Tag: housing of last resort

More RV sites don’t mean more room

If you’re a recreational RVer—someone who bought a travel trailer or class C motorhome thinking you’d like to take the kids camping—a pair of reports this past week by two long-time campground observers could make your head spin.

The first, by industry reporter Jeff Crider writing in RVBusiness News, tells readers they can “expect more than 18,000 new campsites through 2027,” thanks to 90 new campgrounds being built across the country, as well as new sites being added at 66 existing parks. For RVers who had been complaining since the pandemic about the increased difficulty of finding a place to camp, that sounds like incredibly good news—or it could be an instance of being a day late and a dollar short, given more recent reports of reservations loosening up. But hey—either way, it can’t hurt that more RV sites are coming, right?

Well, maybe not. Because as the second report suggests, much of that new RV site inventory is already spoken for, and even then there’s not going to be enough inventory to meet growing demand from residential RVers. Or as Frank Rolfe asks rhetorically, in yet another post promoting the investment rewards of RV park ownership, “What’s up with customers moving into RV parks full-time?” The answer, he quickly responds, is that “millions of Americans are starting to realize that they can live in their RVs fulltime and save a fortune on housing costs, with the additional benefits of pleasant surroundings and camaraderie of the RV park.”

Against that backdrop of “millions of Americans” looking for a home, even 18,000 new campsites becomes a negligible expansion. Indeed, if Rolfe is to be believed, the entire RV park segment is rapidly becoming a tricked-out version of the trailer courts that long ago became a depository of America’s most impoverished class.

Now, Frank Rolfe is not someone to be trusted if you don’t have a firm grip on your wallet, so take whatever he says with a grain of salt. He’s not a reporter but a promoter, one who years ago made a name for himself by recognizing that the residents of mobile home parks are a captive customer base, sitting ducks for ever higher lot rents and add-on fees for even the most basic services. But as affordable sticks-and-bricks homes remain in short supply (thanks in part to speculators at the other end of the vulture spectrum, with hedge funds snapping up single-family homes by the thousands), resulting in a 30-year low in home sales in 2023, the resulting demand for mobile homes has made that an increasingly pricey option as well: indeed, the growth in mobile home prices has outpaced that of single-family homes since 2017, soaring 77% to an average nationally of $127,300.

With the average mobile home in 2022 costing more than $100,000 in every state in the country, and as high as $168,500 in Idaho, house trailers have yielded their lowest-cost housing status to travel trailers—which, it should be noted, are explicitly not designed or built for full-time residency, but which are a damn sight better than living in a tent full-time. And if that carries a whiff of desperation, well, that’s exactly the kind of odor that appeals to a bottom-feeder like Rolfe.

So it is that Rolfe has taken to pounding the drum on behalf of RV parks as the next great real-estate cash machine, extolling their role in solving America’s “worst affordable housing crisis since 1776.” (Really?) Sure, RVs are smaller than mobile homes, built to less durable standards and rarely designed for four seasons, but they’re . . . cozy. And they’ve got those “pleasant surroundings and camaraderie” of an RV park to distract their occupants from their narrowed horizons. To make such privation sound more attractive, Rolfe links to a story about a 38-year-old woman living in a 20-foot travel trailer in Austin who simply loves “tiny living.” It helps, of course, that she’s single, has no kids and is healthy enough to bike to work each day, and whose primary motivation—as detailed in a different, more extensive story— is to save a million dollars by the time she’s 45.

That this is not your typical full-time RV dweller should be obvious, but Rolfe is in any case more interested in convincing RV park owners to convert their properties into something that looks more like a mobile home park. “The average RV park customer stays for 14 days per year” (Again—really?), while a full-timer stays for 365 days, “so one full-time customer is as important for your business as 180 normal customers.” The math doesn’t add up (Rolfe divided 365 by 2 instead of 14, mixing up weeks and days), nor do the dollars, since full-timers get a significant pro-rated discount from nightly rates. But as Rolfe goes on to point out, there are other benefits to having year-round residents, including fewer marketing requirements, more consistent cash flow and more stable management.

Indeed, if the Austin “tiny living” enthusiast is an example of what Rolfe is seeking, there are wads of cash to be made by pushing full-time occupancy in RV parks: in this example, lot rent of $750 a month, plus $42 for utilities, or $9,504 a year. Given that a large RV park may cost as little as $10,000 a site to build, those are the kinds of numbers that will have institutional investors falling all over each other to get into the business, and even more so if they’re shown how to run an RV park with minimal fuss—which is to say, with year-round residents rather than transients. So what’s not to like?—unless, of course, you’re the unfortunate RVer looking for a long weekend where your kids can get some fresh air and wood smoke.

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[Part I of a two-part look at the growing economic pressures squeezing mobile home and RV parks.]

In a harbinger of what lies ahead for a growing number of RV parks, the San Jose Mercury News reported this week that a family trust in California has just paid $40.7 million for the Rancho Santa Teresa Mobile Home Estates in San Jose. The mobile home park has 315 spaces, which means the purchase valued each site at $129,200.

Think about that. What kind of astronomical rents will it take to make that a profitable transaction?

And this was hardly the first or even the highest-priced acquisition of mobile home parks in California, which suffers the country’s most expensive real estate. As one example, the 116-site Mary Manor Estates in Sunnyvale sold in March for $39 million, which works out to $336,207 per mobile home pad. And the 110-site Winchester Ranch Mobile Home Park in San Jose changed hands last year for $50 million, or a whopping $454,545 per pad.

Given that price, Winchester Ranch clearly wasn’t purchased as a mobile home park but for its land, so there’s no surprise that it’s been bulldozed to make way for 320 single-family homes and 368 apartments. A similar fate may await other, similarly high-priced acquisitions. Then again, housing costs have become so extraordinarily distorted that even the most bloated valuations may be sustainable if rents are pushed to even more stratospheric levels.

Consider the average Los Angeles monthly rent for a mobile park site last year, which according to the commercial real estate services company Jones Lang LaSalle was $1,103–significantly higher than anywhere else in the country, yet the market still had the nation’s lowest vacancy rate, at 1%. With an average expense ratio of just 43%, that resulted in a market net operating income of $8,600 per site, or just shy of a million bucks for a park the size of Mary Manor Estates. That’s a number sturdy enough to support an awful lot of debt–and if it’s not enough, well, just raise the rates some more. With comparable apartments renting for triple that amount, the market will bear it.

Los Angeles in particular and California in general are high-cost outliers, but where they lead the rest of the country so often follows. It’s instructive, therefore, to read the latest musing from Frank Rolfe about why mobile home parks are better positioned to weather the Federal Reserve’s ongoing efforts to curb inflation by increasing interest rates. Rolfe, who has been flogged by me (here and here, for starters) and the media in general for his predatory approach to mobile home parks, contends that “mobile home park rents are ridiculously low and have massive potential for increases,” so higher interest rates are nothing to worry about.

But juxtaposing Rolfe’s further comments with recent mobile home park sales underscores the tragic transition that occurs when trailer parks–as well as RV parks and campgrounds–are sold by mom-and-pop operators to corporate and investment buyers. “How did mobile home park rents get so low to begin with?” he asks rhetorically. “To understand, you have to go back to the 1960s when the industry was young. Moms and pops owned virtually all of the mobile home parks and they simply were not good about increasing rents. . . . Moms and pops only raised rents at about half the level of inflation, resulting in rents being so ridiculously low.”

Put another way, moms and pops were putting the brakes on inflationary pressures, but now that moderating influence is being steadily reduced, even as inflation is reemerging as a global economic concern. From Rolfe’s vantage point, however–and that of the other investors snapping up such properties–“the greater demand that recession brings for affordable housing will allow offsets–such as higher lot rents–that will battle back the higher rates on loans.”

Those “offsets,” it should go without saying, only throw more gasoline on the inflationary fire.

[Next post: Part II, taking a look at the hypocrisy behind promoting mobile home parks as “affordable housing” by investors who are making them unaffordable, and the increased pressure that puts on RV parks as housing of last resort .]