Why Manufactured Home Communities?
Manufactured home communities provide a low-cost alternative to traditional site-built housing. Tenants typically pay $250-$500 per month in lot rent and install manufactured homes semipermanently on home sites in private master planned communities. The community land leasing industry in the United States generates $3.75 billion annually. Because of the relatively high cost of moving manufactured homes ($3,000 or more), residents’ homes generally remain in place for many years.
Twelve million Americans live in manufactured homes. Roughly half are retirees who move into manufactured home communities to downsize their living situations and save money. The other half are working families, who find that manufactured housing provides more space and square footage for raising families than similarly priced apartments. Both segments are growing fast.
Even as the demand for affordable housing continues to rise, the number of manufactured home communities in the United States is not likely to grow. Many towns’ zoning laws are averse to manufactured home communities because of their relatively small contribution to the tax base and their perceived impact on nearby housing values.
Compared with other real estate investments, manufactured home communities enjoy low operating capital reserves and low tenant turnover. For investors, manufactured home communities provide income that is largely unaffected by general economic conditions. For this reason, many of the nation’s top real estate investors have entered the industry. Sam Zell, chairman of Equity LifeStyle Properties, has at various times been the nation’s largest owner of rental apartments and commercial space. Berkshire Hathaway acquired Clayton Homes in 2011, one of the country’s largest producers of manufactured homes.
The industry is highly fragmented, with over 66,000 land leasing firms in the U.S. Sole proprietorships account for the majority of industry participants, and the top four firms account for just 15% of industry revenue. There is a good opportunity to acquire properties from sole proprietors, who often wish to retire and cash out. Flintstone Properties particularly looks for this type of opportunity.