SIC 6515

This category covers establishments primarily engaged in the operation of residential mobile home sites. Establishments primarily engaged in the operation of sites for overnight or transient use for travel trailers are classified in SIC 7033: Recreational Vehicle Parks and Campsites.

NAICS Code(s)

531190 (Lessors of Other Real Estate Property)

Industry Snapshot

Mobile homes account for about 6 percent of the total U.S. housing stock. There are an estimated 50,000 income-producing properties and manufactured-home communities throughout the United States and Canada. Of these, approximately 24,000 consist of at least 50 to 75 rental home sites per property.

Increasingly, mobile homes are approaching the average size and amenities of conventional housing units, as the share of mobile homes consisting of multiple sections has grown. Mobile homes are coming into direct competition with conventional units, especially as more double-wide units are built.

The industry remained generally unsophisticated in the 1980s in comparison to other sectors of the housing ownership and operation industry. However, during the 1990s, it underwent a transformation based on its significant affordability advantage over single-family, site-built housing. As a result, the manufactured housing industry accounts for about a 33 percent share of new homes.

Organization and Structure

Land owners who get permission from local zoning authorities can develop a mobile home park with a relatively small investment. The only significant costs involve bringing utilities—including water, gas, sewerage, and electricity—into each site and developing automobile access within the park. For parks that are unpaved, improvement costs are negligible compared to the costs associated with traditional site-built housing communities. Because there are so few barriers to entry, the mobile home operation industry has traditionally been dominated by small companies. According to the 1996 Allen Report on the Largest Community Owners, 500 major multiple-property portfolio owners control about 15 percent of the total property count and one-third of the investment-grade manufactured-home communities.

How the Industry Operates. Mobile home buyers can choose "singlewide" homes that average 980 square feet in size, or "doublewide" multisectional homes, averaging 1,440 square feet. Some new multisectional homes also allow "triplewide" structures. Although residents usually rent their lots, most buy their dwellings. The standard purchase agreement allows the dealer a markup of 20 percent to 25 percent over the wholesale price of the home. The dealer sometimes arranges financing of the home through the manufacturer, though banks finance most mobile homes. Additionally, the dealer usually assumes responsibility for delivering the home to a community and installing it on a lot.

Many local authorities have used zoning laws to ban mobile home parks, restrict their size, or relegate them to the least desirable parts of a community. With supply constrained, occupancy rates have historically remained above 90 percent, which compares favorably with apartment buildings.

Turnover of mobile home residents is very low — only 5 percent for the actual homes and 10 percent among homeowner-renters who generally sell their homes in place before relocating. Turnover is so low because today's larger single-section and multisectional homes are quite difficult and expensive to move. Rent in manufactured housing communities is typically one-third that of nearby townhouse apartments.

In addition to mortgage payments to the manufacturer of their home, most mobile home park residents pay rent to their community owner/operator. Monthly rent typically ranges from $100 per month, although high-end developments with amenities usually charge more than $200 per month. In about 30 percent of communities being developed in the early 1990s, operators also arranged to sell lots to residents as part of a condominium. Some offered 99-year leases on lots, which effectively amounted to buying the parcel.

One reason park owners and operators do not allow residents to buy lots is that they may be able to sell the land for higher prices in the future. In fact, many land owners operate mobile home parks with the specific intent of eventually converting, or selling, the property for a more lucrative purpose as it becomes more valuable.

Regional and Demographic Variations. Profiles of typical mobile home parks differ principally by region and by the age and economic status of its residents. For instance, some communities cater to retirees, offering smaller lots for smaller homes. Other communities cater to families and provide big yards, more parking, and amenities that appeal to children such as swimming pools and playgrounds. Developments designed to appeal to low-income residents offer small lots, few amenities, and unpaved streets. Conversely, most communities aimed at the upscale segment of the market provide paved streets and sidewalks, recreational facilities, large lots with lawns, wooded public areas, off-street parking, and adequate outdoor lighting.

Regional differences result from variations in housing prices, as well as demographics. Parks in the Midwest, Southeast, and Northeast are characteristically traditional. They are usually arranged in grid patterns, are more apt to appeal to low-income residents that are elderly or childless, and charge monthly rents for lots. Mobile home communities in western states and in Florida, on the other hand, are more likely to appeal to families and middle-income residents. These developments also are more likely to have curved, paved, and wooded streets. They also offer more financing options to their tenants, such as condominium or lease-to-buy arrangements.

The migration of population to the Sunbelt has been one of the most significant factors that affect mobile home output and sales. More than 50 percent of mobile homes sold in the 1990s were in the South. The Midwest and West absorbed 20 percent and 16 percent, respectively, while the Northeast accounted for only 8 percent of home placements. Western states had the highest proportion of multi-wide units as well as the highest average unit price.

Background and Development

Uniquely American, the mobile home operation industry emanated from the invention of recreational trailer-coaches in the 1930s. During this early stage, mobile home parks were designed to serve temporary guests who needed a place to park their trailer for a short time. By 1940, more than half of all trailers were being built for permanent housing, and parks began serving permanent, as well as overnight, tenants. The industry gained public recognition when the government bought large numbers of mobile homes to house servicemen and defense workers during World War II. This led to mobile homes becoming an acceptable housing alternative in the 1950s when a national housing shortage left many people out of the housing market. As site-built houses caught up with demand in the 1960s, mobile home operators began offering facilities for larger, comparatively luxurious homes.

In the 1970s, two factors spurred growth of mobile home parks. First, productivity advances in manufactured housing technology allowed mobile homes to become increasingly price competitive with other types of housing. For instance, the average price of a manufactured house, including land development costs, increased from $18,000 in the mid 1970s to $27,800 by 1990. During the same period, the average cost of a site-built house jumped from $44,000 to $150,000. Second, the development of larger, more luxurious homes changed the public perception that mobile homes were temporary housing trailers. Many newer mobile homes in the 1970s offered central air-conditioning, covered parking, and garbage disposals. Also, since 1976, manufactured homes have been required to meet a federal preemptive building code known as the National Manufactured Housing Construction & Safety Standards Act. This code ensures a high level of product quality and allows manufactured housing to cross state lines for siting in almost any locale.

A number of changes have occurred within the manufactured-housing industry during the past two decades. In the early 1970s, nearly 80 percent of manufactured homes were in manufactured home communities. Today, half of the new, larger manufactured homes are placed on privately-owned, scattered building sites and into housing subdivisions. Second, few new manufactured-home communities were developed in the past two decades, and existing ones are nearly full—averaging a 94 percent occupancy in 1995. Furthermore, where vacant rental sites exist, they often can't accommodate today's larger manufactured home.

New manufactured-home production has gone through a boom and bust cycle. In 1973, the industry shipped 579,960 homes. This fell to only 212,690 home shipments in 1975. In 1994, 303,932 homes were shipped—the first year since 1974 to top 300,000 homes. In 1995, 339,601 homes were produced.

The Allure of Mobile Home Communities. The greatest appeal of manufactured housing for most residents is that it offers many of the advantages of home ownership at a cost comparable to renting an apartment. Most residents in manufactured housing communities have their own yard and parking space. They also are allowed to add personal amenities to their property—such as shrubs, covered parking, decks, and storage sheds—that would not be allowed at most apartment complexes.

Mobile homes are comparatively inexpensive in comparison to traditional site-built homes because they are built entirely in factories. With drywall construction, brand-name appliances, and other quality features, multisectional manufactured homes are often indistinguishable from site-built, single-family houses. These multisectional houses have increased from 28 percent of total manufactured home shipments in 1980 to 50 percent in 1996. In 1994, multisectional manufactured housing cost $27.41 per square foot. The average cost of site-built houses was almost twice as much, $54.65. Mobile home community residents also benefit from low maintenance, attractive financing terms, and tax advantages. Manufactured homes are usually easy to trade-in, move, or sell.

The traditional residents of mobile home communities are either first-time home buyers, between the ages of 25 and 44, or elderly retired people. While these groups benefit from cost advantages, disadvantages en-tail limited appreciation in property values and minimal land use rights. Insurance rates for manufactured homes are typically 10 percent to 20 percent higher than those of site-built homes because of increased wind and fire risks. Furthermore, residents of mobile home parks often are alienated from surrounding communities because of the negative image associated with manufactured housing.

By the late 1990s, demand for manufactured housing has been boosted by considerably more favorable public regard for the units, as well as by various economic and demographic factors. After suffering for many years from a poor public image, manufactured home builders have upgraded the quality of their product offerings.

The industry has been focusing on selling manufactured homes and sites as a unit. The Federal National Mortgage Association (Fannie Mae) buys and secures residential mortgages on manufactured housing, as long as the house and land are sold together in a single transaction.

Another factor making manufactured homes a more desirable living alternative has been the long-term trend toward producing larger multisectional units. In the 1980s, 80 percent of new manufactured homes produced were single-section—12 to 14 feet wide by 50 to 60 feet long. At the century's close, only a slight majority were single-section, and even these were larger than they previously were at 16 to 18 feet wide and 70 to 80 feet long.

Rising consumer acceptance, favorable demographics, readily available credit, and a slowdown in low to middle-income apartment construction should keep demand relatively strong. The relative affordability of manufactured housing is helping the group to build market share versus conventional, site-built homes. Manufactured housing represents almost one-third of all homes built in the United States. Furthermore, the industry has significant growth possibilities due to the replacement of the large number of older manufactured homes coming to the end of their useful lives.

Industry Trends. Although many mobile home operators still catered to traditional buyers in the mid 1990s, most newer developments tried to attract more sophisticated residents. As a result, manufactured housing developments grew larger and more expensive and began to resemble site-built communities, rather than traditional trailer parks.

Trend-setting states, including Washington and California, broke new ground in the industry, and operators in other states hurried to follow their lead. California operators lured residents with larger developments, larger lots, aesthetic neighborhood designs with woods and lakes, and recreational amenities. These changes reflected the fact that in 1990 fewer than 20 percent of Californians could afford site-built housing, compared to 50 percent who could afford manufactured housing in a park.

Between 1980 and 1990, the average density of mobile home communities in California fell from 10 to 6 units per acre and the average lot size nearly doubled to 4,800 square feet. During this same period, the number of larger multisectional units in California housing parks increased 100 percent, to nearly half of the market. Furthermore, 80 percent of new mobile home sites being developed in the 1990s were "family projects." Most of the homes in these new projects had three or more bedrooms, a site-built two-car garage, a large front lawn and back patio, and used traditional building materials such as roof shingles and aluminum siding.

An important change taking place in trend-setting markets like California has been the profile of the mobile home operator. While most manufactured housing site operators in traditional markets such as the South are small operations, site owner/operators of newer developments are more likely to be larger, traditional tract housing developers. These developers use manufactured homes to reduce costs and speed product delivery in an effort to lure more traditional, and wealthy, home buyers. These communities differ from traditional mobile home parks because the homes are more permanent and are usually sold on-site.

Financial Markets. One factor which increased the popularity of mobile home communities during the 1990s was financial market activity that provided easier financing for manufactured home buyers, as well as more capital for community owner/operators.

In the 1980s, The Government National Mortgage Association, The Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation all offered secondary markets where lenders could sell portfolios of mobile home loans. The secondary markets were only available for loans on houses that were permanently attached to their lot and were sold as one transaction. Throughout the 1990s, these secondary markets increased the popularity of larger, more modern mobile home parks that sell homes on-site.

Another source of financing for the mobile home park industry in the capital-starved economic environment of the 1990s was locally sponsored tax-exempt bonds. Recognizing the need for affordable housing and the advantages that properly planned manufactured housing communities could deliver, cities increasingly tried to create a friendly political environment for mobile home operators. One way of doing this was to help owner/operators finance new developments that would serve the local community. Beside issuing tax-exempt bonds to finance new projects, some cities also eased zoning restrictions and created agencies to help residents in buying units and lots in mobile home developments.

A third source was the real estate investment trust (REIT). In 1992, real estate mogul Sam Zell arranged to sell a 64 percent stake in Manufactured Home Communities Inc., a Chicago operator of 40 mobile home parks in 16 states, as part of an REIT. Three other major operators of mobile home parks followed Manufactured Home Communities in forming REITs: ROC Communities Inc. of Englewood, Colorado; Sun Communities of Farmington Hills, Michigan; and Chateau Properties Inc. of Detroit, Michigan.

Industry Leaders

Chateau Properties is a self-administered, self-managed real estate investment trust that owns, manages, and leases 47 manufactured-home communities with 20,003 sites in Florida, Michigan, Minnesota, Illinois, and North Dakota. Chateau also owns lands next to some of its communities containing an additional 1,495 expansion sites. Of the 43 properties, 36 have 200 or more sites, with the largest having 1,423 sites. Occupancy rates average more than 90 percent, with monthly rents averaging about $265.

In 1996, Chateau merged with ROC, forming the largest company in the manufactured-housing communities industry. Chateau executives said one of the advantages of the merger would be geographic diversity, making the combined company less vulnerable to regional economic shifts. Also, ROC owned a lot of land that could be developed, allowing for expansion of the consolidated company. The merger was approved despite a lawsuit by Manufactured Homes trying to block the deal. Manufactured Homes had earlier bid $400 million for Chateau.

Sun Communities, Inc., a real estate investment trust, owns and operates 79 manufactured housing communities containing about 28,800 sites in eight states, primarily in the Midwest and Southeast. In addition, the company has nearly 2,000 potential expansion sites. The overall occupancy rate is more than 90 percent, with average rents of about $220 per site.

Other industry leaders included Ellenburg Capital Corp. of Clearwater, Florida, which generated sales of $52 million for the fiscal year ending June 30, 1995, according to the most recent information available on Infotrac. Outdoor Resorts of America Inc. of Nashville, Tennessee, generated $15 million in sales for its fiscal year ending March 31, 1999. Outdoor Resorts created its own niche in the market by catering to mobile vacationers traveling in recreational vehicles. Company president and CEO E. Randall Henderson Jr. predicted in 1996 that motor home resorts would grow 250 percent over the next decade. Outdoor Resorts already operated 16 such resorts, including its premiere $55 million Outdoor Resorts Palm Springs RV Country Club.

Further Reading

Crist, Dean. "Mobile Home Characteristics." Housing Economics, October 1995.

Easton, Thomas. "Real Estate for Bargain Hunters." Forbes, 17 June 1996.

Gargaro, Paul. "Home Free … Almost." Crain's Detroit Business, 30 September 1996.

Goldenberg, Sherman. "Henderson Sees Growth in Motor-home Resorts." RV Business, June 1996.

Hoover, Gary, Alta Campbell, and Patrick J. Spain, eds. Hoover's Handbook of American Business. Emeryville, Calif.: Publishers Group West, 1995.

Infotrac Company Profiles, 22 December 1999. Available from .

Shilling, Gary A. "Home Sweet Factory-Built Home." Forbes, 12 February 1996.

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