HOUSING CRISIS: What are mobile homes worth when a developer buys the land?
Central Mobile Home Park is the final resting place for 134 manufactured homes that are mostly around 50 years old and waiting for the wrecking ball that will come when the park is eventually redeveloped for modern housing.
Some of the homeowners are fighting BC Assessment to keep their property values up while Leonard Kerkhoff, whose company Kerkhoff Construction bought the park in 2020, is fighting the same authority but in the opposite direction.
Which sparks a wider debate on what old homes of all sorts are actually worth in a rapidly redeveloping Kelowna.
“Nobody that I know in this park is sitting here saying this is quiet enjoyment,” park resident Elroy Karius told iNFOnews.ca. “This is a game every morning when you get out of bed. You wonder what’s going to happen today that’s going to change the world.”
He and his sister own two units in the park.
On his home, the 2022 assessed value by BC Assessments was $212,000, but it fell to $163,000 for its current assessment based on its value as of July 1, 2023.
His sister’s dropped to $201,000 from $249,000.
In fact, a resident looked at all the values in the park and found the total dropped 12.5%. iNFOnews.ca did its own calculations on about one-third of the units and came up with similar figures.
Assessed values in Kelowna, on the other hand, fell only 3% on average between 2022 and 2023.
Karius points to two related factors he believes triggered the decline in value.
First of all, he says, Kerkhoff bought up a number of units at below assessed value.
Following on that, Karius said, a BC Assessment employee told him the park has “development stigma," so it changed its assessment process from basing values on similar sales throughout the city to only internal sales for Central Mobile Home Park.
BC Assessment would not comment on this specific site because many of the assessments are currently under review.
“BC Assessment reviews the best indicators of market value (sales) from both within and outside manufactured home parks to determine the assessment,” Boris Warkentin, deputy assessor with BC Assessments, said in an initial email to iNFOnews.ca.
iNFOnews.ca then pointed out that assessments in Shasta Mobile Home Park, only about one kilometre away from Central and of relatively the same age and value, went up by almost 3% at the same time that Central dropped by 12.5%.
"Just like there are a number of factors that affect the total value of a property, there are also a number of factors that contribute to why land and improvement values differ between properties," Warkentin said in a follow-up email.
"Some examples are zoning, current and potential uses, current and potential revenue value, and other factors. Professional appraisers at BC Assessment consider these factors and rely on market evidence, typically in form of sale transactions, in determining the assessed values."
The assessments are vitally important because, when Kerkhoff moves to redevelop the land, all he has to pay remaining owners is the assessed value. If those values drop over time, it’s cheaper for Kerkhoff to buy them out.
“They own their home,” Kerkhoff told iNFOnews.ca. “They don’t own the land the home sits on. This is the way it worked when they bought their homes. From then on, the home itself is a depreciating asset. It gets older and older and starts to fall apart, unless they’re maintaining it and fixing it up in a meaningful way. It should depreciate down to nothing over a 50 to 60 year life.”
The BC Assessment website says the park was opened in 1979. Many of the units are listed as dating to the 1970s, so those units are about 50 years old.
Kerkhoff said he is selectively buying units that make good business sense. He looks at getting a good price, but also wants units in good enough shape to rent out during the years it will take before he redevelops the site.
He now owns eight or nine homes, and has appealed the assessments on all of them as being too high, he said. None have been reduced.
“This is the argument I made with BC Assessment,” Kerkhoff said. “We maintain that assessments shouldn’t be going up so why is a depreciating asset going up.”
He argued that other parts of the city that are redeveloping, such as the Capri-Landmark area, show a different pattern for their assessments.
“The homes have been devalued to zero and the land has gone to, like, $1.5 million,” Kerkhoff said. “Their argument for that is, it is no longer house and land. It’s only land. The house has no value. So, if you apply the same logic to a 55-year-old trailer on land, the home itself should be worth zero and the land should be worth more. Of course, that’s not how they work.”
The Manufactured Home Tax Act requires the units to be assessed separately from the park, Warkentin with BC Assessment said in an email.
A quick check of a number of assessed values for properties on Capri Street and Pridham Avenue proves Kerkhoff out.
Many of those houses, dating back to the 1950s, are assessed at either zero or $10,000 while the land is valued by BC Assessment in the $1.6- to $1.7-million range.
Similar properties and houses a few blocks away, on the west side of Gordon Drive, show total assessments for a number of properties that are closer to $1 million with the houses valued in the $250,000 to $350,000 range.
READ MORE: Not all Central Okanagan trailer park sales mean loss of affordable housing
In order to redevelop the 24.5-acre Central Mobile Park site, Kerkhoff has to start off by getting permission from the city to draft what it calls an area redevelopment plan.
He applied to do that in February 2023 but city council said no, telling Kerkhoff that he had to get nine neighbouring properties at the corner of Casorso and Lanfranco roads to join the planning process.
Kerkhoff now has a memorandum of agreement with those property owners and will take a new proposal to the city in the “next coming months.” But it will be years until he gives the one-year notice to the remaining owners in the park to vacate.
That’s what Karius calls the “death notice.”
“The frustrating thing is, there is no place in this process to do anything other than sit and wait or put it on the market,” he said. “I’m sitting here thinking: ‘Wait a minute. I’m 80 years old. Is this going to take another three or four years and then I’ve got to deal with moving, etcetera, at age 85?’”
Others in the park are equally worried with at least 20 owners appealing their assessments, from what he understands.
“I know there are people in the park who have moved elderly folks out because some of the folks that are here don’t have the ability to understand how to even begin to deal with some of these issues,” Karius said.
He talked to his realtor but the outlook is not good, especially if he doesn’t win his appeal of his assessment. That hearing was held last week, but Karius was told no decisions will be made until all the appeals have been heard. If he loses, he can appeal that decision.
If he had listed his unit at $220,000 last year when it was assessed at $221,000, he would have been within the assessed value and may have been able to sell.
If it stays at the new $163,000 assessed value, no one will pay more than that because that’s all Kerkhoff has to pay when he redevelops, Karius said.
“I’m living here with a $650 pad rental and a $300 tax bill for the property and pay my utilities and I’m OK at about $1,500 or $1,600 per month with a full two bedrooms, two bathrooms, a park in front of me and a park behind me,” Karius said. “You can’t replace this any place.”
It would cost him at least $100,000 to buy another manufactured home and given the declining assessed value of his current home, the math just keeps getting worse. To rent an apartment will cost more than he's paying now, even for a studio suite.
Part of the City of Kelowna’s requirement for the redevelopment of the site is for Kerkhoff to provide an equal number of “affordable” housing units.
“That doesn’t mean that’s actually going to be affordable for people living in the park,” Kerkhoff said.
Affordability is based on 30% of the average household income in Kelowna, not on the income of those residents living in Central Mobile Park.
This isn't the only manufactured home park that’s facing redevelopment.
READ MORE: Thousands demand fairness for evicted mobile home communities
In January, West Kelowna city council pressed pause on an application to shut down the Shady Lane Mobile Home Park.
That owner wants to turn it into an industrial site, but was told he’s got to do a better job of accommodating the owners.
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