactured housing now appreciates in value when it is sited in a good location, is the beneficiary of routine maintenance and care, and is supported by a stable housing market. According to Dr. Carol Meeks of the University of Georgia, the life of a new, year-round lived-in manufactured home is close to 55.8 years." Several of those who had opposed the rezoning have since visited the home community and have been surprised at the quality of the homes and at the home community's appearance.

After the land was purchased, zoning was in place, and a home manufacturer was on-board, it was difficult to find Realtors interested in selling the properties. Eventually, some were found, and they have stated that it is difficult for co-op brokers to be interested because of the stigma. It will take a few years of sales and resales before these attitudes change. The Realtors are hoping that other Realtors come to understand that, "All houses are manufactured, just some of them are on-site and some at a plant."

The developers of this home community feel that they are pioneers because no one in the area has even considered this approach to housing. Their ability to deliver a high-quality product at a low cost, the increasing number of manufactured homes being purchased annually, and the market research that retirees and not just small families are finding these homes attractive and affordable may indeed show they are tapping into a future market.