Download Feasibility Study for Travel Trailer Employee Housing

October 13, 2015
How to Unlock the Potential of Employee Housing for California Farms
Robert A. Elliott
[email protected]
Table of Contents
I. Introduction- Why Employee Housing?
a) Benefits to Farmers
b) Benefits to Farm Employees
c) Environmental and Social Benefits
II. Employee Housing Administration
a) Housing Ownership
b) Legal Basis (esp. Zoning)
III. Types of Housing
IV. Financing
a) Financing Sources
b) Finance Example
-Fixed Costs
-Operating Costs
-Rent and Utilities
Appendix A. Farmer-Landlord and Employee-Resident Profit Summary
Appendix B. Farm Employee vs. Urban Employee Personal Finances
Disclaimer: This document is for informational purposes only. While the information is accurate to the
best of my knowledge, it does not constitute legal, financial, or other advice.
I. Introduction- Why Employee Housing?
Farm employee housing presents a significant underdeveloped opportunity for California
farmers, farm employees, investors, and broader society. Employee housing can increase farmer
income through rent collection and can help farmers attract and retain long-term laborers. On-farm
housing that is much more affordable than any off-farm options will make full-time or part-time farm
employment a viable livelihood choice to a wider section of society than is currently the case. The
viability of part-time hours will reduce the drudgery often associated with farm labor. Increased
availability of manual laborers will allow farmers to depend less on fossil fuel-based technologies and
the corresponding debt/risk that such technologies entail. Reduced reliance on heavy machinery will
also reduce soil erosion and compaction. Diversified, organic, and/or direct market (local) production
often relies more on manual labor than conventional production. Therefore, increased availability of a
labor source supports such alternative practices while generating long-term, rural, place-based
employment. In addition, employee housing could present a third-party business opportunity for
housing developers, consultants, investors, and so forth. That said, third-party business models are
beyond the scope of this document. Rather, this document outlines a solid financial and legal basis for
farm employee housing development. It includes several scenarios which represent complete
systematic approaches, although there are certainly many other ways to conceptualize employee
housing development. The legal basis for farm employee housing outlined in this document (the
Employee Housing Act) is specific to California, but employee housing could also be broadly applicable
outside of the state.
a) Benefits to Farmers
Labor Source: Particularly with respect to diversified production of fruits, nuts, and vegetables farmers
often have trouble finding sufficient labor (especially for harvest).1 Many diversified, direct market
farms harvest several days per week throughout the growing season. Therefore, such farms are wellsuited to offering full-season (or even year-round) part-time employment. Work hours could realistically
be increased to full-time by also employing laborers as farmers’ market sales staff. Such part or fulltime, livelihood-providing employment is the basis for the farm employee housing concept outlined in
this document. Working conditions that are not excessively strenuous added to affordable on-farm
housing can help a farmer to attract and retain a long-term, productive, and satisfied workforce.
1
Economic Factors Affecting Diversified Farming Systems, Bowman and Zilberman, http://food.berkeley.edu/wpcontent/uploads/2014/09/ES-2013-5574.pdf
Income: Farmers can increase their income through renting out on-farm housing to employeeresidents. At a reasonable profit of $100/unit/month, for example, a farm that rents out seven
employee housing units would earn $8,400/year in rental profit (refer to “Appendix A” for finances and
discussion). This additional profit may help a farm to offset labor costs and hire additional employees,
which would in turn allow for increased production/sales and additional rental income. Offsetting labor
costs is very significant given that, on average, labor accounts for about 50% of a diversified farm
operation's production costs.2
Reduction of Debt: On-farm employee housing can reduce debt-load and, therefore, financial risk for
farmers looking to expand their operations. Making manual farm labor more viable reduces a farm’s
reliance on capital-intensive equipment and in the process lowers a farmer’s debt-load.
Support for Beginning Farmers: Given that the average age of U.S. farmers is 58,3 it is increasingly
important to explore opportunities to lower entry barriers for aspiring farmers. While on-farm housing
residents can be farm employees, they could also be beginning farmers. New farmers can benefit
greatly from the land access, marketing avenues, equipment sharing, and amassed knowledge of the
established farm on which the housing is located. Joel Salatin refers to this arrangement between
established and beginning farmers as “stacking fiefdoms.”
b) Benefits to Farm Employees
Makes Farm Work More Attractive: Farm labor is often associated with long hours, drudgery, and
destitution, but on-farm housing can help to change that scenario. Farm employees can realize large
savings in rent and eliminate their commute. In addition, farmers may choose to offer their workers
farm-grown food for low or no cost. Thanks to the Affordable Care Act’s Medicaid expansion, part-time
farm employees’ income will qualify them for low to no cost healthcare through Medi-Cal. Taking all of
the cost savings into consideration, on-farm housing will allow employees to make a living working 2025 hours/week at minimum wage (see Appendix B). This limited hour outdoor labor is enough make a
gym membership unnecessary but not enough to qualify as drudgery. Affordable on-farm housing can
thereby make part-time farm employment a more attractive option for people who may not have
previously considered it. For example, many artists, entrepreneurs, etc. may prefer to support their
independent pursuits through part-time farm work rather than urban employment (e.g. waiting tables).
Also, employee housing can offer substantial benefits to farm support staff (e.g. bookkeepers, chefs,
marketers, value-adders). Given the much higher cost-of-living in urban areas (e.g. San Francisco Bay
Area), an urban resident would easily have to earn at least double the farm employee’s income to be left
with the same amount of spending money in his or her pocket each month. It bears mention that while
2
3
“The Market Gardener” by Jean-Martin Fortier
USDA- Briefing on the Status of Rural America,
http://www.usda.gov/documents/Briefing_on_the_Status_of_Rural_America_Low_Res_Cover_update_map.pdf,
farm labor is in of itself a viable livelihood choice, living and working on a farm becomes even more
practical when a laborer’s spouse or significant other also works (either on-farm or off-farm). The table
in “Appendix B” compares farm employee vs. urban employee finances and assumes a single earner per
household.
Affordable, High-quality Housing: Farm employees would benefit from housing that is much more
affordable and likely of higher quality than other high cost and/or substandard housing options.4
Depending on financing terms, on-farm rent or mortgage payments can realistically be around
$500/month (refer to “Estimated Monthly Rent and Utilities” section). There is growing interest in living
in smaller, less expensive, more energy efficient houses that provide for basic necessities and comforts
but that largely leave nature as the living room. Despite this trend, zoning ordinances have historically
provided significant hurdles for these small (or “tiny”) houses. Thanks to the Employee Housing Act (see
“Legal Basis for Employee Housing” section), agricultural employee housing that complies with the Act's
health and safety requirements is not subject to such zoning ordinances.
Increased Rural Job Opportunities: Employee housing makes it easier for farmers to employ laborers
and thereby generates farm employment opportunities. There are many people who already desire to
earn a rural livelihood and perhaps work in sustainable food production on a long-term basis. In 2010
alone, for example, there were around 80,000 WWOOF volunteers working on farms throughout the
world.5 While some of these people become farmers, many others may lack the funds, entrepreneurial
drive, or desire to start their own farm enterprise. Part-time (or full-time) farm employment may be a
better option for many. California has one of the highest unemployment rates in the nation, and rural
areas are hardest hit.6 A well-managed farm can employ one half-time worker for every three acres.7
Further, more people living and working in a rural area serves to strengthen the nearby community’s
economy and tax base. One figure from Ohio estimates that a job created in farm production creates an
estimated 1.85 to 4.26 additional jobs in the broader economy.8
c) Environmental and Social Benefits
Sustainability: Making manual farm labor more viable can help conserve fertile soils and reduce a
farm’s unsustainable reliance on fossil fuel-based technologies. Ecologically-diversified (and/or organic)
farming is often more labor-intensive than highly-mechanized monocultures. Therefore, when farm
4
“(Un)Safe at Home: The Health Consequences of Sub-standard Farm Labor Housing”, California Rural Legal Assistance,
http://www.crla.org/unsafe-home-health-consequences-sub-standard-farm-labor-housing
5WWOOF
Press Kit Stats, www.wwoof.net/fileadmin/documents/Press_kit_stats.pdf
6
Rural Assistance Center, http://www.raconline.org/states/california
7
Full Belly Farm, http://fullbellyfarm.com/about-us
8
CDS, Local Foods and the Economy, Dellorco, http://www.oberlin.edu/cdsrecyc/localfoods/LocalAg/CDSlocalecon.html
labor becomes a more viable option for farmers and employees, diversified farming becomes more
viable. In the U.S. as of the year 2000, “7.3 units of (primarily) fossil energy were consumed for every
unit of food energy produced.”9 As fossil fuels become less abundant, grow more expensive, and their
damage to the environment accumulates, our continued ability to feed ourselves depends on highyielding, profitable food production systems which minimize fossil fuel reliance. Research suggests that
diversified (and/or organic) farms rely less on fossil fuels, emit less greenhouse gases, and can be more
productive, resilient, and profitable than conventional farms.10 Although soil conservation in
conventional agriculture has improved somewhat over recent decades, a jaw-dropping 1.72 billion tons
of topsoil were lost in 2010.11 That’s about 6.5 million pounds lost every minute. Given the huge
variation in soil types, crops, and farming practices, diversified and/or organic crop production does not
in of itself guarantee reduced soil compaction or erosion. However, diversified farming that uses human
labor and small machinery can significantly reduce several key soil compaction and erosion risk factors,
including wheel traffic from heavy farm equipment, lack of crop rotation, and loss of organic matter
in the soil.12
Community Building: Many people are searching for ways to increase community with others. Wellplanned (intentional) communities facilitate cost-sharing and positive social interaction while preserving
individual space and privacy. Intentional communities that prioritize sustainable design and living are
sometimes referred to as "eco-villages." Other intentional communities may strive to bring individuals
with shared interests (e.g. art, music, tech entrepreneurship) into place-based communities.
Unfortunately, many aspiring rural communities run into zoning obstacles when trying to locate multiple
residences on the same piece of property. As an answer to this challenge, the Employee Housing Act
allows up to 12 single-family units (or one 36-bed multi-family unit) on a single piece of property
throughout the state of California. Zoning obstacles aside, many aspiring communities have the best of
intentions but come up short when trying to make the community financially viable. Employee housing
solves this financial challenge by matching rural livelihood seekers with established farms that are
looking for hard-working, well-trained workers who can be counted on from one season to the next.
9
“U.S. Food System”, Center for Sustainable Systems, University of Michigan, http://css.snre.umich.edu/css_doc/CSS01-06.pdf
10
“Diversifying Corn-Soybean Rotations”, Iowa State University, http://www.leopold.iastate.edu/sites/default/files/pubs-andpapers/2012-07-diversifying-corn-soybean-rotations.pdf, http://rodaleinstitute.org/our-work/farming-systems-trial/farmingsystems-trial-fst-fast-facts
11
“Summary Report: 2010 National Resources Inventory”, U.S. Department of Agriculture,
http://www.nrcs.usda.gov/Internet/FSE_DOCUMENTS/stelprdb1167354.pdf
12
“Soil Compaction: Causes, Concerns, and Cures”, Wolkowski and Lowery,
http://www.soils.wisc.edu/extension/pubs/A3367.pdf
II. Employee Housing Administration
a) Housing Ownership
Technically, “employee housing” is always owned by the “employee housing operator”, who
holds the permit from the California Department of Housing and Community Development. That said,
“employee housing” can be defined as either a) the units themselves and the premises upon which they
are situated or b) the area set aside and provided for parking of units (e.g. mobilehomes, manufactured
homes, travel trailers, or other accommodations provided by employees) (CA HSC 17008(a)1 and
17036(b)2). In other words, an area or lot provided for parking of trailers and manufactured homes is in
of itself employee housing. Therefore, employees (or even third parties) can own the housing units
without acting as employee housing operators. Ultimately, ownership and rental agreements will be
based on mutually-beneficial arrangements for sharing the related work, expense, benefits, and liability.
Since one of the central goals of employee housing is to help farmers, this document assumes that the
farmers are the employee housing owner-operators and that they can collect rent from their employeeresidents. Arrangements by which non-farming (and/or absentee) landowners are the employee
housing operators and rent collectors may work well in some cases, but such arrangements are not the
focus of this document. From here on out, the word “farmer” is used to mean the employee housing
owner, operator, and landlord.
Housing Units Owned by Farmer: Since owning the lots on which housing units are located is enough to
classify a farmer as the “employee housing operator”, farmers can choose whether or not to own and
manage the actual housing units. The benefit of ownership to farmers is that they retain the equity in
the units and the right to sell them. Owners also continue to collect rent for as long as they own the
units. Such ownership and management entails additional responsibilities, such as securing financing,
finding and buying suitable housing units, permitting and legal compliance, insurance, maintenance,
rent collection, and managing rental agreements. Ownership of multiple units involves an increased
debt-load, which unavoidably entails some additional risk. With sound planning, however, the
additional rental income plus effort saved from reduced employee turnover should far outweigh any
additional risk or responsibilities.
Housing Units Owned by Employee: When housing units are owned by employee-residents, farmers
only have to invest in and manage the lot infrastructure (e.g. electric, water, road, septic). Some farm
employees may already own a travel trailer or manufactured home, and others may opt to buy one. In
such cases, employees will find their own financing. They will be responsible for the repairs and
modifications necessary to bring the units into compliance with the Employee Housing Act. Most of an
employee housing unit’s value to an employee will come through the substantial rent savings when
compared to off-farm housing. However, travel trailers and manufactured homes also have value
independent from usage as employee housing in that they can be legally parked in RV or mobilehome
parks. If the employee-owner paid a fair initial price for the unit and maintained it well during
ownership, then the unit should have high resale value (on-farm or off-farm). Granted, the highest
resale value for an employee housing unit most likely involves the buyer also using the unit as employee
housing on the same farm. Reselling a unit within the first few years of its purchase may result in a
small loss of money due to taxes and fees, loan interest and fees, maintenance costs, unit depreciation,
and towing. That said, anyone who remains a farm employee for several years or more would see large
rent savings through trailer or manufactured home purchase.
b) Legal Basis for Employee Housing
California state law guarantees farmers the right to provide their employees any type of temporary
or permanent on-farm housing that meets the health and safety standards described in the Employee
Housing Act, its corresponding regulations, and local statutes (CA Health & Safety Code 17000-17062.5
and CCR 25, ch. 1, subch. 3). More information about the laws and regulations applicable to Employee
Housing can be found at http://www.hcd.ca.gov/codes/employee-housing/.
Zoning: Zoning is straight-forward for employee housing in California. For the purpose of all local
ordinances, employee housing for five or six employees is considered “residential use" (CA HSC
17021.5). Employee housing consisting of seven or more employees and up to twelve single-family units
is considered “agricultural use" (CA HSC 17021.6). No conditional use permit, zoning variance, other
zoning clearance, or additional fee is required of such employee housing that is not required of any
other similar family dwelling or agricultural activity (respectively) in the same area. In other words, the
California city and county zoning ordinances that restrict housing development and dictate what type of
housing can be built are not applicable to agricultural employee housing that complies with the
Employee Housing Act.
Permits: Employee housing operator permits are given by the California Department of Housing and
Community Development. This permit must be renewed annually (unless all the units qualify as
“permanent single-family housing” per CA HSC 17030.5a and 17010d). While zoning variances are not
required, landowners seeking employee housing should begin the permitting process by talking with
city/county health and building departments to make sure that dwellings and civic infrastructure (e.g.
septic, roads) comply with state building standards and local standards (assuming such standards do not
conflict with the Employee Housing Act (CA HSC 17020a)). In addition, employee housing that is
developed per HSC 17021.5 may be subject to certain local regulations specifically regarding residential
usage, whereas employee housing that is developed per CA HSC 17021.6 may be subject to local
regulations expressly regarding agricultural usage.
Local and state permitting officials exist to ensure public health and safety and to coordinate taxation.
They should be considered allies in making sure that employee housing is done properly and safely.
Once a landowner submits an application, local health and building departments have from 30 to 60
days to approve an employee housing proposal or deny it by listing specific procedural or substantive
defects (CA HSC 17021b1). After local approval, a landowner then applies for a permit to operate
employee housing through the California Department of Housing and Community Development.
Housing Rental: The right to collect rent from employee housing is established by CA HSC 17008(a)(2).
Housing can also be rented to agricultural workers that are employed by other farms (CA HSC 17021.6(b)
and 17008(a)(2)). That is to say, as long as there are farmworkers in a given region, a farmer can be
confident that there will be tenants to occupy his or her housing. This assurance lowers the financial risk
involved in a farmer investing in employee housing. Farmers can tailor rental agreements, employment
policies, and farm rules to find win-win solutions for themselves and their employees. Some farmers
may choose to find existing templates and/or seek legal advice regarding contracts with employeeresidents. In the case where farmers do not own the land which they farm, agreements about rights for
employee housing rent collection should be reached with landowners.
Employment: California law (CA Labor Code 1140.4ab) and federal law 29 u.s.c. 203(f) define an
“agricultural employee” as one “engaged in agriculture.” The term “agriculture” is also defined by those
same sections of the code. In addition to field laborers, it would appear that “agricultural employees”
include those who prepare food for market such as on-farm chefs and value-added producers. To
comply with the Employee Housing Act, only one resident of a single-family employee household needs
to be an agricultural employee. Therefore, a partner/spouse/ roommate can have off-farm
employment. While a single part-time farm laborer salary can be sufficient to make ends meet, an
additional earner in a household would clearly be a bonus. Specific employment legal considerations
and practices are beyond the scope of this document. Suffice to say, a farmer who employs a worker at
California minimum wage ($9/hour) can expect to pay $11-12/hour for that worker after including
workers’ compensation, FICA (social security and Medicare), unemployment taxes (FUTA and UI),
Employment Training Tax, and payroll service fees. The “California Guide to Labor Laws for Small
Farms”13 is a great resource for employment related information.
California Environmental Quality Act (CEQA): All housing development in California is potentially
subject to environmental review prior to approval. The sustainable nature of employee housing (refer
to “Environmental and Social Benefits” section above) is very much in keeping with the spirit and intent
of CEQA. In addition, the official California state policy established in the Employee Housing Act strongly
encourages the development of employee housing. Therefore, there is a specific CEQA exemption for
Agricultural Employee Housing (CA Public Resources Code section 21159.22).
III. Types of Housing
Per CA HSC 17008, employee housing can consist of any type of dwelling that complies with the
health and safety standards of the Employee Housing Act and its corresponding regulations. While
housing can technically be as simple as elevated tents or retrofitted railroad cars, dwellings designed for
longer term human habitation are likely to be more comfortable for residents and easier to bring into
13
“California Guide to Labor Laws for Small Farms”, Alcorta, Beckett, Knox, https://attra.ncat.org/attrapub/summaries/summary.php?pub=461
health and safety compliance. Ultimately the farmer and farm employees will decide what type of
housing they deem to be mutually agreeable, but below are several promising options:
Travel Trailers: can be used as temporary or permanent employee housing as long as they meet the
applicable health and safety standards (HSC 17008 and CCR 610). The California Department of Housing
and Community Development has permitted travel trailers for use as long-term employee housing in
many California counties. Travel trailers offer the benefits of being available, affordable, and preequipped with most of the required health and safety systems. They also have a somewhat
standardized resale value (per NADA guides and sale price of similar trailers in an area). In other words,
their value is not tied to their usage as employee housing, which in turn reduces investment risk for both
purchasers and lenders. Travel trailers are not vehicles and are therefore less expensive to purchase,
operate, and insure than “motorhomes” (RVs with engines/motors). Travel trailers that are used as
employee housing will need to comply with RCIA/ANSI standards and possibly federal, state, or local
laws (other than zoning) that specifically regulate travel trailers.
Manufactured (Mobile) Homes: are a great option for increased space and comfort over travel trailers.
They are generally (though not always) more expensive to purchase than travel trailers, and they are
almost always more expensive to transport and install. Manufactured homes also have a somewhat
predictable resale value (based on NADA and Kelley Blue Book values). Even if the upfront price of
manufactured homes is higher, lower interest and longer term loans may be available for manufactured
homes than for travel trailers.
"Tiny Houses": can be the same size as travel trailers (max. 8.5' x 40') and also be built on a trailer
chassis. That said, their classification as a “travel trailer” is optional. While tiny houses may be legally
classified as travel trailers (RCIA/ANSI compliant), special travel trailer regulations can be avoided by
simply classifying them as generic "employee housing" per CA HSC 17008. Tiny houses are often more
stylish, better built, and more customizable than low-end travel trailers. Tiny houses therefore might
not raise neighbors' eyebrows like used and/or low-end travel trailers would. The downside of not
classifying a tiny house as a “travel trailer” (or manufactured home) is that the owner might have
trouble obtaining a legal ownership title. Along the same lines, securing a loan and insurance would
likely be more difficult. The resale value of tiny houses that aren’t classified as travel trailers is also
uncertain, given that they would only be permitted for usage as employee housing and not off-farm as
travel trailers. Many owners will not find such obstacles to be prohibitive, though, given that the
financial viability of many tiny houses is based upon their low upfront cost.
Fixed/Permanent Foundation Housing: is another employee housing option. Permanent housing allows
for more flexibility in design and construction techniques (e.g. thin-shelled concrete, straw-bale, earth
bag). Its main downside is that it ties the house's value to a specific location, which can limit the
flexibility of employee housing management.
IV. Financing
a) Financing Sources
The type of employee housing chosen may be significantly influenced by the financing options
available at the time. In any case, the key to securing good financing terms is shopping around and
negotiating. If a farmer does not have the money for employee housing upfront, he or she may consider
one of the following financing options (or others not included herein).
14

Lenders with a social, environmental, and/or farm-based mission (e.g. Slow Money, CA
FarmLink, Self-Help FCU, Beneficial State Bank, Kiva Zip) may offer employee housing loans (and
on fair terms). Such loans could be considered personal, business, or real estate.

Manufactured homes and travel trailers can often be seller-financed through a "retail
installment contract." If the homes are to be employee-owned, the employee-owners will likely
have to obtain "chattel" financing, whereby the manufactured homes (or travel trailers) are
considered to be movable personal property rather than real estate.

A farmer-landowner may opt to take out a loan on the equity in their home/land.

Conventional mortgage loans may be an option, although most traditional banks likely lack
experience in lending for employee housing and may therefore be reluctant to do so. In
general, a manufactured home owner must also own the land the home is on in order to finance
the home with a real estate mortgage. In such a case, mortgage financing may be available for
landowners looking to buy manufactured homes.

Farm/agricultural lenders may offer financing. There may also be some loans available for
employee housing as affordable housing.

State, federal, and private loans (or even grants) may be available for employee housing.
“Manufactured homes are eligible for government-insured loans offered by the Federal Housing
Administration (FHA), the Veterans Administration (VA), and the Rural Housing Services (RHS)
under the U.S. Department of Agriculture”.14

Some farmers or employees (e.g. chefs, musicians, entrepreneurs) may even be able to partially
or fully fund housing purchase through grants, start-up funding, or crowdfunding (e.g.
Kickstarter, Indiegogo).
Frequently Asked Questions, U.S. Department of Housing and Urban Development,
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/mhs/faqs
b) Finance Example
The following employee housing finance example is designed to be informative for both
employee housing lenders and unit/lot owners. It is meant to be useful for estimation but may not
represent all applicable costs. Below each table are explanations of the table rows and columns. The
example makes the following assumptions:

Seven housing units are purchased, and they are all installed in the same area on a single farm.

Depreciation rates will vary greatly depending on the particular housing unit. Employee housing
finances would still be strong even if the units retained no resale value, although substantial
resale value is likely. Estimated depreciation and earned equity are discussed in Appendix A.

Custom-built homes include any type of unit that is not classified as either a travel trailer or a
manufactured home. Travel trailers in this example are classified as “trailer coaches” and not as
“camp trailers.”
Estimated Employee Housing Fixed Costs (per Unit)
Travel Trailer
Manufactured Home
Custom-Built Home
California Farm Link
Financed by seller
through “retail
installment contract”
Financed by business
loan from Beneficial
State Bank
Purchase Price ($)
12,000
30,000
23,000
CA Sales/Use Tax ($)
(assumes 8.75%)
1,050
2,625
NA
Title Transfer Fee ($)
15
9815
NA
Est. Towing, Pre-buy
Inspection, and Set-up ($)
500
(not financed)
3,000
(financed with unit)
NA
Housing Lot Infrastructure
($) (electric, water, septic,
3,600/unit
3,600/unit16
3,600/unit
Hypothetical Financing
Source
15
“Private Party Sale for a Home on Local Property Tax with HCD Certificate of Title” CA HCD,
http://www.hcd.ca.gov/codes/forms/HCDRT804.pdf
16
Lot infrastructure will not likely be financed by the manufactured home seller, but the actual terms for the lot loan should be
as good as (or better than) those of a retail installment contract. Therefore, calculating the lot loan with the same terms as the
home loan should not significantly affect the financial estimate.
roads) ($25,200 total)
(total)
(total)
(total)
Down Payment ($)
(20% of unit purchase price)
(2,400)
(6,000)
(4,600)
NA
25017
NA
250
33,323
(includes inspection,
towing and set-up)
22,250
29,723
(includes inspection,
towing and set-up)
18,650
Unit Owned
Loan Fee ($) by FarmerLandlord
2% of
(financed
Unit Owned
costs – down by Employee
payment)
(minus lot
infrastruct.)
Total
Financed
Costs ($)
(Includes
loan fee)
Unit Owned
by FarmerLandlord
Unit Owned
by Employee
(minus lot
infrastruct.)
285.30
(0.02 x $14,265)
213.30
(0.02 x $10,665)
14,550.3018
19
10,878.30
Interest Rate
7%
(Fixed)
6.79%
(Fixed)
3.25%
(Variable, based on
Prime Rate)20
Loan Term
3 years
20 years
5 years
449.26
254.17
402.28
335.88
226.71
337.19
Unit Owned
by FarmerLandlord
Monthly
Loan
Payment ($)21 Unit Owned
by Employee
17
Application fee plus loan and documentation fee (Beneficial State Bank,
http://beneficialstatebank.com/ContentDocumentHandler.ashx?documentId=19191)
18
Unit purchase price + sales tax + title transfer + lot infrastructure + loan fee – down payment
19
Unit purchase price + sales tax + title transfer + loan fee – down payment
20
For the sake of simplicity, we assume interest rate stays fixed at 3.25% throughout the loan term
21
Calculated with online loan calculator at http://www.bankrate.com/
Unit Purchase Price:
Housing unit purchase price is pre-tax and includes any repairs necessary to bring the unit into Employee
Housing Act compliance.22
Travel Trailer: In a single 2014 search on www.rvtrader.com, around one hundred new or used
travel trailers at or below $12,000 were listed for sale within 100 miles of San Francisco. Repairs
or modifications may be required to bring a trailer into compliance with the Employee Housing
Act. If the trailer seller owes back taxes or fees on the trailer, then the sales price should be
lowered accordingly.
Manufactured Home: In a brief Internet search, the least expensive new manufactured home
model found cost $19,799.23 Used manufactured homes can be found from around $5,000, but
they likely need a lot of repairs to bring them into compliance with the Employee Housing Act.
Many new low to mid-priced manufactured homes are available for under $30,000. The
$30,000 includes basic accessories and “trailer skirt.” Long-term financing from traditional bank
or sellers may be difficult to find for used (pre-owned) manufactured homes. Therefore, this
estimate assumes that the manufactured home is purchased new at $30,000.
Custom-built Home (Generic Employee Housing): Thetinylife.com blog estimates the average
cost of an owner-built tiny house at $23,000.24 Some basic owner-built fixed-foundation homes
may also be affordable at this price, especially if the owner-builder contributes his/her own
labor.
Sales/Use Tax:
Travel Trailer: Sales tax in California ranges from 7.5% to 10% of the trailer’s purchase price.
The specific sales/use tax rate depends on the city and county where the trailer for sale is
primarily located (situs).
Manufactured Home: When not classified as real estate, manufactured homes are subject to
sales/use tax.25
22
Trailer owners may be able to deduct portions of loan interest, depreciation, sales tax, maintenance, registration fees, and
insurance from income taxes (if itemized deductions come to more than the standard deduction). Farmer-owners may be
eligible for business-related deductions.
23
http://www.mobilehomesdirect4less.com/trumh-dempsey/
24
The Tiny Life Blog, Mitchell, http://thetinylife.com/tiny-house-infographic/
25
“Manufactured Homes: Frequently Asked Questions”, California State Board of Equalization,
https://www.boe.ca.gov/proptaxes/faqs/manfacthomes.htm#4
Custom-Built Home: Sales tax is not applicable if the unit is classified as real estate rather than
personal property. Real estate is taxed through local property taxes.
Title Transfer Fee:
Travel Trailer: There is a one-time title transfer fee of $15.
Manufactured Home: There is a one-time title transfer fee of $35.
Custom-Built Home: Titles may not be available for other/generic employee housing. If titles
are available, though, fees will be on a case-by-case basis.
Towing Cost and Pre-buy Inspection:
Travel Trailer: Towing cost will vary depending on the distance of the sale location from the site
of the employee housing installation. The trailer may need to be towed to a DMV office for
physical inspection prior to licensing and registration. If the trailer buyer does not own a
suitable vehicle for trailer towing, he or she will have to either rent such a vehicle or pay
someone for towing service. It’s possible that a seller may deliver a trailer at no cost, but if not,
a high-end estimate for one-time towing cost is $500. Getting a trailer inspected by someone
who knows a lot about travel trailers will more than pay for itself. Any pre-buy inspection fees
are grouped with towing costs for the purposes of this estimate.
Manufactured Home: Both set-up and transport will be more expensive for manufactured
homes than for travel trailers. Towing and set-up cost is highly variable and depends on factors
such as: whether or not there is a “take-down” cost, whether or not the home seller throws in a
deal on set-up and/or transport, how far the unit needs to be delivered from sale to installation,
the type of accessories installed, whether the unit is a single-wide or double-wide, and the
company hired for set-up. The $3,000 estimate assumes a new single-wide home and includes:
$500 for delivery to dealer, $280 for accessory installation, $2,000 for set-up, and 30 miles
towing at approximately $7.50/mile.26 Given that towing and set-up are integral parts of a
manufactured home sale, this estimate assumes that they are financed by the seller.
Custom-Built Home: This document’s financial estimate for custom-built homes assumes that
they are constructed on-site. Therefore, there are no additional towing or set-up costs that are
not included in the price of the home.
Down Payment:
This estimate assumes a down payment of 20% of the housing unit’s purchase price. Some
lenders may want the down payment to represent a percentage of the entire financed costs (not just
purchase price), while other lenders may not require a down payment at all. Loan payments will be
lower with a higher down payment and higher with a lower down payment.
26
$7.50/mile estimate based on several online forums and http://www.boe.ca.gov/pdf/pub47.pdf
Employee Housing Lot Infrastructure:
Housing lot infrastructure refers to roads, electricity, water access, and sewage disposal. The
cost of this infrastructure can vary somewhat depending on the type of housing unit to be installed, but
for the sake of simplicity this estimate uses the same lot infrastructure cost across unit types. Employee
housing units can be put on a permanent foundation or concrete platform if desired. Doing so would
increase total lot infrastructure cost. It’s possible that all of the necessary lot infrastructure could be
financed along with the housing unit purchase loan.
Roads: Usage of pre-existing roads is clearly preferable, but it may be necessary to extend short
stretches for employee-resident parking access. Depending on soil characteristics, such
extension may be as simple as keeping the area mowed or it might require dumping a little
gravel.
Electricity (Grid-based): Electricity can be pulled from a grid connection or from off-grid
installations. As fossil-fuel based electricity becomes more expensive and renewable
technologies (esp. solar) drop in price, renewable power may be available at costs equal to or
lower than grid power (especially in sunny parts of California). Grid-based electricity hook-ups
would not be a significant fixed cost for housing lots.
Electricity (Off-grid): Off-grid systems would require substantial upfront investment. With
longer-term and/or non-conventional financing, however, such an investment would represent
no additional financial burden. Some solar panel financing plans (e.g. “power purchase
agreements”) eliminate upfront investment by the homeowner. Alternatively, off-grid power
infrastructure could be purchased outright and potentially financed through the same loan as
the housing units. Other financing and even tax incentives that are specific to alternative energy
may also be available. The $75/month budgeted for grid-based utilities could be collected by
the farmer from employee-residents in order to pay off the off-grid infrastructure.
Water: City water access may be an option, but employee housing is more likely to be
connected to well water. Housing lot water hook-ups will entail installing some extra pipe but
with proper planning should not represent a major fixed cost.
Sewage: As for sewage disposal, a septic system will likely be required. If a farm’s existing
septic system does not have enough spare capacity to accommodate employee housing sewage,
then a farmer will have to either upgrade the existing system or purchase an additional one.
While septic system costs depend on many factors (e.g. design, size, soil type), a realistic
estimate for a professionally-installed septic system that can accommodate up to 12 employees
is $5,000. Based on multiple Internet discussion forums, a low-end estimate for septic system
life expectancy is 20 years.
Lot Infrastructure Total: While road, electric, and water infrastructure costs will vary greatly
from farm to farm, this document’s estimate budgets $25,200 as a maximum total cost. This
high-end estimate is based on the lot rent that a farmer would collect from 7 employees over 36
months at $100/month. Loan terms longer than 3 years would allow for higher expenditure on
lot infrastructure, although it is likely that the cost would be significantly under $25,200. Any of
the $100/month lot rent that is not spent on lot infrastructure becomes profit for the farmer. It
bears repeating that the $25,200 lot infrastructure estimate does not include investment in offgrid power infrastructure.
Loan Interest, Terms, and Fees:
Travel Trailer: While there are countless ways to finance any type of employee housing unit
(see “Financing Sources” section for a few options), this document’s estimate assumes that a
travel trailer is financed by a loan from California Farm Link. Such a loan generally has a 3-year
payback term at 7% fixed interest.27
Manufactured Home: Average manufactured home loan terms for the year 2012 were: 20%
down, 20-year term, 6.79% fixed interest.28 This estimate assumes seller-financing through a
“retail installment contract.” It also assumes that there is no additional loan fee because loan
processing costs are all part of the sale of the unit.
Custom-Built Home: Loan terms for custom-built employee housing will be highly
unpredictable. This estimate assumes the unit is financed through a business loan from
Beneficial State Bank. Such a loan generally has variable interest based on the prime rate (e.g.
3.25%) and a 5-year loan payback period.29
Estimated Employee Housing Operating Costs (per Unit)
Annual Tax (property or
vehicle) ($) (assumes
1.5% of unit value/year)
Employee Housing
Operator Fee
27
Travel Trailer
Manufactured Home
Custom Built Home
$15/month
$37.50/month
$28.75/month
$4.63/month
$4.63/month
$4.63/month
“Get a Farm Loan”, California Farm Link, http://www.californiafarmlink.org/farm-financing/9-access-to-capital
28
“Manufactured Housing Consumer Finance in the United States (2014)”, Consumer Financial Protection Bureau,
http://files.consumerfinance.gov/f/201409_cfpb_report_manufactured-housing.pdf
29
“Commercial Lending”, Beneficial State Bank,
http://beneficialstatebank.com/ContentDocumentHandler.ashx?documentId=19191
Unit Maintenance ($)
(2% of purchase price per
year)
Lot Infrastructure
Maintenance (Road,
water, septic, and
electric)
$20/month
$50/month
$38.33/month
$32.28/month
$32.28/month
$32.28/month
NA
$40/month
NA
$164.41/month
$103.99/month
Insurance
Total Monthly Operating
Costs
$71.91/month
Regular employee housing operating costs include general unit maintenance, lot maintenance,
annual taxes and fees, and insurance. If the housing unit is owned by a farmer, he or she will recover
these costs through the rent collected from employee-residents. Even if an employee owns the housing
unit, the farmer-landlord will likely have to pay for lot maintenance, the employee housing operator fee,
and property taxes that may be linked to the land. Again, such expenses can be recovered by the farmer
through rent collection. If the housing unit is employee-owned, then the employee who owns it will
have to pay for some of the operating costs (e.g. travel trailer taxes, unit maintenance, insurance)
directly. All that said, for the purposes of overall rent estimation, it doesn’t matter whether farmerlandlords or employee-residents are responsible for the operating costs.
General Taxes and Fees (Annual):
Travel Trailer: For the sake of taxation, travel trailers are generally considered to be vehicles.
Therefore, license, registration, and various city/county fees are collected by the CA DMV and
take the place of property taxes. The Employee Housing Act offers a rare exception whereby
travel trailers can be used as permanent housing. Hypothetically, the trailers should not be
subject to double taxation. That is to say, the travel trailer owners should not owe both DMV
fees and local property taxes. In practice, which form of taxation is used will likely be on a caseby-case basis. With respect to DMV fees, the 2015 annual trailer license fee is 0.65% of the
trailer value. The registration fee is $46/year. Additional city/county fees depend on the trailer
location and range from $24 to $47/year. Small travel trailers (no more than 16’ in length)30 can
be classified as “camp trailers” and are eligible for reduced fees and registration requirements
through “permanent trailer identification” (PTI) (CA Vehicle Code 242). “Trailer coaches” are
not eligible for PTI. DMV fees come to an average of $160/year ($13.33/month). With respect
30
Vehicle Code Section 242, CA Department of Motor Vehicles,
https://www.dmv.ca.gov/portal/dmv/detail/pubs/vctop/vc/d1/242
to property taxes, we can assume 1.5% of $12,000 or $180/year ($15/month). Both tax rates
are comparable, but this document’s estimate will assume the higher of the two ($15/month).
Manufactured Homes: Subject to either an “in-lieu tax fee” or local property taxes.31 Local
property taxes are applicable for all manufactured homes first sold on or after July 1, 1980.
Home owners can voluntarily convert manufactured homes first sold before July 1, 1980 from
in-lieu taxation to local property taxation. Most manufactured homes will therefore be subject
to property taxes. Such taxes provide a source of revenue for city and county governments from
employee housing. The general property tax rate throughout California is limited to 1% of a
property's assessed value, but there may be other taxes or fees necessary to pay off any voterapproved general obligation bonds or other indebtedness which could result in a slightly higher
overall property tax rate.32 To err on the side of caution, this estimate uses a total property tax
rate of 1.5%. Each local government will determine the specifics of how to assess and collect
such property taxes per CA HSC 17021.5 (residential) and CA HSC 17021.6 (agricultural).
Custom-Built Homes: Section 17021.5 of the Employee Housing Act provides that housing of 5
or 6 employees will be taxed as residential usage whereas CA HSC 17021.6 provides that housing
of 7 or more employees and up to 12 single-family units will be taxed as agricultural usage.
Local governments will determine how exactly to apply residential and agricultural regulations
to collect property taxes from employee housing. For the sake of simplicity, this estimate uses
1.5% for all employee housing (whether residential or agricultural).
Employee Housing Operator Fees:
Travel Trailer: Employee housing is subject to annual operating fees, which are paid to the
California Department of Housing and Community Development. As of 2014, the minimum
annual Employee Housing Act permitting fee is $200 plus $27 per employee for whom housing is
provided (or $27 per recreational vehicle lot provided for employees) (CA HSC 17036(b)(2)). The
annual permit fee for seven travel trailer lots would be $389 or $56/employee/year.33
Manufactured Home: Employee housing operator fees are the same as those for travel trailers
($389 for seven units).
31
“Manufactured Homes: Frequently Asked Questions”, California State Board of Equalization,
https://www.boe.ca.gov/proptaxes/faqs/manfacthomes.htm#4
32
“Manufactured Homes: Frequently Asked Questions”, California State Board of Equalization,
https://www.boe.ca.gov/proptaxes/faqs/manfacthomes.htm
33
Employee housing may qualify as “Permanent single-family housing” (CA HSC 17010d, 17030.5a) and thereby be given a
longer permit period and not require annual renewal. For the sake of simplicity, the employee housing in this document is not
classified as “permanent single-family housing.”
Custom-Built Home: This estimate assumes that the employee housing operator fees for
custom-built employee housing are the same as for travel trailers and manufactured homes
($389 for seven units).
Employee Housing Unit Maintenance:
Housing unit owners should budget sufficient funds for employee housing maintenance. Any
over-estimate of costs will result in a reserve fund for unforeseen expenses. Annual maintenance
should be fairly routine, given that any unit used for employee housing has already passed applicable
health and safety standards determined by the Employee Housing Act.
Travel Trailer: Most online travel trailer maintenance estimates include the tow vehicle and
assume lots of travel. A largely stationary travel trailer used for employee housing, on the other
hand, would require little towing-related maintenance (and its usage would be more like that of
a manufactured home). This estimate assumes a maintenance cost of 2% of the trailer value per
year.
Manufactured Home: Surveys of manufactured (mobile) home residents estimate average
maintenance costs at 2% of the home’s value each year.34
Custom-Built Home: For the sake of simplicity, this estimate assumes maintenance of 2% of the
unit’s value each year. That said, maintenance costs for owner-built houses may be lower given
that the owner has in-depth knowledge of how the house is constructed and can thereby save
costs by doing many repairs themselves.
Lot Infrastructure Maintenance:
Lot infrastructure maintenance will be similar for all types of employee housing units. For the
sake of estimation, this document assumes that all infrastructure will be replaced completely after 20
years (either gradually or all at once). This estimate uses the high-end figure of $25,200 for the initial lot
infrastructure purchase in 2015. Using the U.S. long-term average inflation rate of 3.3% per year, we
estimate how much new infrastructure will cost in the year 2035 and then divide that into a monthly per
unit cost: (1.033^20 * $25,200) / 7 units / 240 months = $28.71/unit/month. In addition to its
depreciation costs, a septic system requires regular pumping and cleaning. Based on information from
multiple online forums, an estimate for regular septic system pumping and cleaning is $300/year
($3.57/unit/month). A high-end total estimate for lot infrastructure maintenance is therefore
$32.28/unit/month (28.71 + 3.57).
Insurance:
Travel Trailer: While being towed, travel trailers will likely have liability insurance through the
tow vehicle, although the tow vehicle owner should check to make sure. It may not be cost
34
“Manufactured Housing Appreciation”, Consumers Union, http://consumersunion.org/pdf/mh/Appreciation.pdf
effective to purchase comprehensive coverage for inexpensive and/or used trailers, so this
estimate does not factor in travel trailer insurance. That said, comprehensive insurance might
be a good idea for higher-value trailers, and it’s possible that such insurance would be required
by a lender. Some farmers may have general/landowner liability insurance that would cover
damage to trailers while used as housing.
Manufactured Home: An experienced towing company with its own insurance will likely tow a
manufactured home from its sale location to where it will be installed as employee housing.
Home owners may choose to buy liability and/or comprehensive insurance for its usage as a
residence. Some lenders may require such insurance as a condition of the loan. A June 2015
Progressive Insurance online quote estimated a comprehensive plus $50,000 liability insurance
policy at $384/year. The estimate was based on a new 60’ x 16’ fully skirted, tied down, singlewide manufactured home owned by a 33 year-old in Santa Rosa, CA. The cost is increased if the
insurance is paid in multiple installments. This document’s financial estimate uses a
conservative value of $480/year.
Custom-built Home: Conventional insurance may be difficult to find for custom-built employee
housing that is not classified as a travel trailer or manufactured home. Home owners who want
to insure their units may find some unconventional options through shopping around. Assuming
a low upfront cost for a custom-built home, this estimate does not factor in insurance.
Estimated Monthly Rent and Utilities (Paid by Employee-Residents)
Monthly
Unit Owned
Housing Unit by FarmerPayment/Rent Landlord
($)
Employee(Loan payment
owned Unit
+ operat. costs)
Estimated Utilities and
Waste Collection ($)
Unit Owned
Lot Rent Paid by Farmerby Employee- Landlord
resident ($)
Employeeowned Unit
Travel Trailer
Manufactured Home
Custom Built Home
521.17
418.58
506.27
407.79
391.12
441.18
75/month
75/month
75/month
0
100/month
0
100/month
100/month
100/month
Unit Owned
Total Monthly by FarmerLandlord
Payment ($)
(incl. Lot Rent) Employeeowned Unit
521.17 or
596.17 (incl. utilities)
507.79 or
582.79 (incl. utilities)
518.58
506.27
or 593.58 (incl. utilities) or 581.27 (incl. utilities)
491.12
541.18
or 566.12 (incl. utilities) or 616.18 (incl. utilities)
Monthly Housing Unit Payment/Rent:35
In this estimate, rent is determined by adding the “Total Monthly Tax, Operation, and
Maintenance Costs” plus the “Monthly Loan Payment.” Depending on whether the housing units are
owned by the farmer-landlord or by the employee-residents, monthly payments made by residents will
either be a) rent paid to the farmer or b) loan payments to the lender (respectively). That said, the total
monthly payment amounts are the same whether the unit is owned by a farmer or by an employeeresident. This estimate refers to payment/rent amounts during the housing unit (and lot infrastructure)
loan repayment period. After the loan is paid off, farmers will continue to earn rental profit, although
they may choose to lower the rent they charge. Of course, employee-owners’ overall monthly
payments will become significantly lower once the loan is paid off. Profit earned by the housing unit
owners (farmer or employee) during the loan’s repayment period is in the form of the equity. If desired,
the equity can be cashed out by selling the unit, but the owner may prefer to keep renting out (farmer)
or residing in (employee) the paid-off housing units. Travel trailers and custom-built homes in this
example have short loan terms (3 to 5 years). Therefore, the monthly payments are fairly high, but the
owner builds equity in the unit quickly and likely without it losing much resale value. The manufactured
home in this example has a long loan term (20 years). Therefore, the payments are kept low but the
owner does not build much equity in the manufactured home due to loan interest and depreciation of
the unit.
Estimated Utilities and Waste Collection:
Utility costs will be similar for all types of employee housing but will vary with the size of the
unit and how well sealed and insulated it is. There are too many variables to accurately estimate
monthly utility charges. Suffice to say, utility bills will be very low for well-sealed units in the mild
weather across much of California. Energy efficient amenities and a water/energy conservation ethic
will also keep utilities to a minimum. For grid-provided utilities, farm employees may be eligible for
savings programs (e.g. CARE) and should be able to split any fixed (service) charges between all farm
35
It bears mention that in addition to unit or lot rent collection, there are alternative ways for a farmer to earn income from
employee housing, such as: renting out a commercial kitchen, charging parking fees (as opposed to rent), or selling meals to
employees (which can be deducted pre-tax from wages with an employee’s written agreement).
residents (including the farmer/farmhouse which is likely not classified as employee housing). Off-grid
systems (e.g. solar, wind, wood, passive) can reduce or even eliminate utilities and can be cost-effective
depending on the fixed costs of related infrastructure (e.g. photovoltaic panels). Refer to “Employee
Housing Lot Infrastructure” section for further discussion of off-grid systems. Waste collection costs can
be shared with other employee-residents and perhaps with the farmer as well. Taking everything into
consideration, a realistic estimate for average monthly utility costs per unit is $75/month.
Lot Rent Paid by Employee-resident:
If Unit Owned by Farmer-landlord: This estimate already includes the lot infrastructure
payment in the farmer-landlord’s total housing unit loan payment. Most of a farmer-landlord’s
profit during unit loan payback takes the form of equity in the unit, but he or she may choose to
charge additional rent for the lot (especially in the case of long-term loans where equity is built
slowly and is significantly off-set by depreciation). Therefore, this document’s estimate assumes
that farmers only charge lot rent in the case of manufactured homes. To keep the monthly
payments affordable for employee-residents while still having their rent collection cover the
entire loan payment, farmers who own travel trailers or custom-built housing may choose not to
charge lot rent during the loan payback period.
If Unit Owned by Employee-resident: If the units are employee-owned, then a farmer does not
earn equity in the unit and his or her primary rental income will therefore come from renting
out the lot. Employee-residents do not take out loans for lot infrastructure, but their lot rent
serves in part to pay off the lot infrastructure in which a farmer has invested. After the
infrastructure is paid off, the lot rent can go toward the farmer-landlord’s profit. While the
figure depends on the specific loan terms and infrastructure costs, an employee-resident lot
rental payment of $100/month should be more than sufficient to pay the farmer’s lot
infrastructure loan payment. The example in this guide groups lot infrastructure maintenance
costs in with operating costs, but lot maintenance could just as easily be budgeted into the lot
rent.
Total Monthly Payment:
Regardless of who owns the units, the “Total Monthly Payment” is simply: Housing unit
payment + lot rent + utilities.
Appendix A
Farmer-Landlord and Employee-Resident Profit Summary (Monthly)
Farmer-Landlord Owned Unit
Travel Trailer
Equity
Earned in
Unit*
Manufactured Custom-Built
Home
Home
Employee-Owned Unit
Travel Trailer
Manufactured Custom-Built
Home
Home
285.79
44.81
296.62
285.79
44.81
296.62
Lot Rent
Charged by
Farmer **
($/month)
0
100
0
100
100
100
Farmer
Profit
($/month)
285.79
144.81
296.62
100
100
100
($/month)
Employee
Profit
($/month)
Savings over Savings over Savings over Rent savings + Rent savings + Rent savings +
off-farm rent off-farm rent off-farm rent
285.79
44.81
296.62
This document’s “Introduction” estimates that a farmer-landlord can comfortably earn
$100/unit/month in rental profits from employee housing. Profit earned by the housing unit owners
(farmer or employee) during the loan’s repayment period is in the form of the equity earned in the unit.
Such equity/profit in this estimate ranges from $44.81/month to $296.62/month. If the employee owns
the unit, then only the lot rental payment goes toward farmer profit. Depending on the total cost and
financing terms for the lot infrastructure, a varying amount of the $100/month lot rent will go toward
repaying the infrastructure loan. That amount which does not go toward loan repayment will be farmer
profit. After the loan is fully repaid, the entire $100/month will serve as farmer profit.
*Equity Calculation:
Let’s assume a reasonable 5% annual depreciation rate for all types of housing.
Travel Trailers: Upon paying off the unit loan (after 36 months), a travel trailer owner will have
earned an average of $285.79/month in equity ((0.95^3*(12,000))/36 months, where ‘3’ is the
loan term in years and ’12,000’ is the unit purchase price). If that employee pays a total of
$507.79 for the loan payment plus operating costs, then he or she is actually only paying
$222/month in non-recoverable costs (given that the equity earned in the unit could be cashed
in if the unit were sold). Of course, savings are even greater after paying off the loan and no
longer having that monthly payment.
Manufactured Homes: Given the longer (20-year) loan term estimated for a manufactured
home, higher overall interest and depreciation will limit the equity built in the home
(0.95^20*30,000/240 = $44.81/month).
Custom-built Homes: Monthly equity earned in a custom-built home is 0.95^5*23,000/60 =
$296.62/month.
**If a farmer can afford to do so, this estimate assumes that he or she only charges lot rent during the
loan repayment period when the units are manufactured homes. In this way, the farmer passes on a
little of the earned-equity profits as savings to the employee-tenant who is not earning equity.
Appendix B
Farm Employee vs. Urban Employee Personal Finances (both Part-time)
Urban Bay Area Resident
($/month)
Farm Employee-Resident
($/month)
$1,800
($18/hour)
$900
($9/hour)
$18
$9
FICA
(7.65% of gross income)
$137.70
$68.85
2014 Federal Income Tax
(Filing single, $6,200 standard
deduction, $3,950 exemption)
$232.50
$5.42
2014 CA State Income Tax
(Filing single, $3,992 standard
deduction, $108 exemption)
$34.92 ($29.92/month if CA
Nonrefundable Renter’s Credit is
claimed)
$5.58 ($0.58/month if CA
Nonrefundable Renter’s Credit is
claimed)
Average Gross Income
(1200 hours worked/year)
CA State Disability Tax (SDI)
(1% of gross income)
Unit Owned by Unit Owned by
Farmer-landlord
employee
Estimated Avg. Housing Rent
(not including utilities)
$1,000
Money Remaining (after costs
listed above)
$376.88
Money Remaining (average of
farmer-owned and employeeowned units)
$376.88
$304.29/month
$515.34/month
(Fixed costs +
(Payment + lot
Operating costs –
rent)
Equity)
$295.81
$506.86
$401.34
It’s worth repeating that “employee housing rent” refers to either: a) rental of housing unit and
land lot where it is located, or b) employee’s ownership payment for housing unit plus rent payment to
farmer-landlord for the lot.
Thanks to employee housing, the personal finances work out better for a farm employeeresident than for an urban Bay Area resident who earns twice the gross monthly wages. Of course, both
urban and farm-employees would have more money each month if they worked more hours per week.
That said, this estimate is designed for freelancers who choose to work only part-time in order to leave
time and energy for independent pursuits (e.g. art, music, entrepreneurship).
Employee housing rent varies greatly based on the particular housing unit purchased and the
financing terms. This estimate averages rent across travel trailer, manufactured home, and custom-built
home estimates taken from the “Estimated Monthly Rent and Utilities” section (see below for
calculations). It bears mention that $1,000/month is a low rent estimate for the Bay Area and likely
represents a single room in a house with a shared kitchen and bathroom. Farm-employee residents
would likely have more privacy and living space, especially when you consider the outdoor living spaces
on a farm.
Finances work out best for farm-employees when they own the housing units. When the units
are farmer-owned, farmers may consider charging lower rent or paying higher wages in order to make
sure that employees earn a livable wage. After all, the farmers are earning equity in the unit and
benefiting from having increased labor source stability.
Average of results from “Estimated Monthly Rent and Utilities” section:
Farmer-Landlord Owned (Employee earns no equity in the unit):
Travel Trailer: $521.17/month
Manufactured Home: $518.58/month
Custom-built Home: $506.27/month
Avg: 515.34
Employee-Owned:
Travel Trailer: 507.79-285.79 = $222/month
Manufactured Home: 491.12-44.81 = $446.31/month
Custom-built Home: 541.18-296.62 = $244.56/month
Avg: 304.29