Category: Uncategorized

Ice-fishing tents for the homeless

Sometimes it’s hard to decide whether, as a society, we’ve just taken one step forward or one step back. Case in point: Denver has created what amounts to a campground of ice-fishing tents to house the homeless. It beats sleeping outside–Colorado has been in a deep freeze the past week or so–and for many occupants it beats sleeping in public shelters, which are overcrowded and often perceived as unsafe. But as observed by Nan Roman, president of the National Alliance to End Homelessness, the approach signals that “we’re institutionalizing that it’s OK for people to live outside.”

As reported yesterday by the Associated Press, the insulated tents come with electrical outlets, a cot and a zero-degree rated sleeping bag–but apparently no heat source. While cities like Seattle and Portland, Oregon, have experimented with building tiny homes for the homeless, even the most modest designs can cost nearly $25,000 apiece, compared with the $400 cost of an ice-fishing tent. And given the situation in Colorado, where record-high home prices have been exacerbated by the loss of hundreds of homes to a December prairie-grass fire, such a low-cost approach can serve the greatest number for the least expense.

But as Roman intimates, such stop-gap measures run the risk of becoming normalized. The country’s housing crisis is growing more urgent with each passing month, and without a vigorous overhaul of urban housing policies, the lack of affordable housing will only grow more extreme. “It’s just hard to see us say as a nation, ‘Well, it’s okay to see people stay outside as long as they have a tent,’ ” Roman told the AP reporter. “It’s hard to feel that’s progress.”

Last night’s temperature in Denver dropped to 5 degrees Fahrenheit. It was -6 on Wednesday, and hasn’t risen above freezing since Monday. Need more be said?

RV parks squeezed by housing costs

It may not be immediately obvious that an explosion in home prices will increase campground costs, but that’s because our understanding of this niche real estate market gets channeled by that “camp” prefix. “Camping” means recreating which means getting away from it all, leaving little mental room for other considerations. Yet campgrounds increasingly are a key residential resource, offering affordable housing options to itinerant workers as well as those priced out of more conventional housing. And as the cost of that housing goes up, so does demand for RV sites.

That’s why this week’s release of the latest Case-Shiller index should interest, and concern, anyone who owns or is thinking about buying an RV. The index, widely watched by investors, measures average home prices in major metro areas across the country–and it rose 18.8% over the 12 months ending in December. That’s the highest calendar-year increase ever recorded over the index’s 35-year history. Meanwhile, a separate measure compiled by the Federal Housing Finance Agency, also released this week, found a 17.6% increase in home prices over the same stretch.

As housing prices soar–the median cost of an existing single-family home was $361,700 last quarter–home sales begin to decline and the whole market starts locking up. People unable to buy a home will turn to rental housing, which puts upward pressure on rents but also attracts the attention of commercial real estate investors. Indeed, as reported Jan. 25 by the Wall Street Journal, the most popular commercial property among investors last year was apartment houses because of their perceived ability to keep raising rents. Of course, higher rents keep squeezing out people with low to modest incomes, who then turn to . . . yup, house trailers (a/k/a “manufactured housing”) and RVs, as housing of last resort.

Some of those RVs increasingly are turning up on city streets because their owners can’t afford even the comparatively low rates charged by RV campgrounds–and some wouldn’t be permitted in most RV parks, anyway, because they’re too old and dilapidated. But those who can afford $500 or $600 a month for a long-term site are jostling with more conventional RVers for a spot, and even overnight sites are in greater demand because of this additional influx of “campers.” Campground owners faced with this increased demand, meanwhile, will increase their rates accordingly–sometimes not even deliberately so, thanks to the growing adoption of algorithm-driven “demand pricing.”

In a wider context, therefore, campgrounds are properly seen as just one component of a housing ecosystem; changes in one area can ripple throughout the entire system. That may not have much to do with campgrounds as recreational outlets, but it most definitely will affect their affordability and overall character.

Tax dollars and RVing, part 2

In my last post, I questioned a New York state decision to award a $200,000 development grant to a privately-owned RV campground. The 300-site proposal has yet to complete public hearings, has not had an environmental impact study and has generated a considerable amount of local opposition–so why has the state already decided to support a commercial, presumably profit-making enterprise with its residents’ tax dollars?

But this is hardly the most egregious example of government meddling in the free market. Far more common than such favoring of a particular private enterprise, and ultimately more damaging on several fronts, is government use of tax dollars in direct competition with the private sector. Such spending is contrary to free market principles, diverts tax money from more critical–and usually underfunded–government programs, and typically is wasteful to boot.

Take, for example, the recent efforts by allegedly conservative South Dakota Governor Kristi Noem to build a 176-site campground in Custer State Park, for a whopping $9.8 million. That per-site cost projection of $55,000 is roughly twice the going rate of new park construction in the commercial sector, and private campgrounds typically include more amenities in their construction budgets than do their public counterparts, further increasing the disparity. On the other hand, Noem’s inflated price tag is right in line with the projections I used to see when reviewing Virginia State Parks budgets for campground construction, so bloated government spending on such projects seems par for the course across the country.

Once built, such government-underwritten campgrounds typically offer lower rates to RV owners than their privately-owned competitors, who have to charge enough to pay off their unsubsidized (except in New York) construction loans and mortgages. At the same time, the inadequate revenue such public facilities generate historically have failed to cover ongoing maintenance and repairs, resulting in the current nationwide backlog of deferred maintenance that runs into the billions of dollars. While user fees should not be expected to cover the costs of public facilities open to all–that’s what taxes are for–it’s not asking too much to have RV owners pay the market rate for their more privileged recreational choices.

There is a place for government spending on outdoor recreation–for activities or resources that the private sector can’t provide. Hiking and dirt-biking trails, back-country shelters, reforestation and erosion control projects, scenic drives and large man-made lakes for boating–all come to mind as appropriate uses of tax dollars, because if the state or federal government doesn’t do them, no one will. But campgrounds? The number of deep-pocketed investors falling all over themselves to get into the business should send a clear signal to the Kristi Noems of the world to keep their government mitts to themselves.

Adding tax dollars to the RV mix

It’s bad enough when someone wants to shoehorn an RV park into the midst of a relatively tranquil area, but so much worse given the outsized ambitions of many recent development proposals. Gone are the days of someone building a brand-new campground of 50 or 60 sites. Now it’s 250 or 300 or even more, with all the attendant traffic, noise and general disruption brought on by doubling, tripling or even quadrupling the local population on a summer weekend.

So can you imagine how much more aggravating it is when one such outsized proposal gets juiced by a $200,000 infusion of tax dollars even before public hearings have been concluded, an environmental impact study conducted or required permits issued? Let’s just say the air around Mayfield, New York, is even frostier than usual for this time of year.

At issue are plans by a local landowner, first detailed a year ago, to build a 300-site RV park and campground on a dead-end road at the southern tip of Great Sacandaga Lake, in upstate New York. The proposed Woods Hollow Campground would occupy 83 acres, a third of which are within the boundaries of Adirondack Park, and include a boat launch and docks, boat storage, beach access, a playground, swimming pool and splash pad, and a “community event center.”

As the implications of those ambitions began to sink in, local resistance mounted. An online petition opposing the project collected more than a thousand signatures, and a Save Woods Hollow website sprang up to disseminate information and rally the troops. A series of planning board hearings foundered repeatedly: a November hearing was canceled because the town failed to give timely notice, one scheduled for December was cancelled because local property owners were not properly notified, and a January hearing had to be recessed due to the overwhelming turnout. Planning board members conceded that they had been provided with “a lot of information” that would take time to digest, so tentatively scheduled the hearing to resume Feb. 16.

On Feb. 2, however, it was the Woods Hollow property owners requesting a delay, asking that their application be tabled while they update their site plan. Planning officials therefore have canceled tomorrow’s meeting and are scheduled to meet next on March 16, when the Woods Hollow Campground proposal may–or may not–be revisited.

But here’s the kicker: amid all this back-and-forth, the state of New York lavished $200,000 on the Woods Hollow project as part of its Regional Economic Development Council program. The December grant was one of only three bestowed on Fulton County, with the other two, totaling $213,750, going to the Village of Northville. The Woods Hollow money, the state asserted, “will be used to build a new and unique camping destination” that “will provide a safe and affordable getaway for families who want to reconnect with the outdoors while creating lasting memories.”

Those “lasting memories,” alas, have been created already in an increasingly distraught neighborhood. No word, meanwhile, on what will happen to that slug of taxpayer money if the lakeside campground proposal gets deep-sixed by the mounting opposition–and there’s no visible public concern about an apparently slipshod vetting process for grant applications, or discussion of the questionable use of taxpayer money to subsidize private developments, regardless of their potential economic contribution.

Life seen through a keyhole

There is no end to the misery that’s allowed to fester because of the unfortunate tendency to think of one’s own experience as universal–“If I can do this, anyone can,” or “If I don’t see it, it can’t be real.”

Last month, I wrote about closures of dispersed camping sites along Colorado’s Front Range because–as explained by the U.S. Forest Service–boondockers had “created thousands of new campsites as they pulled off roads and damaged resources, trampling vegetation and compacting soils with tents, campers and vehicles” and had “negatively impacted municipal water supplies with human waste and trash.” But because those closures are near the heavily urbanized Denver area, apparently some readers concluded they a) aren’t really as bad as was represented; and b) are just another example of governmental overreach.

As one irritated RVer wrote, “This article reeks of incompetent government bureaucrats sniveling about having to do their jobs. My wife and I live in close proximity to southern Colorado and thus utilize Colorado public lands over quite a wide area. Sometimes we pull our travel trailer up there, sometimes we merely take an all-day drive on various backroads and 4×4 trails, but we always have an eye out for RV camping opportunities from which to base future exploration. Frankly, in the areas we’ve traveled, which include the mountains from a roughly 100 mile swath ranging from Cortez, Colorado, through Durango, and east to Pagosa Springs, we’ve noticed exactly the opposite.”

The swath this reader describes is along the southern flank of the San Juans, north of the Arizona border, and therefore quite a bit south of the Arapaho Roosevelt National Forest affected by the closures I’d written about. It therefore may well be that boondockers have not caused the kinds of problems in this more remote area than they have 250 miles to the north–but so what? And what kind of egocentric irritation does it take to conclude that people this reader hasn’t met, dealing with a problem he hasn’t seen, are “incompetent” and simply “sniveling” about doing their jobs?

Yet while this reader looks at the world through a narrow keyhole, reality is moving in on him. Last week, the Colorado Sun reported that a surge in recreational camping around Buena Vista and Salida is “wreaking havoc on natural areas,” prompting public lands managers to mull the closure of dozens of dispersed campsites–and this is only February. According to the report, wildlife populations are plunging in the face of habitat loss and an increase in motorized recreation, ranchers are complaining of damaged fences and gates left open, poorly tended campfires are raising wildfire fears.

And, of course, there’s the ever-growing curse of what one district ranger calls “the Charmin flowers.”

Salida, it bears noting, is half the distance to my reader’s stomping ground than the area he blithely dismissed as an example of government incompetence. And as public lands managers try to contain and minimize the damage that’s already been done, one sure-fire consequence will be a broadening of the problem. As one noted, “It’s like squeezing a balloon–it expands elsewhere.” The area outside Durango and Pagosa Springs could be next.

The reasons for the explosion in boondocking are many and complex, from the unsustainable numbers of RVers seeking someplace to go “camping” to an explosion in people who can’t afford skyrocketing rents and real estate prices but still need a place to call home, however primitive. The solutions to these problems would be difficult in the best of circumstances; they’ll be made even more bitter by those who start by denying there’s anything wrong in the first place, then pivot to blaming the people charged with fixing things as incompetent–presumably because that may inconvenience them.

Slip, sliding away

Every now and then Woodall’s Campground Magazine, for whom the skies are not cloudy all day, nevertheless publishes something hinting at possibly stormy weather. The current issue includes a column by Peter Pelland that does just that, and it’s worth pondering.

Pelland is CEO of a small company that specializes in building websites and producing print advertising for the camping industry in general, and family-owned campgrounds specifically. But prior to that focus he worked more closely with New England’s ski industry, and 40 years later he sees a lot of parallels with what’s happening today in the campground sector. It’s not pretty.

The “golden age” of skiing occurred in the 1950s, he writes, when hundreds of “mom and pop” operations studded New England’s slopes, some operating on such a primitive level that their rope tow lines were powered by tractors or old Packard automobile engines. But as with mom and pop campgrounds today, gentrification set in. Monied investors, smelling opportunity, moved in, building destination resorts and buying out smaller operators, consolidating the industry and driving their rudimentary competitors out of business.

By 1975, Pelland observes, there were only 745 ski areas operating in the entire United States, even as New England alone had 605 defunct operations, documented by the New England Lost Ski Areas Project. And the number kept shrinking–509 in 2000, 470 by 2020–with the industry consolidating to such an extent that today there are only 10 major companies owning the bulk of all U.S. ski resorts. Skiers’ costs, meanwhile, soared to stratospheric levels. The price of a single peak-day lift ticket purchased at Steamboat, Colorado, for example, is now $279. At Big Sky, Montana, it’s $225–plus another $45 if you want to ride the aerial tram.

The problem, however, is that even at those levels the prices charged for lift tickets don’t begin to cover the costs of operations. As Pelland further details, the lifts have grown increasingly expensive to purchase and install, running into millions of dollars each. Snowmaking costs–the need for which has been exacerbated by increasingly funky weather–add tens of thousands of dollars more, not just for equipment but in electric bills. It may not come as a surprise, therefore, to learn that skiing is becoming incidental to the ski industry: “[T]he profit center is now real estate development, with million-dollar building lots for second homes, condominiums for every middle-to-upper income level, fractional ownership, absentee homeowners and artificial ‘ski villages’ that are designed to keep all of the dollars spent in the resort’s pockets,” Pelland writes.

Much the same evolution is now sweeping the campground industry, Pelland adds–and he’s absolutely right. As he concludes, “The bottom line is that there are forces that are driving up the price of camping and that profits cannot be based solely on camping fees. There is a strong demand for campgrounds as investment properties these days, with parks being bought and sold at a lightning pace, and most of those sales going from mom and pop operations to corporate ownership groups.”

Ski resorts, alas, are not the only ones who have to contend with slippery slopes.

Fresh competition for RV parks

Amid the frenzy of buying and selling RV parks and the relentless hiking of site fees, it’s easy to lose sight of up-and-coming competitors grasping after the same limited supply of investment and consumer dollars. Two recent Wall Street Journal stories underscore fresh challenges to the RV industry that may take some of the wind out of its sails.

On the recreational front, campground investors should be looking over their shoulders at boat and marina sales. Waterside properties, as the Journal reported Tuesday, got a huge boost in 2019 when the Internal Revenue Service ruled that fees paid for boat slips and boat storage could be counted as real-estate rents, just like other commercial properties. That more favorable tax treatment then got juiced by the pandemic, as consumers realized that boating–just like camping–is a relatively safe way to socialize outdoors, all of which adds up to a revitalized investment opportunity.

Industry analysts say the marina business “resembles the manufactured-housing and recreational-vehicle industries before institutional investors discovered them and drove prices much higher,” the Journal reported. Indeed, U.S. sales of boats and marine products and services were up 14% last year over 2020. Meanwhile, Blue Water, which in recent months has been aggressively adding to its portfolio of RV parks, is moving almost as briskly deeper into the boating sector, announcing Monday that it had acquired two more marinas, in Delaware and Virginia.

While boats and marinas may cut into the RV sector’s recreational business, a similar challenge is emerging on the lodging front. Extended stay hotels, which cater to guests staying a week to three months, “were popular with first responders, nurses, military and construction workers during the early months of Covid-19” the Journal reported Monday. That’s exactly the customer base that was flocking to campgrounds as well, and as the Journal also observed, as the pandemic wore on and Americans began to travel more, those hotels “attracted vacationing families, project managers and information technology workers”–again, precisely the same customers who were filling up RV parks.

The tricky aspect of this development is that the spiraling increase in RV campground rates is starting to put them at a competitive disadvantage. Room rates at extended stay hotels start at less than $50 a night for approximately 300 square feet, including a bathroom and kitchenette–twice the size of most RVs, and without the expense of buying, maintaining and insuring one. A full hook-up RV site for $50 a night is quickly becoming just a memory, and even more upscale hotel extended-stay accommodations–like Marriott’s Residence Inns, which offer even more space and such upgrade amenities as dishwashers–can charge $140 a night and still be an attractive alternative.

The cost of renting an RV site is climbing because RV parks are changing hands at prices that have become unmoored from business fundamentals–mortgage debt has to be serviced, and the easiest, fastest way to do that is to charge the customer more. At some point, however, many of those customers are going to look around and start wondering what they’re getting for their dollar, and whether it’s enough.

And that’s when the bubble will start deflating.

Bubble, bubble: part two

Sometimes, it seems scarcely a week goes by without yet another announcement of an investment group with deep pockets jumping into the RV campground business, adding to a bewildering mix of players that can’t be kept straight without a detailed scorecard.

Last week, for example, Halmos Capital Partners announced the formation of Cedarline Outdoor, “an outdoor hospitality investment platform focused on the RV park industry.” Cedarline says it wants to create a “diversified portfolio of properties unique to the industry in terms of infrastructure, scale and visitor experience.” No telling yet what that means, but use of the word “unique” is always a grabber, especially in this context. We’ll have to stay tuned.

Just a couple of days later, NAI Global–a commercial real estate juggernaut that “maintains its competitive edge through a well-established culture of learning that informs decision making at all levels” and thereby demonstrates why it will never ace the SAT verbal section–declared it has “expanded its offerings” via a “brand-new service,” NAI Outdoor Hospitality Brokers. The Colorado-based “team” will specialize in purchasing and selling RV parks, campgrounds and glamping resorts across the U.S.

And so it goes, week by week.

What’s intriguing about all of this belated attention is that it’s coming just as interest rates have started an upswing, with inflation worries overshadowing the markets. For those with a cautious bent, this might be seen as a good time to pull back from any real estate investing, especially in as overheated a niche market as RV campgrounds, as briefly described in my last post. In times of economic uncertainty, goes the timeworn refrain, cash is king. Keep your powder dry, and wait for valuations to tumble.

Not so for the folks at the circus known as RV Park University, however, which mercilessly flogs a “home study course” aimed at middle class Americans yearning for a lucky investment break. Head ringmaster Frank Rolfe–who most assuredly is not speaking to the likes of Cedarline or NAI Global–contends that the stock market currently “is more overvalued than at any other moment in American history,” making this precisely the right time to invest in a niche “that is built on the fundamentals of income and cash flow and not PR and logo design”–that is to say, in “the simple RV park.”

The key to this great opportunity, Rolfe wrote in a recent broadside titled, “With the stock market collapsing, time to buy an RV park?” is that campgrounds are “a very simple business that anyone can understand quickly. You rent spots to park RVs–it’s simply renting land.” Even an idiot presumably could grasp that once you own an RV park you can just settle back and watch the money roll in–and to help you get there, Rolfe is ready to sell you a bunch of CDs and an outdated paperback for $400 or so.

Of course, nowhere in this come-on does Rolfe intimate that the campground biz is every bit as overvalued as the wider stock market. Or that whatever their other shortcomings, the rapidly swelling ranks of real estate investment pros are not going to leave much more than bleached bones for the small investor to pick over. That wouldn’t help his business one bit.

Bubble, bubble, toil and trouble

As 2021 numbers start rolling in, it’s clear that real estate investors racked up a record-setting year for commercial property sales, at $809 billion–nearly double the previous year, and readily exceeding the previous record of about $600 billion, set in 2019. As reported by the Wall Street Journal, buyers loaded up on warehouses, which serve as fulfillment centers for the e-commerce boom; apartment buildings, to capitalize on record-high rents; and resorts and vacation-oriented hotels, because of the resurgence in travel to leisure destinations.

What do all these real estate segments have in common? The belief that they’ve picked up powerful tail winds from the pandemic, which has changed so much of what and how we do things. But overlooked in this summation is possibly the most rapidly appreciating market segment of them all, that of campgrounds and RV parks. Although reliable numbers are hard to track down, I’m betting that the campground sector is punching way above its weight class, and for much the same reason: the pandemic has made RVs cool. They’re the perfect cocoon for the pandemic-skittish crowd. And they’ve got to be parked somewhere at night or for a month, and Walmart’s parking lots just won’t cut it in the long-term.

Potential campground sellers aren’t oblivious to these dynamics, which is why the latest set of listings I received from Campground Marketplace–a Michigan based nationwide campground broker–features a slew of jaw-dropping asking prices. A nine-acre seasonal campground in Alaska, with gross sales of $23,315, wants $385,000. A 17.5-acre property in the Midwest with gross sales of just under $300,000 can be yours for $2.5 million. A KOA Journey with 62 sites, 6 cabins and $178,156 in gross revenues–but “situated off a heavily traveled interstate”–is up for grabs at a smidge below $2 million.

These are crazy prices, as are the other listings, all looking for sale price multiples of 7, 8 and 10 times annual revenues–or more than double historical valuations. They’re also unsustainable for anyone who needs a mortgage, since they won’t throw off enough cash to service debt and also cover overhead expenses (never mind capital improvements!), so the buyers either have to be flush and simply looking for a place to park their money–or they’ll be seriously hiking site rates and hoping camper demand will be strong enough to meet the higher costs.

This is, in other words, a classic example of a bubble, in which assets get over-priced in the belief that they can be unloaded at a profit as the bubble keeps swelling, but before it pops. It doesn’t help that this frenzy is being goosed along by the brokers and other charlatans who profit from an overheated marketplace, like the unrelenting promoters at RVPark University. More on that in the next post!

RVs: homes hiding in plain sight

Because the West Coast is so often a leader in trends that eventually sweep the nation, one acronym that East Coast dwellers should learn is ADU, for accessory dwelling unit. ADUs can take many forms, such as basement apartments, apartments over a garage or a second, smaller building adjacent to the main dwelling, but in all cases they are part of the same property and cannot be bought or sold separately.

Once more widely popular as housing for extended-family members, or to generate extra rental income, ADUs fell out of favor in the mid-20th century and in many cities would now run afoul of zoning regulations. But as real estate prices have exploded all up and down the West Coast, the idea of maximizing land use and building relatively cheaper housing has become irresistible. As one result, California implemented a slew of new ADU funding and related regulations just a year ago, in hopes of encouraging more such development.

The key word in that description, however, is “relatively.” When the median sales price of a home in Alameda County last year was $1.3 million, or $875,000 in Seattle, an ADU can look like a bargain–even though the cost of one built to code can run as high as $400,000 in the Bay Area and Vancouver, BC. Yet even at a more typical mid-range cost of $80,000 to $150,000, there is nothing inexpensive about this approach, and it hardly looks like a cost-effective housing alternative for the growing army of people living in their cars, vans and battered RVs.

Enter Portland, Oregon, an interesting case study of where the future may lie. As reported a few days ago by freelance writer Thacher Schmid, Portland and Multnomah County have been overrun by illegally parked vehicles serving as homes of last resort. Although the city is the third-highest U.S. metro area for cost of living increases, unlike 45 other cities it has not designated “safe parking” programs for homeless residents, forcing them into a stealthy existence of parking on the sly, under overpasses, in city parks and in industrial zones.

Yet Portland also has had a progressive profile on accepting ADUs, and in recent years had basically ignored a creeping erosion of what’s acceptable as auxiliary housing, notably by vehicles that don’t have a fixed foundation. Kol Peterson, who spearheads a Portland-based organization called Accessory Dwellings, in mid-2020 extensively surveyed the city’s Cully neighborhood and found 65 inhabited mobile dwellings among its 4,685 households, including 36 RVs and 29 tiny homes on wheels. Based on that finding, he projected that Portland as a whole had an estimated 3,273 such illegal dwellings, at a time when the city had only 3,139 legally permitted ADUs.

Less than a year later, at the end of April, 2021, the Portland city council unanimously passed new regulations to allow RVs and tiny homes on wheels to be used as ADUs. That means RVs, which in almost every zoned jurisdiction nationwide can be inhabited legally only in RV and mobile home parks, may become increasingly recognized by other city officials as a viable form of affordable housing–after all, a $20,000 used RV is a whole lot more affordable than just about any ADU that can be built.

Suburban and urban homeowners may not be thrilled at the thought of having someone living in an RV camped out behind a neighbor’s home, but then again, most people who have spent much time in an RV won’t be thrilled at living in one year-round, either–especially if it’s seen a few years and isn’t going anywhere. But until society as a whole come to grips with its burgeoning housing crisis, even this rock-bottom response is better than living in the muck and stench of the illegal encampments that have been springing up in every major city.