It’s becoming pretty common for mobile home parks to be torn down to make way for a new and more profitable use. But this story is different, because the owner of the property it the city itself, not your typical park owner. So how did this 15-acre mobile home park meet its fate? And what are the lessons learned for all of those out there that complain about higher mobile home park lot rents?
Mobile home parks are only one of a number of potential land uses
First you have land. Then you have the use on top of it. And there are many different “toppings” for any tract of land in the U.S. Each of these options has its own intrinsic value, which is a function of net income and the cap rate. While mobile home parks are definitely valuable, they cannot compete with a retail center, hotel, class-A apartment complex or office building. There are around 100 or more mobile home parks torn down in the U.S. each year, and not to be made back into vacant land. They are being torn down because there’s a more profitable use for that parcel. In the case of the Florida City property, it’s a mixed-use development.
The value of land in many markets is approaching – or exceeding – the park value
Many mobile home parks have outstanding locations. This is mostly due to their age, with the majority of U.S. parks built between 1950 and 1980. Because they are older, cities have built up around them and what used to be on the fringe of civilization is today in the heart of it all. We once owned a park that was listed on Wikipedia as ground zero for a fairly large city in Dallas that was built up around the property over a half-century. Mobile home parks also frequently feature outstanding road frontage and are of just the right size for most development projects, ranging from a few acres to around 20. These are exactly the traits that developers are looking for. In the case of the Florida City park, that magic size was 15 acres.
Park owners are criticized for raising rents, even when it’s the only thing holding off redevelopment
We are well versed in unfair criticism for raising rents. We once bought a falling-down mobile home park in Austin called North Lamar. The only other bidder was buying it for land value and then planning to bulldoze it after closing. We bought the property, injected hundreds of thousands dollars of capital into it, and saved the day. We also raised the rents from $390 per month to $450. All that the City of Austin could think about was the fact we’d raised the rent. They could care less that we took this dump and made it into a clean and safe affordable housing option for the residents. They spent years harassing us and used the media as a weapon against us. Do you think we – or anyone else -- would want to improve a property in Austin again as a result? The only thing holding back park redevelopment on a large scale is the amount of the lot rent. When the North Lamar residents bought the park from us, as part of a plan between a non-profit and the City of Austin, they had to raise the rents to $680 per month to make sense of the costs of operation and mortgage. Higher lot rents in mobile home parks are a given. The only alternative is that they all get torn down.
Cities are looking for any opportunity to tear parks down, don’t you get that?
It’s really sad that the media does not understand the simple fact that all cities across America want to tear all the mobile home parks down – really badly. Mobile home parks offer nothing to a city but huge budget outlays with no real benefits. If you look at the property tax revenues that are paid on mobile home parks vs. the cost to the city on such items as school tuition and uninsured medial costs, they are losing huge amounts of money per year. In addition, let’s all be honest that mobile home parks are not exactly the type of use that attracts more upscale investment next door. So the media is literally doing the dirty work of City Hall by trying to publicly shame park owners for doing good works and keeping rents healthy. It’s crazy the media can’t figure this out, and their failure damages the very people they claim to be trying to protect. I didn’t hear of the city of Florida City taking too much effort to keep that park open and to forego the $6 million dollars for the land, did you? I also didn’t read about the neighbors being opposed to it being redeveloped into an upscale mixed-use center, either.
Is this really want everyone wants?
As someone who has had to deal with complaints about raising rents for over 25 years, I simply have to ask the rhetorical question: what does everyone want us to do? Nobody is going to buy old rundown parks and bring them back to life – and inject capital into them to do so – without significantly raising rents. So the only alternative is for all the old parks to die and be buried beneath a new Home Depot or apartment complex. It’s your choice. But don’t think that the option of bringing old parks back to life and rents not to go up is on the menu, because it’s not. If somebody has a better idea, I suggest they get out there, identify, evaluate, negotiate, perform due diligence on, finance, and bring a park back to life and keep the rents unchanged. Show us the way. Essentially, put your money where your mouth is. Until then, quit publicly shaming those who do these important steps and keep old parks alive.
I know that the U.S. is locked in a cage fight between capitalism and socialism. I know the media panders to whomever their customer base is, regardless of their personal thoughts or morality. But it’s becoming insulting to the intelligence of any adult who has a fundamental grasp of the realities of economics to pretend that raising rents is evil or ill-advised. Just ask the former residents of the park in Florida City if they would rather have paid significantly higher rents. I’m sure they’d disagree with any media report on that topic.