THE KAUL Co.,

June 7, 1955.

Hon. BRENT SPENCE,

Chairman, House Banking and Currency Committee,

Washington 25, D. C.

DEAR CHAIRMAN SPENCE: In the course of the hearing on H. R. 6164 on Friday, June 2, 1955, Congressman Irwin D. Davidson asked whether mobile home parks were profitable enterprises and whether the industry could furnish an operating statement for a typical park.

Although no statistical survey has been made which will give us an industry average, we have been able to compile, and enclose herewith, a typical operating statement based on the current operations of some typical parks which aggregate over 560 spaces. The experienced operators in this business calculate to earn between 5 to 10 percent per year on the capital investment, which is approximately what the attached statement indicates. Some operators may do a little better and some not as well as this, but in general, mobile hoze parks have been a prudent investment. We know of no bankruptices or foreclosures of good quality parks since World War II, nor have we heard of any spectacular profits in the industry.

Congressman Davidson also asked why banks are reluctant to lend if the mobile parks are sound profitable businesses. Most of the reluctance is due to the fact that the parks are located in the outskirts of town, or near Government installations, where the course of future development is less certain than in urban subdivisions and commercial developments. If mobile home parks are included under FHA, we believe, the lending institutions will open up credit just as happened when farm housing in outlying areas was made eligible for FHA and Department of Agriculture guaranties.

We sincerely appreciate the consideration of the House Banking Committee and earnestly hope that Congress will take favorable action on the proposed amendment to include mobile home parks in the National Housing Act.

Respectfully yours,

RALPH KAUL,

Consultant, Trailer Coach Association.

Typical operating statement on 100 space mobile home trailer park based on current operation of park having aggregate 560 spaces

1 Assumed $80,000 mortgage 5 percent 20 year on 100 spaces $100,000 appraisal.

Mr. LUCAS. Your questions have been very objective, and have been helpful to us. We are glad to have them.

These amendments, as I have indicated, relate to FHA insurance on the financing of real estate and improvements, clearly consistent with the FHA pattern of insurance activities.

In effect, the mobile-home park is a suburban apartment development, something with which the FHA is long identified. The principal difference is that in the case of the mobile-home park the tenant owns the unit and rents the space and the utilities. It is for the financing only of the land, improvements, and utilities that FHA insurance is called for, not for the units themselves. Consequently, normal FHA practices would obtain. Operations under these amendments, if adopted, would require no radical departures from FHA's customary procedures.

Although the FHA would probably prepare and promulgate a set of regulations applicable only to mobile-home parks, it is to be observed that the items financed by the FHA-insured loan proceeds fall within the general area of the present FHA-insured program, that is, land, improvements, and utilities. The difference is that the mobilehome park would require less FHA-insurance commitments because residential structures are not included. But the objective in all cases is the same, to provide more housing: In the routine case, by insuring loans for the residences themselves, and, in the instant case, by insuring loans for the provision of the improved, utility-serviced spaces on which the shelter will be located.

Mr. Chairman and members of the committee, I am not unmindful of the congressional and executive policies against FHA-insurance of loans to finance transient accommodations. That is why I am anxious to emphasize that the improvements constructed or financed under H. R. 6164 are not transient. They are as permanent as anything can be-land, grading, paving, subsurface utilities, and so forth. The spaces thus provided are not available for overnight parking. They are rented by the month to families having a longtime need for that location to accommodate a specific purpose for being there, an indeterminate assignment to a military post, a 2-year objective. The record must be clear on this point.

Under this bill FHA would not be participating in a venture to finance an overnight hotel for a constantly traveling trailer, but rather would be participating in a program for mobile-home parks, meeting all essential requirements for planning and plumbing, fire and wiring codes, calculated to provide spaces for stays of semipermanent, indeterminate lengths of time by completely equipped and furnished

homes.

As Prof. Taylor W. Meloan, assistant professor of marketing of Indiana University, says on page 114 of his recent book, Mobile Homes:

*** mobile homes have evolved into special-purpose permanent housing that has become and will undoubtedly remain an important part of American life.

That there is need for more and better trailer parks is clear. I am sure that you committee members in your travels have been impressed both favorably and unfavorably by what you have seen in the way of trailer courts or parks. Some are very good and some are very bad. We believe there are too many bad ones.

Our association, the MHMA, maintains a field staff to visit, inspect, and rate these trailer courts for our guide book. We wouldn't undertake to tell them what to do, but we would furnish them gratuitous service in the way of technical advice that our men might be able to give them if they so desired.

Last year we rated as satisfactory only some 5,500 such trailer parks of the approximately 12,000 in the United States. We rate these parks on such features as sanitation and sewage facilities, power availability, means of entry and exit, roadways provided, water availability, fire hazards, recreation areas, appearance, and so on through a comprehensive checklist. To those which rate 95 points or better out of a possible 100 we award what we call a gold-star rating. Last year we were able to make less than a thousand such awards.

Finally, may I point out that many leaders in the financial faternity who specialize in retail financing are enthusiastic in their endorsement of these amendments. Once it became known that a bill was going to be introduced proposing amendments intended to authorize FHA to insure loans for mobile-home parks, many bankers financing mobile homes at retail communicated with us to express their endorsement of the need of these amendments. These endorsements have come from large and small banks, from national as well as State banks, from finance companies and discount houses, and from various parts of the country. I do not want to burden you or the record with lengthy quotations, but I ask your indulgence to quote a line or two from a few representative letters.

From the Albany Discount Corp., Albany, N. Y.:

In my area we have many parks which are marginal due to one reason only. That reason is lack of adequate park financing. I find that park owners have to build their parks out of park earnings. There is no mortgage money available due to lack of Government participation.

From Southeastern Fund, Columbia, S. C., which does business all over the southeastern part of the country:

The one segment of this industry which has been slow to keep pace with the improvements experienced in the other segments has been mobile-home parks and courts * * *. We believe that more persons interested in real estate development would construct parks or courts if reasonable medium-to-long term financing was available.

And on the question of the Government going into a matter of this kind, you could say the same thing when FHA went into financing of housing. Private enterprise was not able to handle the situation, just as private enterprise is not able to handle this situation.

From Denver, serving the Mountain States, comes a letter from the Citizens Savings Bank:

We have financed hundreds of mobile homes and in addition to the military personnel we now find our customers engaged in road-construction occupations, dam-construction workers, and oilfield employees. All of these occupations necessitate the moving of the person and his family from time to time and they have found that mobile-home living is expedient in their moving from city to city. They are not forced to sell a house and, therefore, their mobile home becomes a wise investment.

We understand that your association is endeavoring to have an amendment of title II of the National Housing Act authorizing FHA to insure mobile parks. A very great requisite of mobile home living is a comfortable, sanitary, modern trailer park where they can park their trailer.

Most of the trailer parks are in a deplorable condition because the park owner is unable to adequately finance needed improvements in the form of

sewer, sidewalks and patios, power connections, and needed landscaping. In my opinion, mobile-home owners are entitled to the same consideration and treatment as those persons who rent a unit in a multiple dwelling.

FHA title II insurance would make it possible for park operators to finance the cost of their parks and its improvements by interesting large investors with adequate capital.

Two of the largest financing companies in the country have written. One, the Commercial Credit Co., Baltimore, writes:

From our investigation and surveys it is quite apparent there is a need for additional mobile-homes parks throughout the country. We further understand that your association is endeavoring to secure an amendment to title II National Housing Act, authorizing FHA to insure mobile parks. We certainly recommend their entering this field, as above-mentioned our surveys show a need for more modern mobile parks.

And the other, Universal CIT Credit Corp., New York, says:

In the writer's opinion, the adoption of the above-proposed amendment would help enormously toward the attainment of this desirable objective, and I am glad to record my endorsement of your recommendation that this amendment be adopted.

Here is an extract from an extremely thoughtful letter from Pullman Trust & Savings Bank, Chicago:

I think the idea is excellent. Mobile homes and the parks in which they must locate, are as essential to our economy and national defense as are the construction workers who build our ever-expanding lines of communication, power, and other public works projects, and atomic energy plants and other defense installations. Any one who fairly estimates our future expansion nationally, and our needs for defense installations, and who carefully analyzes and recognizes the elements inherent in these construction operations, must face the fact that they will require a tremendous, somewhat fluid, force of workers who can move with some celerity from community to community. If adequate facilities are not provided, then our whole future expansion and construction of defense facilities will be needlessly slowed down.

Actually, as Americans who do things, we would not nationally tolerate such a slowdown. What would happen is that we would slam-bang our way through, letting the law and human decency blink at the fact of sloppy parks for mobile homes, illegal usages of property, etc. Such sloppiness and illegality breeds a sort of extra-legal financing operation, which is always terribly expensive. It may mean that no financing, as such, can be secure, and pure capital funds have to be used for the entire cost of the trailer park; or it may be that the operators of the parks will resort to high interest rate and high commission sources of scarce funds; in either event, the cost soars, and must be passed on to occupants of the mobile homes, and in turn passed on by them into our costs of construction, and thus finally paid, well padded all down the line, by all of us as taxpayers. Added to this, of course, is the deterioration of the communities in which such parks are located.

There are now enough instances of well built and well managed mobile home parks to provide sound bases for design, construction, and operations' programs which will provide reasonable insurance against loss of funds invested or loaned to such facilities. It is a good time to present the whole problem to the Federal Housing Administration as a normal function of that body.

From Pioneer Finance Co., Detroit, comes this:

During the 18 years in which we have been in the business of financing mobile homes we have observed the steadily growing acceptance on the part of the public of the idea of the mobile home as a permanent home. During this period of 18 years the mobile homes manufacturers have steadily improved their product to the point where as of now they represent by far the greatest value in the history of the industry. They, also, compare very favorably in value with other forms of housing.

We have noticed during our 18 years' experience in this business that trailer park development, nationally speaking, has not developed proportionately * * *. For the above reasons we are heartily in favor of the efforts of the association to extend title II financing to mobile homes parks and wish you every success.

The following two paragraphs come from the Michigan National Bank, Grand Rapids, which, incidentally, has financed mobile homes on a national scale, and I wish my friend, Mr. Wolcott, were here to hear this:

As a bank interested in the mobile home industry, we have made somewhat of a study of the park situation. It is for this reason that we have somewhat of a definite viewpoint on the immediate need for funds to assist in the building and rehabilitation of good mobile home parks. To acquire more information and experience in this field, we have during the past 3 years extended loans to four substantial park operators in amounts aggregating in excess of $500,000 with two of the parks borrowing approximately $150,000 each to complete their improvements. To date our experience with this type of loan has been most satisfactory.

It is our opinion that a mortgage loan of a reasonable amount made to a responsible park owner of property in a good location will prove to be a sound financial venture for a bank or insurance company. For this reason we are pleased to go on record as recommending that loans properly made on trailer parks be included and insured under title II of FHA in a manner similar to the procedure now available for financing multiple-family residences and apartment projects under the FHA-insured mortgage program.

From Peoples National Bank of Grand Rapids:

We have been acquainted with mobile home industry since 1935 and have been amazed at the growth of the industry, in spite of the poor parking facilities which are offered trailerites.

Finance assistance by FHA will do much to improve living conditions for thousands of good Americans throughout the United States. We sincerely hope you are successful.

The four minor amendments to the National Housing Act contained in H. R. 6164 would appropriately fit in after Section 4 of H. R. 5827. Appended to this statement is a rewrite of the applicable sections of the National Housing Act, as amended, showing how those sections would read if the amendments were adopted.

The first amendment makes it clear that the real estate on which an insurance mortgage is authorized under section 207 (a) (1) and on which there is to be constructed buildings includes real estate upon which there is to be constructed facilities for trailer coach mobile dwellings.

The second amendment includes space in a trailer court or park within the section 207 (a) (6) definition of "rental housing."

The third amendment merely makes it clear that the value of completed-physical-improvements limitation, referred to in section 207 (c) (2), will, in the case of trailer parks, not be measured by the same standards applicable to ordinary residential structures, that is, to buildings installed on real estate. Much of the improvement in a trailer park will be underground, such as sewer, light, and water utilities, and surface, such as grading, landscaping, and roadways, with only a small amount of the value represented by such structures as office, recreational, laundry, or toilet facilities.

The fourth amendment contains the dollar limitation on the mortgage. Present limitations in section 207 (c) (3) are on rooms and dwelling units. This fourth amendment limits the mortgage in the case of trailer parks to a maximum of $1,000 per space or $300,000 per mortgage.

In the light of the place the mobile home occupies in the Nation's housing picture, the need of more and better parks, the adaptability of this type of insurance to FHA's normal activities, and the willing