When the System Works and the Outcome Is Wrong

Jeffrey Howard is an old friend. We have known each other for a long time, and I was fascinated to read some of his recent reporting.

He recently reported on residents of Idlewild Acres, a manufactured-home community in Morganton, North Carolina, who are organizing against substantial increases in their lot rent.¹ Residents told Jeffrey that some increases were announced before existing leases expired, that infrastructure remained in poor condition, and that some people who purchased homes had not received their titles.

The experiences are fairly harrowing. According to one resident, a mother put plywood over a failing floor to keep her five-year-old child, who has a condition that makes his bones especially fragile, from falling through it and breaking his bones.

Per the reporting, the corporate owner disputed the claim that maintenance had stopped. Its representative listed completed capital improvements and said several hundred work orders had been closed. The company also said the rent increases would remain in place.

This story can be read as a dispute between tenants and a landlord. But I think that framing is too narrow, because if we dig a bit we see that it is also a story about system design.

Valid logic versus outcomes - Soundness is what matters

I’m a nerd. I think of things in terms of valid, explainable, and similar, and see systems in all kinds of things. So allow me some conceptual pointers in logic and mathematics.

In formal logic, an argument can be valid and still be unsound. Validity means the conclusion follows from the premises. Soundness requires something more: the premises must also be true.²

Mathematics has a related lesson. A result may be perfectly correct under a particular set of assumptions (axioms) while telling us very little about the problem we actually wanted to solve. If a logic proof contains no error but the resulting model is useless, contradictory to observation, or unacceptable for its intended purpose, we go back upstream. We reconsider the axioms.

This does not mean that an unpleasant mathematical result proves that an axiom is false. Mathematics does not care whether we like a theorem. It means that our chosen axioms may not describe the world we intended to describe.

Human systems work in a similar way. Our axioms are property rights, contracts, zoning rules, financing structures, corporate incentives, enforcement procedures, and assumptions about who can realistically walk away from a transaction.

Given the rules they know and understand, people then behave strategically.

Economist Douglass North called institutions the “humanly devised constraints” that structure political, economic, and social interaction.³ Elinor Ostrom spent much of her career showing that different rules, monitoring arrangements, and enforcement mechanisms produce different outcomes even when the underlying people and resources are similar.⁴

Lawrence Lessig makes the same point in sociotechnical language. Behavior is constrained by more than legislation. Law, markets, social norms, and the architecture of a system work together.⁵

The architecture matters because it determines which choices are cheap, which are expensive, and which are effectively impossible.

The architecture of a mobile home park system

The central feature of many manufactured-home communities is divided ownership. A resident may (1) own the home but (2) rent the land underneath it.

On paper, that looks like a normal exchange. The homeowner pays for a place to put the home, and the landowner receives rent. In practice, the two sides are not equally mobile.

A manufactured home is technically movable. After it has been installed, connected to utilities, occupied, and maintained in one place for years, moving it can be prohibitively expensive or physically impractical. Some older homes cannot survive a move. A destination also has to be available and willing to accept the home. The homeowner therefore owns an asset that is largely immobile but does not control the land required to use it.

Sociologist Esther Sullivan describes residents in this position as “halfway homeowners.” They receive many of the costs and responsibilities of ownership without the security normally associated with owning the land beneath a house.⁶

Economists Werner Hirsch and Anthony Rufolo identified the predictable incentive problem created by this arrangement more than 25 years ago. Divided ownership of an immobile housing asset creates an opportunity for rent increases because the landowner understands that the homeowner’s cost of leaving is unusually high.⁷

Once one party has made a large, location-specific investment, the other party can capture some of its value by changing the terms. The homeowner’s past investment becomes the park owner’s future bargaining power.

The system produces the leverage of the property owner that causes the mobile homeowner to be forced to accept new terms.

Ownership that is not quite ownership

The second problem is that manufactured homes often occupy an awkward legal category.

The Consumer Financial Protection Bureau notes that manufactured homes are generally treated as personal property by default unless steps are taken to convert them into real property.⁸ That means a person’s primary residence may be titled more like a vehicle than like a conventional house.

This distinction affects financing, taxation, title administration, and consumer protections. Home-only, loans generally have shorter terms, higher rates, and fewer protections than mortgages secured by real property.

North Carolina law reflects this dual structure. A manufactured home can be converted to real property through a title-surrender process, but doing so generally requires the homeowner to own the land or hold a qualifying long-term lease.⁹

That complexity is directly relevant to Jeff’s reporting. Residents alleged that some buyers had waited years to receive titles. Gvest’s representative responded that its sales team had begun contacting buyers to determine how they wanted their titles delivered.

Note that I do not know enough about the individual transactions to reach a legal conclusion. There may be a slew of different contracts, title statuses, liens, or facts for each home. But, the systems issue does not depend on resolving those individual disputes.

A title is the formal mechanism connecting a person to the thing they say they own. When that thing is also their shelter, delayed or unclear title administration moves the issue from minor paperwork problem to a major hurdle. It restricts the owner’s ability to sell, finance, move, or defend the asset. The person may have paid for a home while lacking the practical powers that ownership is supposed to provide.

What North Carolina protects

Current North Carolina law requires at least 60 days’ notice to terminate a tenancy involving only a manufactured-home space.¹⁰ It requires 180 days’ notice when a community is being converted to another use that will require homes to move.¹¹ Residential landlords must keep covered premises fit and habitable, maintain safe common areas, and remedy dangerous conditions such as unsafe flooring.¹² State law also recognizes tenant organizing and good-faith repair complaints as protected activities for purposes of a retaliatory-eviction defense.¹³

While these protections matter, they are still a partial response to a distinct ownership structure.

North Carolina does not currently have the comprehensive Mobile Home Park Act that legislators have repeatedly proposed. The 2025 version remains in the Senate Rules Committee as of this writing.¹⁴ The proposal would create a more specific framework for leases, termination, cure rights, dispute resolution, resident organizing, and other features particular to manufactured-home communities.

North Carolina also generally prevents cities and counties from regulating the amount of rent charged for privately owned residential property.¹⁵ Local governments therefore have limited ability to respond directly to unusual rent increases, even where local officials believe the housing market has become structurally coercive.

The result is a system with some conventional tenant protections wrapped around a nonconventional form of ownership.

The broken axioms

The outcome at Idlewild Acres appears less surprising when the rules are written plainly.

1. Someone can meaningfully own a home without secure control over the land necessary to use it.

2. The ability to leave makes a contract voluntary, even when leaving may require abandoning or destroying much of the value of the home.

3. A primary residence can be treated as vehicle-like personal property for title and financing purposes while being treated as immovable real estate when the owner wants to relocate it.

4. Market rent reflects a competitive price even when one side faces enormous switching costs and the other side controls the only usable location for the asset.

5. General landlord-tenant law can adequately govern a relationship that combines homeownership, land rental, consumer finance, vehicle-style titling, infrastructure management, and local land-use policy.

6. Individual residents can enforce their rights through contracts, agencies, and courts even when ownership is distributed among affiliated companies, park-specific entities, management firms, and title records that may be difficult to understand.

When we start with those premises, I believe that the result is not difficult to derive. An investment owner seeks higher returns. A park manager raises lot rent. A resident evaluates the cost of moving and discovers that moving is not a credible alternative. The resident absorbs the increase, sells at a discount, abandons the home, or enters a legal fight.

Within the system, each and every step can appear locally rational yet the aggregate result can still be destructive.

Fixing the premises

Though the exact policy leaves room for reasonable disagreement, I see less room for disagreement about the structural problem.

The Federal Housing Finance Agency has already identified a practical floor of manufactured-housing protections. These include renewable leases absent good cause for non-renewal, written notice of rent increases, a meaningful opportunity to cure missed payments, the right to sell a home in place, the ability to assign a pad lease without unreasonable restraint, and advance notice of a park sale or closure.¹⁶

North Carolina could also make title-transfer obligations clearer and easier to enforce. A person who has completed the purchase of a home should not spend years determining whether, when, or how the legal evidence of ownership will arrive.

Residents could be given a meaningful opportunity to purchase their communities when owners decide to sell. Resident-owned cooperatives do not eliminate costs or difficult decisions, but they align control over land with the people whose homes depend on it.

Infrastructure obligations could be linked more clearly to rent increases. Rent is not only a payment for dirt. In a community setting, it purchases access to roads, drainage, utilities, common areas, administration, and a stable place to keep a major asset.

None of these changes requires believing that every investor is malicious.In my view, that is important because investment can be a tremendous tool to improve communities and individual’s economic and sociotechnical outcomes. I believe that a good system should not require unusually benevolent owners to produce tolerable outcomes. It should make ordinary strategic behavior compatible with human stability. (Economists would classify this in mechanism design).

Jeff’s article documents people organizing because they believe the current arrangement is failing them. The broader issue is that systems can produce harmful outcomes without containing a visible logical error. Sometimes the system is not broken because people have stopped following its rules, but because they are following them.

In short - the proof works, but the axioms don’t.

Administrative note

Information and conclusions presented in this blogpost are sourced from reporting and from my read of sources. It does not constitute legal or financial advice.

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