The household income for 20% of all Americans is under $20,000. That’s 60,000,000 people. Based on the government’s suggested ratio of housing costs to total income – about 33% — these families can afford around $500 per month. But the average apartment rent in 2010 was over $1,000 per month. So where can you live for $500 per month? There are only two options: 1) low rent apartments and 2) mobile homes sited in mobile home parks.
So who wants to live in a mobile home? Just about everyone, as it turns out. Low rent apartments have many characteristics that tenants find appalling including 1) high crime 2) constant noise on all sides and above and below you 3) no outside play space 4) inability to have a pet and 5) no sense of “community”. Mobile homes, however, offer the chance to have privacy, a small yard, a pet, and an actual neighborhood feel like a real subdivision. A mobile home in a mobile home park is infinitely more desirable than its multi-family alternative. Perhaps that’s why 8% of all Americans already live in a mobile home.
The least expensive form of detached housing
So how did mobile homes get so cheap? In the 1970’s HUD began to regulate the mobile home manufacturing industry, and allowed many construction methods to reduce the cost of the product. Still, the disparity between mobile home and traditional stick-built housing has a lot to do with the soaring value of “stick-built”, single-family homes. As you can see in the following chart, while mobile home prices rose over time, the prices of stick-built homes skyrocketed. As a result, a new mobile home costs less than one-third of its stick-built relative, or about $30 per square foot. Warren Buffet – who is known for his attraction to value and low costs – is the largest owner of mobile home manufacturing and financing in the U.S. But that’s only half the story.
There is an extremely large and fluid secondary market on mobile homes, in which homes often sell for as low as $1,000. These homes are made available by private owners as well as mobile home park owners and lenders through repossessions. Consumers can access these homes through traditional newspaper classifieds, signs on mobile home park frontage, and word of mouth. When you factor in this secondary market, the price per square foot drops to as low as $1 per foot. Mobile homes are, without question, the least expensive form of detached housing.
Understanding mobile home parks
The other part of the equation in this affordable housing model is the mobile home park. Mobile home park rents remain extremely affordable, with the average rent in the U.S. around $200 to $300 per month. With a new home, the sum of mortgage and lot rent is around $700 to $1,000 per month. However, with used homes, this sum can be as low as $300 to $500 per month. Affordable lot rents are as important a part of the model as home prices.
Mobile home park owners make good money at rents this low.