I live in the San Francisco Bay Area, one of the hottest real estate markets in the country. Homes in my neighborhood routinely sell for hundreds of thousands of dollars over asking price, and most receive multiple offers within a short window of time.
Many people move to the Bay Area because of new jobs with attractive compensation plans. After all, this is one of the biggest tech hubs in the world. Google, Facebook, and Apple all call the Bay Area home, and we all know they’ve got deep pockets.
For people lucky enough to bring home one of those healthy paychecks every couple of weeks, the Bay Area can be a fantastic place to live. The weather is temperate year-round, with plenty of sunshine to soak up. There are almost no mosquitoes (this is perhaps my favorite part of living here, truth be told). And, there are more Michelin-starred restaurants here than anywhere else in America.
Sounds like a wonderland, doesn’t it? Life here must be easy. Everyone must be happy. Right?
While this may be true for those with the hefty paychecks, what about those who are on the other end of the spectrum? Living paycheck to paycheck can be stressful anywhere, but when the cost of living is skyrocketing from month to month, it can be nearly impossible to endure.
According to a California Housing Partnership report, workers in several Bay Area counties would need to earn four times the minimum wage to pay the median rent for an apartment. In Oakland, workers would have to make nearly $50 an hour to afford the median Alameda County rent of $2,553.
The vast gap between wages and rental rates has a disproportionate effect on the lowest-income renters, who spend more than half of their income on housing. This has also led to a significant increase in homelessness across the Bay Area.
When looking at data like this, it’s no wonder that many have declared the Bay Area’s affordable housing crisis an emergency.
But, while the affordable housing crisis is certainly magnified in the Bay Area, it is by no means limited to this one geography. Nearly half of all renters across America can’t afford rent, and over half a million Americans are homeless on any given night.
One of the biggest contributors to the affordable housing crisis is the fact that low-cost housing is disappearing from the market. Since 1960, renters’ median earnings have gone up by 5 percent, while rents during that same period had gone up by over 60 percent. ?
And not only that, but a Harvard study found that the fastest rise in home prices is at the low end of the market. That’s right. Those “cheap” homes are appreciating at twice the rate of high-end homes.
As a result of the lack of affordable housing, many people are either getting displaced, or they’re seeking out alternative housing options.
One housing option that’s grown tremendously in popularity of late is manufactured housing (also known as mobile homes). Just as the name implies, these are homes that are manufactured in a factory, rather than on-site, and they are often clustered together in a manufactured home park.
Not too far from where I live, there’s a manufactured home park that caters to an older demographic, ages fifty-five and up. There’s currently a two-bedroom manufactured home in this community listed for $125,000.
Writes one resident, “We meet for coffee every morning for anyone who wants to drop in at the Clubhouse. Lots of activities like Bingo games for $$, bus trips to the casinos, pot lucks and entertainment.” In addition to the clubhouse, the community here includes pool tables, shuffleboard courts, a swimming pool, a crafts room, and ongoing community activities.
Meanwhile, down the road just a few blocks over, there’s a two-bedroom single family home listed for $999,000. No bingo or clubhouse.
I am, by no means, suggesting that manufactured home parks will “fix” America’s affordable housing crisis. What I am suggesting, however, is that manufactured home parks could be a potentially critical piece in helping to alleviate the situation and provide a great housing option for many people.
Okay, let’s be honest for a moment here. When I started talking about mobile home parks, what were the first things that came to mind? Trashy trailer parks? Sketchiness? Cramped housing? No worries, those were the first things that popped up in my mind too.
However, things have changed. For one, the 1976 HUD Code set national standards related to energy efficiency, quality, durability, fire safety, and transportability, for all manufactured homes built after this date. Prior to 1976, there were no uniform regulations surrounding construction practices, which is partly why older trailer parks and mobile home parks have gotten a bad rap.
While there are still many “mom and pop” operations out there (which can be a huge opportunity for investors; more on this later), manufactured home parks these days can often be beautiful, clean, and safe communities where neighbors regularly get together and help each other out.
Manufactured home parks give residents the opportunity to own their own home, at a fraction of the cost of a traditional single family site-built home.
Speaking of “site-built,” as I mentioned previously, that’s one of the main differences between a manufactured home and a traditional home. Not the quality of the construction, but, rather, where the home is built. A manufactured home is built in a factory and is delivered to the site fully assembled, whereas a traditional home is built on-site.
It’s sorta like ordering an IKEA dining set fully assembled, versus going to Home Depot to buy the wood and build the table and chairs from scratch yourself. Sorta. Anyway, you get my point.
Remember how I said that manufactured homes are potentially a huge opportunity for investors? Clayton Homes, the largest builder of manufactured housing and modular homes in the US, is owned by Warren Buffett’s Berkshire Hathaway. And if good ol’ Warren is investing in them, we should all take note, don’t you think?
Life in a Manufactured Home Park
Beyond the affordability issue, what are the benefits to the potential homeowner? Why might someone choose to live in a manufactured home park?
For one, manufactured homes allow people to experience the perks of homeownership at a fraction of the cost. As a homeowner, they can paint or renovate anytime they want. Unlike in an apartment building, neighbors are not just on the other side of the wall, so noise is less of an issue. Small yards keep maintenance to a minimum. And, don’t get me started on the community perks. Many manufactured home parks include pools, fitness centers, and regularly scheduled community events.
On top of that, manufactured home parks are actually safer than similar non-manufactured dwellings. This is due, in part, to the physical layout of the communities, which optimize sight lines, thus making illegal activity much easier to detect.
Manufactured homes are also some of the most eco-friendly homes out there, as they make good use of every inch of space. And since manufactured homes are built in factories, weather doesn’t interfere with the process, so there are no wasted materials.
Sense of Community
Many people who have studied and lived in manufactured home parks sing their praises, saying that these “villages” foster openness and hospitality among people, encouraging people to go outside, rather than stay indoors.
Whereas traditional single family homes are built and designed to ensure isolation and privacy from neighbors, manufactured home parks bring people together and foster a sense of community.
And in today’s growing affordable housing crisis, that sense of community is of the utmost importance.
I’ll bet this isn’t quite the article you thought it would be, when you started reading. After all, even though we invest in housing as real estate investors, most of us are insulated from the realities of the affordable housing crisis.
But when you know better, you can do better. Perhaps you picked up a tidbit from this article that you didn’t know before, that opened your eyes to a new reality. Or maybe you were already well-aware of the realities of the affordable housing crisis but don’t know what to do about it. Because, really, what can a single person do to solve this overwhelmingly huge affordable housing crisis?
In a word, invest.
That’s right, you heard me. When you invest in affordable housing with the plan to improve it and help good people find a home, you are helping to alleviate the affordable housing crisis.
In fact, I think this nation needs more real estate investors. We need more capital invested into our communities, into bringing more affordable homes to the market, fixing those in disrepair, and maintaining those that are out there.
Hopefully, through reading this article, you’ve come to see manufactured home parks in a different light, as places that provide safe, clean, and affordable housing, as well as a tight-knit community. And who wouldn’t want to invest in a place like that?
In part 2 of this series, we’ll take a closer look at exactly why manufactured home parks are one of the best real estate investments out there, with returns that consistently outperform both self-storage and multifamily properties.
Continue to –> PART 2 OF THIS SERIES