Mobile Home Park Mastery: Episode 194

Mobile Homes On Residential Lots: The Myth Vs. The Reality

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Just as cicadas come out of the earth around every five years, so does the concept that there is a solution to affordable housing in placing mobile homes on vacant single-family residential lots. In this Mobile Home Park Mastery podcast we’re going to expose why this has always been a doomed idea and the reasons that it keeps coming up in conversations on a cyclical basis.

Episode 194: Mobile Homes On Residential Lots: The Myth Vs. The Reality Transcript

We all know that placing mobile homes in a mobile home park is a business model that works, but can you place mobile homes on single family residential lots and make that work too? This is Frank Rolfe, the Mobile Home Park Mastery Podcast. We're going to be talking about the concept, which is getting more and more immediate attention these days, of placing mobile homes on single family lots, and separating the myth from the reality of this concept.

So what is the concept? Well basically on a single family zoned lot you're only allowed to place a home that meets the definition of that city of a single family dwelling. Under the uniform building code, they're going to define that as what we all know as a stick built dwelling. However, some would say that's unfair, we need to relax that. We need to allow mobile homes to go on that single family lots, and that somehow this will solve our national affordable housing crisis by placing mobile homes in places where they weren't originally intended to be placed.

First off, let's just look at this from a financial perspective. Single family lots are not free. The average lot in the United States is $80,000. Let's assume we're looking in an area that's more blighted and doesn't fall under the category of really expensive lots. So let's say that lot still costs $10,000. So for $10,000 I'm buying that parcel sized piece of land with access to water and sewer, and a road going out in front. Well, now I've got to put a mobile home on said piece of land. Well, if I go out right now with all the COVID up charges in mobile home manufacturing I'm looking to buy a home to go onto that land that's going to cost me, straight out of the factory, $30-40,000 or more. Then I have to add on this COVID surcharge so now I'm at maybe $50,000. Then I've got to get it there and get it set up. And by the time I get done, I'm going to have easily in most American markets, including the site preparation, probably about $50-60,000 in that mobile home. Then you add on the price of the lot, another $10,000, I'm up there in the $60-70,000 cost landscape.

But at the same time, in those kind of neighborhoods I can find an existing stick built dwelling, probably larger, for the same price point. So let's not kid ourselves that this is somehow some great genius vision to providing affordable housing because it really isn't. In those kinds of areas where I can buy lots cheap, in those areas where the city is so desperate for housing that they'll relax the uniform building code, the homes there are already not that pricey. We're not talking putting mobile homes into a $250,000 single family area, but typically when people talk of this concept placing them in lesser expensive parts of the city so there really isn't that big a price point difference.

Manufacturers would tell you that well, but wait, the mobile home is built in factory conditions to incredible tolerances. Yes, I've been hearing that same PR for the longest time but I'm not sure that's the most important part of a home. I don't know for a fact that if the rafters align with laser precision that really that is the big selling tool, that is what creates the difference in the quality of the home. I think there's probably something more. I think that the stick built requirements probably create a product that is really heartier and longer lasting. Mobile homes are designed to create a less expensive product that is still safe and of good quality, but I don't think anyone out there is going to say when they compare the permanence of the structure that the mobile home is going to be on par with the stick built. Stick built, for example, have lots of load bearing interior walls; mobile homes do not. So when it just comes to a sheer heartiness factor and longevity factor, I'm not certain that just the fact that things are built in a factory to a very tight specification is going to really turn the corner on that.

But there's an even bigger problem when you talk about placing mobile homes on single family lots. And it's all coming back to the same problem that has plagued the industry forever, and that is the stigma. Number one, can you convince the zoning administrator that it's okay to place mobile homes where traditionally they've only allowed stick built homes? It's a pretty high hurdle. I don't think you're going to be able to pull it off. Even in my small town in Missouri, the city has not ever granted except on very rare occurrences the ability to place a mobile home on a single family lot. Number two, can you convince the neighbors that this is a good idea? Once again, I would say no you can't. if you look at the pricing of single family homes next to mobile home parks there's a clear scientific case that would show that when you place a mobile home next to a single family home, that single family home declines in value. So you would have complete neighborhoods in an uproar over the very concept of relaxing the uniform building code to place mobile homes on traditional single family lots. And then finally, can you even convince the customer after you went to all that effort of overcoming the zoning hurdles and hostility from the neighbors, is anyone going to want to buy it? Because once again, it's not a traditional stick built home.

Now the industry always is trying to confuse people by changing the names around. So recently in recent years you've seen them trying to promote this very concept using the word "cross mod". Somehow a "cross mod home," oh no that has nothing to do with a mobile home, nothing to do with your traditional thoughts of the modular, yet it's the same product. So the issue is can we fool everyone by changing the name? And the industry has probably learned at this point that you can't. they tried it before, changed the name from mobile home to manufactured home, no one adopted that name and I don't think they're going to adopt "cross mod" any better.

So why do we keep even throwing out this crazy narrative of dropping mobile homes onto single family home lots? Doesn't really work, isn't going to be effective, going to be hard to sell. It emanates from the manufacturers. The manufacturers would love to have one more product line out there. They've got mobile homes that go out on land, check that box. Mobile homes that go into mobile home parks, okay check that box. But wait, we have an exciting new idea, mobile homes that go on single family residential lots. Obviously they see this as a very attractive item from a profitability standpoint because you can probably charge more for a home going on a stick built lot. It'll be a higher price point, probably a lot more profit in it. But I'm not really sure their desires for profitability are going to overcome the reservations and the stigma against the product from the zoning administrators, neighbors, and customers.

The bottom line is until you can overcome the stigma against the product, you're not going to get anywhere. On top of that, you've got a stigma that's probably lurking around out there from lenders. They've seen this movie once before, it was called Land Home. I was there, I saw it. Back in the 1990s people try and do subdivision based on bringing mobile homes in to what would appear to be stick built lots, surrendering the title, making them then real property, and then selling them off, often with conventional financing. But what did we see from those developments? We saw lots of repossessions. I've seen entire subdivisions of these things completely vacant, not a single customer in any of the homes, the homes literally falling apart with the windows broken out. A lot of lenders took massive losses on this when it came around before and those with longer memories are not going to want to jump back into that.

You also have the problem of the federal government who is now saying well we're going to force cities to allow mobile homes on single family lots. I don't think they can do it. I know right now the federal government has all kinds of wild visions of its own power. It doesn’t have a whole lot of power in that category of zoning. I'm not sure it has really any. It can probably do something to twist some arms here and there to have people give sound bites supporting this idea or that for fear of retribution, but I'm not really sure that the US government out of Washington DC can convince some zoning administrator in some city or town that they suddenly have to change their codes and the rules on how it works. I think if it ever did occur you'd probably see it mired in litigation for years to come.

The bottom line is the only real model for mobile homes in the United States to solve affordable housing is to put them in mobile home parks. That's what they're designed to do. That's where they're designed to go. Rather than all of us waste time on talking about this concept of putting them in the single family residential lots, let's have the government take a more active role in sponsoring the financing on the ability for customers to buy these mobile homes under financing programs that are truly affordable so they can then buy a home and place it in the appropriate spot, and in so doing they can create one more unit of affordable housing that is truly needed in America today. This is Frank Rolfe, the Mobile Home Park Mastery Podcast. Hope you enjoyed this. Talk to you again soon.