Conundrum: Are Mobile Home Park Residents Lot Rent Increases Offset by Manufactured Home Appreciation?
Source: Excerpts from Daniel Weisfield Newsletter responding to a June 6, 2022, Washington Post Story “We’re all afraid: Massive rent increases hit mobile homes.” (Daniel Weisfield is the Co-founder of Three Pillar Communities, a real estate investment firm focused on manufactured housing with 40+ communities in 8 states).
“The Washington Post story twists the facts, portraying manufactured homeowners as victims. This is offensive to manufactured home park residents and perpetuates the stigma around manufactured housing that we are working so hard to overturn, ” Weisfield said.
Manufactured home land lease communities (aka “mobile home parks) number 43,000+ in the U.S. with an estimated 4.3 million homesites in those communities. The average annual site rent increase is 4.2%.
A majority of existing mobile home parks were developed dating back to the 1940s, 50s, 60s, and into the 1970s. The last 4 decades have seen scant few manufactured home communities being constructed, a result of land use restrictions and zoning in cities and counties across the country, especially in or near urban areas. Today, only 27% of new homes are sited within manufactured home communities.
The lack of supply and demand for manufactured home placement sites within rental properties is the driving force dictating resident rent increases, usually in line with other types of other rental properties such as apartments, site-built houses, etc. The annual site rent increase in mobile home communities is averaging 4.2% (MHI).
Daniel Weisfield in his reply to the Washington Post explains the mobile home park conundrum. People look at the same set of facts and draw wildly different conclusions. If you focus solely on how much lot rents cost today, compared to what lot rent used to cost (while ignoring the cost of all available housing alternatives, and ignoring how manufactured home price appreciation creates wealth for park residents when they resell their homes), then you will tend to criticize park owners. If you focus on the affordability of manufactured home lot rents today, compared to all available alternatives, and if you recognize how manufactured home price appreciation puts real dollars into park residents’ pockets, then you will see manufactured housing communities as a massive source of value for cost-conscious consumers.
A key point: The idea that “manufactured homes cost a lot to move, and this puts park residents at a disadvantage” is wrong, and is based on a misunderstanding of how the market for manufactured homes in parks actually works. The reality is that more than 90% of manufactured homes installed in parks will never move. When a park resident decides to move, the home remains in place, and the resident sells the home to someone else who wants to live in the park. As a result, manufactured homes in parks behave like real estate, and they tend to appreciate over time.
A 2021 study of the U.S. Census Bureau data found that the median value of mobile homes increased by 39% from 2014 to 2019. Bottom line: A resident who decides to move out of a park often sells their manufactured home at a profit.
Manufactured housing communities are a powerful tool to create more social opportunities across the economic spectrum and to help lower-income Americans build wealth through rent savings and home ownership.
“At Three Pillar Communities, we routinely see residents of our manufactured housing communities get wealthier when they decide to place their manufactured home for sale,” said Daniel Weisfield.
