By George Allen, Realtor®, CPM®Emeritus, MHM
Not a month goes by someone, from within or outside the manufactured housing industry, doesn’t ask: ‘Just how many landlease (nee manufactured home) communities are there in the U.S. these days?’ Well, I’ll take a stab at revisiting that perennial question, from several perspectives: why we’ll never know for sure; the historical answer (circa 1999) that remains pretty much unchanged; and, some contemporary ‘thinking’ on the subject, relative to raw land development, existing LLCommunity expansion, ‘park closure’, types of investors, and why we call the property type what we do….
We’re not the only income–producing property type who wrestles with the ‘How many?’ question. Here’s a direct quote from an RV park trade periodical just last month: “Although the numbers vary somewhat depending on the source, the industry’s more knowledgeable individuals believe there are about 8,000 to 9,500 private U.S. RV parks and campgrounds.”*1 (italics added for emphasis. GFA).
Here are reasons why the landlease community (‘LLCommunity’) business will likely never ascertain an accurate property count, or even – frankly, come close to it. First off, only a dozen or so states out of 50 bother to license this type of realty investment, usually the contemporary key to securing a county by county listing of such properties located therein.*2 For example, a state like Texas, as large as it is, does not have an official, comprehensive list of all the LLCommunities located there. Add to that reality, how each state establishes its’ own base rental homesite count, e.g. from two to five homes on the same parcel of developed land, constitutes a ‘mobile home park’. And then there is Illinois, a state with a ‘home rule’ statute allowing dozens of mid to large sized cities to have jurisdiction over these properties; hence, hundreds of LLCommunities that never appear on that state’s Board of Health list.
We first started looking at this national inventory issue way back in 1993, as ELS, Inc. (nee MHC, Inc.), and a couple other firms, prepared to take their ‘manufactured home community’ property portfolios public, as a real estate investment trusts (‘REIT’). Before that could happen (successfully), Wall Street analysts and stock investors needed to learn much more about our real estate asset class. For starters, ‘Just how many such properties are there in the U.S.?’ And at the same time, though beyond the scope of this article, they wanted objective, empirical data related to our national physical occupancy percentage; average homesite rental rates; an Industry Standard Chart of Accounts, accompanied by typical operating expense ratio(s) or OERs; and other similar investment real estate benchmark statistical indicators.
The answer to the national inventory question, was viewed four ways. First; at the time (1993) and in common practice, “…the manufactured home community segment of the HUD Code housing industry…used the range of 50,000 to 55,000 properties when describing (its’) national inventory.”*3
Then we applied the Pareto Principle; whereby, approximately 20 percent of the states (at the time, we had data from 11 licensing states) theoretically contained the bulk, or 80 percent, of all such properties in the U.S. The 11 states accounted for approximately 29,190 LLCommunities. Mathematical extrapolation computed 100 percent of the properties might contain nearly 37,000 such income – producing entities. The weakness here, is the assumption these 11 states indeed contain ‘the bulk of all such properties’ – but with 39 states not licensing (& inventorying); how to know for sure?
Regression analysis, relative to 11 states with 29,190 LLCommunities, suggested the remaining 39 states contained 23,275 properties, when taken together, totaling 52,465 arbitrarily reduced to 52,000 to account for no LLCommunities in Hawaii, and possibly other states, at the time.
Then there was the latter day ‘informed estimate,’ of 55,000 properties, using information collected during compilation of the National Source list of Manufactured Home Communities (Appendix M in How to Find, Buy, Manage & Sell a Manufactured Home Community, published by J. Wiley & Sons, NY, in 1996 & 1998.
Averaging the 37,000 and 52,000 and 55,000 respective estimates together, suggests there might have been 48,000+/- LLCommunities nationwide in 1999.
Since each of the years between and including 1994 and 1998, saw the HUD Code manufactured housing industry enjoying heady 300,000+ new home shipments per year (High of 372,843 in 1998); and the LLCommunity asset class experiencing record high national physical occupancy rates (e.g. 95%+/- in 1998), hundreds of new LLCommunities were built across the U.S., making one comfortable estimating 50,000 such properties overall.
Then came the ‘closed park’ phenomenon. As difficult as it had/has been to estimate the inventory of LLCommunities across this country, it’s been next to impossible to accurately document the number of such properties converted to alternative uses, regulated out of existence, converted to fee simple, and or simply ‘closed’ during the past ten or so years. Several related observations:
• There has been no accurate count of all ‘closed’ LLCommunities across the U.S. In part, because some, if not many, of the now closed properties have been small, older properties (i.e. often functionally obsolete) that don’t generate publicity when ‘closing,’ as do those acquired for supposed ‘higher and better use’ of realty proper.
• Closures have often been a local housing market phenomenon, sometimes driven by reckless development (e.g. retail strip centers built without anchor tenants in place when opened) of alternative forms of commercial property during the ‘go go’ years of the past decade. Other regions of the U.S., often rural environments, have experienced few closures at all.
• Add to this, the reality that almost everyone, outside the LLCommunity asset class, ignores the fact this income–producing property type continue to be developed on appropriately zoned raw land, along with routine expansions of existing LLCommunities.*4 Bottom line? Since the ‘chatter about park closures’ has quieted to less than a whisper, during the past few years, as LLCommunity development and expansion continues, we’re likely seeing a net gain in both property inventory and rental homesite count nationwide.
• Another piece of fine–tuning with a bearing here, particularly where very small, if not older LLCommunities are concerned, has to do with the oft cited ’85 percent of all LLCommunities (except in Sunbelt states where figure is closer to 78 percent) are 100 sites and smaller in size.’ This factoid hearkens to the early 1990s, when work first began on answering this national inventory question. Take published lists of these properties, in states where available, and ‘run the numbers.’ The slewed phenomenon occurs, in large part, because of the aforementioned extremely low threshold count, e.g. ‘3 manufactured homes on a parcel of land equals a LLCommunity’ where said properties are licensed.
Well, there you have the past and latest ‘thinking’ on the subject of ‘Just how many (landlease communities) are there?’
The only other related aspects, of this subject, have to do with subjective gradations of this type investment property and characteristic realty investors, e.g. Mom & Pop sized = 100 sites and fewer in size; Institutional Investment Grade = 200 sites and more; and Young Wealth Builders = ‘anything in between’, whether 75 – 100 or 175 – 200 sites in size. Why? Most investors are pursing ‘economy of scale;’ minimal with smaller properties, much larger with high number of occupied rental homesites.
And then there’s the reason many of us, particularly in what’s left of the trade press, increasingly refer to this unique property type as being landlease communities or LLCommunities. Two decades ago, one found only pre–HUD (1976) ‘mobile homes’ and post – HUD ‘manufactured homes’ sited in these properties. Today, expect to find not only these two housing types, but two story modular homes (in DE, MD, CA & elsewhere), ‘park model’ RVs (i.e. less than 400 square feet in size) common in all Sunbelt regions and great for siting on functionally obsolete (i.e. too small for today’s large manufactured homes) rental homesites; RVs for a season – where allowed; and even some stick–built homes constructed on–site to look like manufactured homes (FL, post Hurricane Andrew).
And, if you have a concrete way to zero in on more accurate estimates of the national inventory of LLCommunities, many of us would like to hear and read your thoughts and evidence. Address suggestions and comments to MHI’s National Communities Council (‘NCC’) via (703) 558-0678 (Thayer Long). And, while you’re at it, if not already a direct dues – paying member of the NCC, and own/operate LLCommunities in the U.S.; become one! I’d like to meet you at our next meeting.
1. From WOODALLSCM.com, dated 8/18/2010. Knowledgeable individuals? David Gorin (my consultant counterpart in that asset class) and Ann Emerson, VP & publisher of Woodall’s.
2. Why? Licensure hearkens back to the early days of the manufactured housing industry, when there were no bathrooms in ‘trailers,’ and trailer parks catering to this clientele featured public sanitary facilities, regularly inspected – and thereby licensed, by the (state) board of health. When in–home sanitary facilities became commonplace, need for inspection oversight lessened, but licensure, for the most part, didn’t sunset with said modernization.
3. This quote, and methodologies following, are taken from a Facebook feature published in May 1999, by the now defunct Community Management magazine, then headquartered in Arizona.
4. Look at any ALLEN REPORT of the past five or so years, since the development/expansion question has been included in the annual survey. For example, while year 2009 was a decidedly slow year in this regards, the 21st annual ALLEN REPORT survey of 500+/- known portfolio owners/operators, with 125 responding, showed four firms reporting 22 new LLCommunities containing 3,749 new homesites; and five firms reported expansions of 21 existing LLCommunmities for a total of 379 new homesites. While these figures may sound low to some, bear in mind that the vast majority of LLCommunity owners/operators, for a variety of reasons, eshew answering this particular question in the annual survey.
George Allen, Realtor®, CPM®Emeritus, MHM
Consultant to the Factory – built Housing Industry &
The Landlease Community Real Estate Asset Class
Box # 47024
Indianapolis, IN. 46247