Even Though The Election Is Not Yet Over: Either Way The Big Winner Is Affordable Housing

In every election there is a winner and a loser. But with affordable housing, the outcome of every election is the same: the demand for affordable housing goes up and nobody does anything about it. As a result, the mobile home park business always does well as the sole provider of quality affordable housing in the U.S. Why does it always turn out this way?

What is affordable housing?

Our definition of affordable housing is the ability for those who earn $7.25 per hour to $15 per hour to have a nice place to live that only costs a third of their income. That equals about $500 to $700 per month. That’s not very much in today’s housing world, but mobile home parks can make that happen in a big way.

Why it doesn’t exist outside of mobile home parks

Apartments can’t deliver affordable housing. The average apartment rent in the U.S. is around $1,200 per month. The only way an apartment can hit the target is with Section 8 – the program in which residents pay a low rent and then the difference is paid by the American taxpayer. It’s called a “subsidy” and not a “solution”. On top of that, the least expensive apartments do not deliver a “nice” housing option, but rather a horrid, crime-ridden, poorly maintained mess. And don’t even think of single-family homes hitting this target, that’s beyond impossible.

Why nobody can build more of it

If existing apartments and single-family homes can’t hit affordable pricing targets, maybe new housing can be built to hit these metrics. Well, the answer is that it’s impossible. Why? Because the average single-family home lot in the U.S. costs around $80,000, making the total cost to build a new house around $180,000. Hardly affordable. And new apartment construction is equally impossible, with a cost of around $100,000 per unit which necessitates a rent of $1,000+ per month.

Mobile homes are the best option for those who need it

Through the process of elimination, the only form of housing that meets the price demand of affordability is the classic mobile home park. But there’s more to it than just the price point. Mobile homes allow for some significant housing preferences for their customers, including:

          • No neighbors knocking on walls and ceilings.
          • Your own yard and outdoor living area.
          • The ability to park by your front door.
          • A sense of community with neighbors who care and are not transient.

Those are some really unique strengths that apartments cannot match even if they could hit reasonable rental rates (which they can’t).

We could build more mobile home parks but it has not been allowed in 50 years

As great a product and price point as mobile home parks present, it gets zero credit for this achievement with city hall. There have been virtually no new mobile home parks allowed to be built over the past half-century. The estimate is that there are around ten new ones built each year and around 100 re-developed into new uses (typically big box retail or apartments). Some of this city hall hostility is the result of the massive negative stereotype created by the media, and the other is the simply economic challenges that affordable housing brings to any community it serves.

So all we see with mobile home parks is more demand and less supply

Mobile home parks are in a unique situation. They are the only non-subsidized form of affordable housing, but at the same time their supply is capped. When you have growing demand and static supply, the result is higher valuations and higher rents. And that’s why mobile home parks do well regardless of who wins in any election, including this one.

Conclusion

Mobile home parks are in great shape for the new America. They are well protected from competition and need no political party to push them forward. They are a contrarian bet on a declining U.S. economy. They are on the right side of all U.S. megatrends, including the aging of the American population. And, most importantly, they provide a tremendous value for the dollar. Regardless of the outcome of this crazy election, mobile home parks always win.

Frank Rolfe has been an investor in mobile home parks for almost 30 years, and has owned and operated hundreds of mobile home parks during that time. He is currently ranked, with his partner Dave Reynolds, as the 5th largest mobile home park owner in the U.S., with around 20,000 lots spread out over 25 states. Along the way, Frank began writing about the industry, and his books, coupled with those of his partner Dave Reynolds, evolved into a course and boot camp on mobile home park investing that has become the leader in this niche of commercial real estate.