Real estate bubbles harm real people

Two unrelated developments this past week affecting two RV parks, one in New Jersey and one in North Carolina, illustrate two trends on a collision course. And as with most trends that involve economic forces, those who get hurt the most are those who have the least.

The first trend is that of low-income people increasingly turning to RVs for permanent housing. Notwithstanding industry assertions about RVs not being built for year-round use, the country is studded with RV parks that cater largely or entirely to owners of travel trailers, fifth-wheels and the occasional motorhome who have nowhere else to live. In years past, this population would turn to trailer courts–and many still do. But as the number of trailer courts has diminished and their rents have soared, those squeezed out of conventional rental housing by that market’s price distortions have had to look elsewhere. RVs, comparatively small and under-insulated though they are, therefore have become the new housing of last resort.

The second trend, alas, is that RV parks are now tracing the same inflationary curve as the trailer courts that preceded them. Some are shutting down, for a variety of reasons, and many more are either restricting or phasing out long-term campers altogether; almost all are increasing rents, in the most extreme cases doubling their previous rates. And as with the trailer courts, that means RV parks are pushing out those least able to keep up with rising costs, notably people on fixed incomes and low-wage workers.

In the first instance, a tenant of Surf and Stream Campground in Manchester, NJ, earlier this week filed a lawsuit against the campground’s owners and Ocean County, seeking to halt eviction proceedings and to get help for the residents to find new homes. The campground’s owners are selling the 20-acre property to the county for a nifty $7.45 million–or a whopping $372,500 an acre–to be preserved as open space. The 160 people who have made their homes there, alas, are just so much collateral damage. They include veterans with PTSD, single parents in financial distress, senior citizens and people with disabilities, all of whom will be hard-pressed to find a one-bedroom apartment for even double the $600 a month they were paying for their RV sites.

The owners of the RV park, it should be noted, deny that anyone lives at the campground year-round. The residents, of course, say otherwise–and shouldn’t have a hard time proving the point, which may not be enough to fend off evictions (currently slated to begin later this week) but may trigger assistance from the state’s Relocation Assistance Act. That’s not great, but at least requires the state and county to ensure that those who get displaced are able to find “comparable decent safe and sanitary housing” elsewhere.

The second example, still in its embryonic stage, comes to us in the form of an online real estate listing that popped up this week, offering to sell the Homestead RV Park in Maggie Valley, North Carolina, for a mere $1,650,000. Since the “park” is only 2 acres, that works out to $825,000 per, which makes the New Jersey deal look like a bargain. Crammed into that scant acreage are a modest “clubhouse” and 22 RV “lots,” which the seller earnestly informs us bring in an average monthly rent of $550.

Try to learn more about the Homestead RV Park and you’ll quickly find that it has never been reviewed and has no website, despite being located–as the real estate listing observes–“in the center of the famous vacation destination of Maggie Valley.” How can that be? Quite simply because the park is basically an RV retirement community, its year-round occupancy restricted to “responsible adults age 45 and up.”

Do the math and you’ll quickly figure out that the Homestead has an annual gross of $132,000; because the seller volunteers that his annual operating expenses are $31,680, you may conclude that he has a net operating income just north of $100,000–which at his asking price yields a capitalization rate of 6%. Even in the best of times that’s an awfully low return–and these are not the best of times. Indeed, a buyer would be lucky to get a commercial loan at 6% right now, which means the park’s current cash flow wouldn’t be enough even to cover monthly loan payments.

So maybe that means this park will never sell at the asking price. Or maybe, just maybe, a potential buyer will decide that if current cash flow doesn’t cover expenses, well . . . increase the flow. With Maggie Valley a happening place, with limited room in the mountain valley for additional RV sites, and with the average local one-bedroom apartment renting for $1,400–when one can be found, that is–doubling site rates to $1,100 a month would maintain the same net operating income as is enjoyed by the current owner, even with an outsized mortgage.

Of course, there is that pesky collateral damage problem to consider. But surely a bunch of “responsible adults age 45 and up” should be able to figure out how to cover a doubling of their housing costs–right?

Poking big money is a risky business

I’ve written several times in recent months about deep-pocketed developers whose plans for outsized RV parks have run into unexpected opposition from local residents. For some unfathomable reason, people living quiet lives in rural communities often don’t cotton to the idea of having an extra thousand or more transients rolling into the area, their narrow country roads overrun by rumbling motorhomes and diesel-chugging trucks hauling travel trailers and fifth wheels. They show up at public hearings and form impromptu opposition committees and throw as much sand into the gears as they can, and they most certainly can bog things down.

But big money often claims big friends, and then the fighting can get downright vicious.

One of those fights is shaping up as a court battle in central Kentucky, where an ambitious proposal to build an RV resort of several hundred sites initially was greeted warmly by municipal leaders, who were sold on the idea that the Kentucky Bluegrass Experience Resort would be an economic shot in the arm for the city of Midway. But as the enormity of the project sank in for local residents, raising concerns about increased traffic and the potential for adverse environmental impacts, sentiment quickly shifted–too late, it seemed, because the developers had already obtained a conditional-use permit.

But Midway’s town fathers, undeterred, found an end-run by blocking KBER’s access to the city’s water and sewage services. KBER’s developers cried foul and responded by suing the city’s Board of Adjustments; in May, with the legal proceedings dragging on and Midway’s city council showing no sign of flinching, they filed a motion to add the city itself as a defendant. And there matters stand, with a project once heralded as an economic godsend morphing into a bloated bully determined to have its way regardless of the cost in local goodwill. Even if KBER wins its legal battle, it will have lost the hearts and minds of its neighbors.

Meanwhile, a more nakedly political brawl is shaping up in western North Carolina, where an RV park-building developer in Maggie Valley has enlisted the help of state representative Mark Pless to revoke the town’s zoning authority. Pless’s measure, adopted this past week in the House, will come up for a vote in the Senate this Monday without a hearing, thanks to an arcane maneuver in which Pless found a bill that the Senate had already passed, stripped out its contents–with the consent of its original sponsor–and substituted his own measure in its place.

Prompting Pless’s ambush was a six-month development moratorium that the town of Maggie Valley had adopted after last fall’s election, in which two new aldermen who had campaigned on a “smart growth” platform were swept into office on an avalanche of support. The moratorium was designed to give the town enough time to complete its Unified Development Ordinance, which had been in the works for years. It also threw a monkey wrench into various development proposals from developer Frankie Wood, who has been holding out the lure of resurrecting the town’s fabled amusement park, Ghost Town in the Sky, while pursuing several RV parks, RV planned unit developments and other high-density projects. It didn’t take Wood long to cozy up to Pless.

Indeed, underscoring how personal these conflicts can become, two provisions of Pless’s bill specifically target Maggie Valley–and both expire Jan. 1, 2025, shortly after the terms of the two recently elected aldermen end. Meanwhile, in an ironic juxtaposition, the town’s development moratorium expires this Monday. The now completed development plan is scheduled for a public hearing at 6:30 p.m.–presumably after the North Carolina Senate will have voted on whether to hogtie the town’s ability to control its growth.

Money and ambition are not averse to steamrolling any claims of self-rule and self-determination. And the more money is at stake, the more devastating and widespread the damage.

NIMBY part 2: Maggie Valley woes

Straddling a winding North Carolina road, halfway between Asheville and the Great Smoky Mountains National Park, the town of Maggie Valley is the kind of vacation spot that appeals to people looking for hiking trails, Appalachian vistas, wildflowers and black bears. No surprise, then, that despite a relative lack of flat ground it has at least nine campgrounds and RV parks along a two-mile stretch of the main drag, which seems like a fair number for a town of only 1,700 or so–but for some, there’s never enough.

Riding the same wave of pandemic-juiced development that is afflicting other naturally beautiful areas, Maggie Valley also has been contending with the grandiose plans of a Myrtle Beach-based developer, Frankie Wood, who for the past two years has been spinning tales of how he intends to revive a now-defunct tourist attraction, Ghost Town in the Sky. Ghost Town has been sitting in mothballs since 2002, and Wood–as reported by The Mountaineer–apparently hasn’t invested a penny of his own money in the mountain-top amusement park. But he does have a “trail of bad debts and court cases over the past 30 years,” including having his own home foreclosed on in 2019.

In best “Music Man” style, however, Wood has besotted much of the Maggie Valley business establishment with his grand designs, acquiring partners for other projects he insists must precede The Big One. Chief among these is a need for more housing for all the employees he’ll eventually need, which translates into planned unit developments, trailer courts and more RV parks, which–given Maggie Valley’s vertical geography–has meant a flurry of rezoning requests to allow increased building density. And, for a while, Wood was getting all that and more, receiving dozens of land-use designations consistent with high-density development.

But while much of the business community warmed up to Wood, a clear majority of Maggie Valley residents felt otherwise. Too much was going on, and what was going on was too helter-skelter, without a clear vision of how everything would fit together or how it would reshape the town. Last fall, with two of the town’s aldermen positions up for election, two of the four candidates campaigned on a “smart growth” platform–and were overwhelmingly propelled into office by the biggest voter turnout anyone in Maggie Valley can recall. “I want to see smart growth, smart investment,” top vote-getter John Hinton summarized for the Smoky Mountain News. “Campgrounds are not smart growth. We want to see homes built. I’d love to see Ghost Town redeveloped . . . but I’ve yet to see a comprehensive plan of how that would work, a comprehensive plan that would not include a burden on the taxpayers of Maggie Valley.”

Lacking such a plan, the town is now drafting its own and expects to have it finished by July. Until then, the Maggie Valley board of aldermen hit the “pause” button, approving on a 3-2 vote a moratorium on any new developments. Sounds smart, doesn’t it? A triumph for local control over zoning and planning decisions? A recognition that there has to be a balanced approach to land use, so that someone doesn’t plop a landfill next to a hospital, or a steel mill in the middle of a housing development?

Not to North Carolina Rep. Mark Pless, who recently told a Mountaineer reporter that a six-month moratorium “sends the wrong message about Haywood County, that we are closed for business.” Dismissing the new aldermen as “wet behind the ears,” Pless–who has just finished serving the first year of his freshman term in office–said he is thinking about introducing legislation to reverse the town’s decision. Such a local override bill doesn’t require the governor’s signature in North Carolina, only needing the approval of the state’s House and Senate–and as the Mountaineer pointed out, legislators from outside the area affected by a local bill typically bow to the wishes of their colleagues.

Home rule? Only a quaint idea when there’s money to be made, even in an area as politically conservative as western North Carolina. Pretty soon the Mountaineer may have to contemplate a name change to something a little less rugged and independent. Maybe the Profiteer. Or better yet, the River City Review.

Because yep, you’ve got trouble right there in River City.

When NIMBY is a good thing

The NIMBY acronym, meaning “not in my backyard,” is a scornful term–and rightly so–usually hurled against those who oppose a development that they believe would lower their property values. Such projects typically are intended to benefit an underserved population, such as low-income housing or a half-way house, and typically are greeted with false expressions of sympathy and a dozen reasons why–although of course this is a wonderful idea–this just isn’t the right place for it. Please! Not here. Not in my backyard.

It’s therefore tempting to give in to a fleeting sense of schadenfreude when the shoe is on the other foot: when the proposed development would serve those who already have a lot, not those who have little. When a developer rolls into a quiet rural community and announces he’s going to spend a few million dollars to build a vacation playground for RVers, complete with a water park, boat docks, sports courts and game rooms, a restaurant, amphitheater, fitness and yoga center, and whatever else may strike his fancy. When the locals are forced to contemplate the prospect of hundreds of people invading their peaceful corner of the world every week, shakily driving their oversized homes-on-wheels along narrow country lanes.

But it will be good for the community, the developer will bray. Think of all the new business this will bring to the area! The new job opportunities! The boost in local tax revenues!

Somehow the math never quite works out that way, but by the time the locals figure that out it’s too late. As one resort area after another has already demonstrated, from one end of the country to the other, all that new development pushes real estate costs so high that the people filling those new but low-paying jobs can no longer afford to live in the area. The increased spending by all those new visitors is largely captured by the development itself, with only a fraction trickling into the wider community. And in most cases the tax base doesn’t grow enough to pay for the increased demand on police, fire and other services, because transients living in houses-on-wheels don’t pay nearly as much in taxes as people in sticks-and-bricks homes, even as they have almost as many needs.

But developers hoping to cash in on the pandemic-catalyzed RVing boom are looking to build new campgrounds just about everywhere–and because it makes more economic sense to build a bigger campground rather than a smaller one, those proposals tend to be big. Big enough to inject almost as many visitors into a local community as there are local residents–and those local residents, once they figure out what’s in the works, overwhelmingly don’t like it one bit. From a proposed RV park of 300+ sites at the Mashantucket-Pequot casino in Connecticut, to a similarly sized RV park proposed for Lake Anna in Virginia, to the mega-park branded as the Kentucky Bluegrass Experience Resort, grassroots opponents have convinced their local representatives to block or severely modify such unwanted intrusions into their communities.

The developers, no surprise, are fighting back on several fronts–and even are resorting to disdainful accusations of NIMBYism against their opponents. That’s flipping the term on its head, of course, which is amusing and unsustainable. Less amusing, on the other hand, is a North Carolina state politician’s promise to enact legislation that would allow the state to overrule local land-use decisions–not on behalf of low income housing or half-way houses, but to repel attempts to control the development of still more RV parks in an area that is already bursting with them.

In circumstances like these, NIMBY may be the most appropriate response.

Next post: the threat to Maggie Valley

Housing squeeze makes RVs a default

The development struggle that’s been going on in Maggie Valley, North Carolina, for much of the past year is symptomatic of a growing problem around the country, as developers rush in to capitalize on the renewed interest in RVs and RV campgrounds. As with any boom investment, the financial shock waves thrown off by big money frequently buffet little people who have no skin in the game and are simply trying to get by–and when it’s their housing that’s at stake, the end result is immiseration.

In Maggie Valley, the conflict began when a Myrtle Beach-based developer unveiled a $200 million (!) plan to revive a defunct theme park, which many locals remember fondly from the latter half of the last century. But bringing Ghost Town in the Sky back to life requires a lot more juice than it once did, the developer explained; it requires a whole lot of ancillary development, from new restaurants to a hotel to a health clinic. It also will require finding at least 200 new workers in an area that doesn’t currently have them, and new housing for all those workers, because the area doesn’t have enough of that, either. That’s why reviving the theme park also means building additional RV campgrounds, he told the town, because that’s the cheapest and most flexible housing solution–even though the town has precious little flat land and at least a dozen existing campgrounds already serving the tourist trade.

The campground “solution” raises several issues, not least among them the suitability of RVs for long-term housing. But here’s an even more fundamental question: why isn’t there enough housing in Maggie Valley for the people who work there? And the answer, as just about all resort towns already know, is that real estate prices have gone through the roof. In Maggie Valley, located in Haywood County, home prices have jumped 33.7% in just the past year and 73.3% over the past five years, to an average of $338,316. Meanwhile, the average monthly income in Haywood County was just $2,454 in 2020, putting affordable housing out of reach of the people working in the tourist industry that is supposed to inject the town with economic vitality.

Ironically, while some of that upward pressure on prices is due to inadequate new construction, a significant part of it is the result of the pandemic-fueled return to the outdoors that developers are now trying to exploit. As local observers have noted, new visitors arrive, they fall in love with the mountain scenery and they decide to stay–sort of–by buying a vacation home. Sometimes two. That’s nice for them, providing a refuge from whatever claustrophobic cities they call home, but while their surplus homes sit empty most of the time, local workers more rooted to the area can’t find an affordable place to live.

This is not a problem peculiar to Maggie Valley, of course, although it may be more pronounced in mountain communities because of their additional topographic constraints on new home construction. Local news reported last summer that many workers in Jackson Hole, Wyoming, were living out of their cars in Bridger-Teton National Forest because there was no housing to be had. In the Idaho panhandle this past week, the Shoshone Board of County Commissioners heard numerous objections to a proposed RV park, including the fear that it would essentially become a magnet for “trailer trash.” As one local resident pointed out, a plummeting availability of rental properties is forcing area workers to turn to short-term rentals and RVs for their housing needs, with RV campgrounds at risk of becoming the next generation of trailer courts.

Indeed, short-term rentals are the other main driver of housing scarcity: real estate investors have concluded that the higher rates they can charge for short stays more than compensate for their higher risk compared to long-term rentals, and so have been snapping up houses and apartments that would otherwise be rented by working people. The short-term rental sector is so lucrative that newcomers like reAlpha–trolling for new investors with as little as $1,000 to buy in–dangle an irresistible set of numbers: Zillow’s estimate that long-term rentals are currently pulling in an average of $1,495 a month, vs. Airbnb estimates of $3,256 a month for short-term stays. “There’s a reason billionaires invest 20-40% of their wealth in real estate,” reAlpha croons.

Given those pressures, it’s little wonder that many RV campgrounds increasingly are headed in the direction of being dumping grounds for people with nowhere else to go. RVs are hardly designed for year-round living, and unlike regular housing they depreciate over time, so their owners never build up the equity that would allow them to escape their trap. But they are a step above living out of a car in a national forest–and they do enable developers with deep pockets and large ambitions to keep on getting bigger.

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