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Why are New Mobile Home Parks Not Being Built?

Mobile home parks - transaction mess

In many real estate circles, the discourse around establishing thousands of fresh mobile home parks has drawn significant attention. The idea gained traction as existing manufactured housing communities have become increasingly expensive due to rising rents and property values. However, the journey of initiating new developments in this niche market is often riddled with intricate challenges, dissuading many from pursuing this avenue.

In this blog post, we will discuss the typical challenges involved in developing new mobile home parks and why there is such a distaste for this alternative affordable housing crisis solution.

Financial Complexities

The affordability and accessibility of manufactured housing communities have historically drawn interest from investors. However, the landscape has significantly shifted over time, with rising rents and property values making existing mobile home parks increasingly expensive. This shift led some to consider the prospect of building new mobile home parks as a more cost-effective alternative. 

The belief that constructing new manufactured housing communities would result in lower costs compared to purchasing existing ones was rooted in the presumption of decreasing expenses. However, this assumption collided with the reality of declining trends in mobile home sales. 

The decline in mobile home sales directly contradicted the optimistic projections made by some investors. Despite assurances from certain dealers about the ease of filling up new lots, the ground reality reflected a dwindling demand for mobile homes, highlighting the inaccuracy of these assurances. 

Regulatory Barriers

Obtaining permits for new manufactured housing communities is a substantial challenge across the United States. The regulatory environment surrounding such developments poses significant hurdles for potential investors and developers. 

Municipalities and cities are reticent to support the establishment of new mobile home parks due to financial concerns. Unlike establishments like retail centers or hotels that contribute significantly to the local economy through various taxes, mobile home parks offer minimal financial benefits while burdening the locality with education costs for children residing within them. 

The financial equation from the perspective of cities and towns becomes a critical factor in their reluctance to approve new mobile home park developments. While other properties generate considerable revenue for the city through taxes, mobile home parks do not provide proportional returns. Moreover, these mobile home parks often require significant educational resources due to the children living in them, further straining the municipality’s budget. 

Mobile home parks - mobile home

Societal Perceptions and Stigmas with Mobile Home Parks

The perception of mobile home parks within society creates additional barriers to establishing new developments. Properties adjacent to these mobile home parks often experience a decline in value due to the perceived stigma attached to mobile home living. This decrease in property value prompts strong resistance from local residents against the establishment of new mobile home parks in their vicinity. 

The societal stigma surrounding manufactured housing communities is deeply ingrained and significantly influences the willingness of communities to accept or support new developments. Despite efforts to challenge and change these perceptions, the negative stereotypes associated with mobile home parks persist, making it challenging to secure locations for new mobile home park developments. 

Logistical Challenges with Mobile Home Parks

The logistical challenges of building in rural areas further complicate the prospects of establishing new manufactured housing communities. Many remote areas lack access to essential municipal utilities and infrastructure necessary for housing developments. As a result, potential investors face the daunting task of establishing private utilities in these remote locales. 

The establishment of private utilities comes with a substantial financial burden, significantly increasing the overall cost of developing new mobile home parks. These expenses render the venture financially unviable and deter potential investors from pursuing new mobile home park developments in such areas. 

Attraction and Filling of Lots 

Even if investors successfully navigate the hurdles of regulation, societal perceptions, and logistical challenges to build new manufactured housing communities, attracting residents to remote locations remains a formidable task. The extended duration required to fill these lots, coupled with accumulating interest rates, poses significant financial challenges. 

The time it takes to fill these lots with residents who rent or purchase mobile homes is a prolonged process. This delay significantly impacts the profitability of new mobile home park developments. The longer it takes to fill the lots, the more interest accrues on the initial investment, making it increasingly challenging to achieve profitability within a reasonable timeframe. 

Mobile home parks - securing transaction

Governmental Discourse 

Governmental encouragement for new mobile home park developments often focuses on specific areas receiving federal subsidies. However, these locations may not align with the preferences of potential residents seeking suburban living with adequate amenities. The mismatch between government-sponsored locations and residents’ preferences further undermines the feasibility of new developments. 

While the government might express support for new mobile home park developments, the areas proposed for these developments may not meet the expectations or needs of potential residents. Factors such as proximity to jobs, schools, shopping, and healthcare play a crucial role in residents’ decisions to live in mobile home parks. Government-sponsored locations may not fulfill these criteria, limiting their attractiveness to potential residents. 

Existing Mobile Home Park Owners’ Perspective 

Existing mobile home park owners find reassurance in the low likelihood of new competition emerging in the industry. Unlike other real estate sectors that are susceptible to saturation, the stringent barriers to entry in the mobile home park industry offer stability and security for current investors. 

The existing barriers to establishing new mobile home parks act as a protective shield for current mobile home park owners. The difficulty in obtaining permits, societal stigmas, logistical challenges, and attracting residents to remote locations significantly deter potential competitors from entering the market. This ensures a level of stability and security for existing mobile home park owners, making the industry less susceptible to saturation compared to other real estate sectors. 

Conclusion

In essence, the landscape of new mobile home park development is typically riddled with intricate challenges. From financial and regulatory hurdles to societal perceptions and logistical complexities, each aspect poses formidable barriers for potential investors.

Navigating these challenges requires a careful understanding of the multifaceted nature of the industry. While the allure of new developments may seem promising, the intricacies and obstacles present a landscape that demands thorough consideration.

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By Andrew Keel

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Disclaimer

The information provided is for informational purposes only. It should not be considered investment advice, nor a guarantee of any kind. There are no guarantees of profitability. All investment decisions should be made based on individual research and consultation with registered financial and legal professionals. We are not registered financial or legal professionals and do not provide personalized investment recommendations.

Tristan manages Investor Relations at Keel Team Real Estate Investment. Keel Team actively syndicates mobile home park investments, with a focus on buying value add, mom & pop owned trailer parks and making them shine again. Tristan is passionate about the mobile home park asset class; with a focus on affordable housing and sustainability.