YOU EITHER HAVE HIGHER MOBILE HOME PARK LOT RENTS OR YOU HAVE THIS. By Frank Rolfe

We recently saw this news story on the internet. Perhaps the writer should talk to John Oliver, who criticizes mobile home park owners for raising rents. You see, you can’t have both low rents and parks not being re-developed into more profitable uses. And it’s about time that media outlets start telling the truth about the situation.

The rights of private property owners

The owners of this Kentucky “trailer park” have every right to do whatever they want with their land. It’s called “property rights” and it’s true for all landowners in the Unites States. As a result, you have no legal right to stop development (as long as it meets zoning laws) nor can you try and shame mobile home park owners into passing up large offers for their land if one comes along. This concept – sponsored and promoted by any number of non-profits and crackpots – is not supported by law and is a futile battleground.

The laws of economics

If you don’t want mobile home parks to be redeveloped into other uses there is only one way to accomplish that: make owning mobile home parks more profitable than tearing them down to sell the land or to redevelop into a different use. It’s not that hard an economic principle. Business is based on money, and the most profitable use for land always wins out. It is hypocritical for any writer to pretend that they can’t grasp this reality yet they jump ship from one media outlet to another based on who pays them more. If you can hold a job, you should be able to understand this most basic concept.

Higher lot rents are the #1 driver to profitability

If maximizing income in a mobile home park is exactly what keeps those residents from having to move, then we should all embrace that higher lot rents are exactly how to achieve this goal. Mobile home parks don’t really have any other source of revenue. Yet every time a mobile home park owner raises their lot rents – despite the fact that they’re still the least expensive housing option in town – all they get is criticism from residents and condemnation from the media. No other real estate sector faces this and it’s completely non-productive. Don’t the residents understand that the extra $20 per month in rent is all that’s holding back the wrecking ball?

How the narrative became misguided

The standard mobile home park lot rent when all these parks were built a half-century ago was around $50 per month. That’s around $500 per month in today’s dollars. Nobody criticized these mobile home parks back then, even though the rents – based on today’s dollars – were around twice as much as people pay today. That’s because the demographics of mobile home parks in the 1950s and 1960s was higher than stick-built homes. Elvis Presley lived in a mobile home park in two movies as well as in real life (he built his own mobile home park in the woods near Graceland). Since mobile home parks morphed into affordable housing (for the most part) beginning in the 1970s, it was not the rent levels that became media fodder but rather the perception of those increases. Media groups love pandering to the concept that they are watching over “America’s most vulnerable” when attacking higher rents, but instead they are simply promoting homelessness when the owners throw in the towel and sell the land to Home Depot.

Predictions for the future

I drive through mobile home parks all the time that are being redeveloped. I always wonder what the lot rent would have had to be to keep that park from being sold and torn down. It might have been only $30 per month. Do the residents wish they could turn back time and pay $30 per month more? That’s pretty much what everyone needs to get on the same page about. It’s called reality and I hope that all Americans engage in more of it in the years ahead. With higher inflation and the fact that mobile home parks share some of the best locations in many markets (with direct road frontage and bordering commercial areas) there will need to be significant lot rent growth for most parks to stay in their current use and the mood of the media and residents better be more embracing of this certainty.

Conclusion

I hate to burst the bubble of millions of people, but mobile home parks are a business that is protected by all states under laws regarding property rights. If you don’t want mobile home parks in Kentucky to be turned into TIF-driven new developments, you need to push for higher lot rents, and not propose that the state change laws disallowing property owners to seek maximum profitability. Even pretending that such a concept fits with U.S. law is not helping anyone, and is simply going to accelerate moms and pops who say “I’m tired of all the criticism – I’m calling that land broker who left me the message about tearing this park down and building a strip center”. Surely, this reality cannot be that hard to grasp.

By Frank Rolfe

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.