Manufactured home communities
By: J. David Chapman/December 16, 2021
Jimmy Buffett sings about them, police departments raid them, retired people in Florida live in them, and I have always wanted to own one. I’m talking about trailer parks. There is even a Canadian mockumentary television series focusing on the misadventures of a group of trailer park residents called Trailer Park Boys. OK, it is no longer politically correct to call them trailer parks, so I’ll refer to them as manufactured home parks or mobile home communities.
America’s growing affordability housing gap is forcing many people to reassess the traditional single-family home and look at mobile home communities as an alternative. This affordability challenge, along with changing demographics, is causing a modern incarnation of the traditional trailer park. Today’s manufactured homes are energy-efficient, and many communities now have swimming pools and playgrounds. These amenities are making them the perfect choice for both retiring baby boomers and millennial-age young families. The average cost of a manufactured home (not including land) is $73,600, compared to $374,900 for a single-family home. The gap is very similar for rental housing.
Real estate investment trusts, or REITs, have outperformed the broad stock market in recent years, and manufactured housing REITs have outpaced their peers in the office, multifamily and retail in terms of total returns for the year. The private equity giant, Blackstone Group, is even making a foray into manufactured home ownership, purchasing 14 housing communities from Toronto-based Tricon Capital Group Inc. On the public-ownership side, there are three companies in the sector: Sun Communities, Equity Lifestyle Properties and UMH Properties. All three have produced good dividend yields and outperformed other real estate investments.
The industry still faces significant problems. One is a commercial real estate anomaly of scarcity of supply because new communities are difficult to develop due to the NIMBY-ism and permitting requirements while demand for cheap housing is consistently high. We have witnessed this locally with new manufactured home communities announced in northeast Edmond. The developer encountered significant resistance from nearby property owners, and it is nearly impossible to get a permit for a manufactured home community in the OKC metropolitan area. It is also difficult to obtain traditional home mortgages on manufactured homes, and in tornado-alley there is a perception that manufactured homes don’t fare well in high winds.
J. David Chapman is a professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).