Why Are There No Mobile Home Parks in Chicago?

A recent guest of mine in from out of town commented to me on the absence of trailer parks in the city. This remark brought to the forefront a topic that I've been meaning to discuss for some time.

Manufactured housing. Modular housing. Container homes. Mobile homes. They all have assorted differences but they have two things in common. The first is that they are constructed in factories somewhere other than the land they're intended to occupy. The other is that they are very, very scarce on the ground in Chicago. In any other city a blog about rental housing would spend a whole lot of time talking about mobile home parks but we've barely touched on them at all because there's really no overlap between mobile home renters and Chicago renters.

There is one mobile home park in Chicago. It's located at 4000 E. 134th Street on the far south side smack up against the border of Indiana and it's called Harbor Point Estates. There are plenty in the neighboring suburbs, though. In fact, one of the worst airplane crashes in Chicago history occurred in 1979 when a DC-10 taking off from O'Hare landed on a trailer park in Des Plaines, just a few miles from the airport.

The simple reason behind the absence of trailer parks in Chicago is something called "highest and best land use." The more complicated reason is also "highest and best land use." So of course we must explain things in more detail.

Highest and Best

The term "highest and best land use" comes from the world of economics. It's used by real estate appraisers when figuring out the value of land for sale. The amount of money that a bank or lender would make available to a developer is based on these appraisal values. A piece of land can be said to have reached its highest and best use when something built upon it creates maximum production while still being possible from a physical, legal and financial standpoint.

Consumers encounter an equivalent of "highest and best use" every time someone suggests that they could buy something other than a Starbucks latte for the price of a Starbucks latte. You know full well that there are other things you could do with your $5, like feed most of a starving village in a third world country for a week.

Just like those consumers who choose to go for extra foam instead of extra philanthropy, developers can also choose to ignore a plot of land's highest and best use. However, it's much more difficult to get financing to build it. Something like a trailer park will need a lot of financing to get started, especially if those trailers are going to be used as rentals rather than purchased outright. However, from the surface it doesn't look like the idea should be scuppered entirely.

So let's unpack this a bit further to find out where the sticking point lies.

Physically Possible

There is no doubt that you can build a trailer park in Chicago and find people to live there. The terrain is nice and flat. There's ample sources of water and power. In fact the abundance of trailer parks in the suburbs is proof positive that it is physically possible to do in this area.

However, a trailer park would require a considerable amount of undeveloped land to construct. The Harbor Point development takes up about 1.8 continuous square miles. It's situated on a flood plain. 10 years ago an expansion project planned at Harbor Point required 700,000 cubic yards of soil and a $26.5 million TIF grant from the city. Good luck finding another plot of land like that within the city limits that isn't reserved as park land and isn't at least partially underwater for a good part of the year.

Legally Possible

Alright, now suppose you find that stretch of 2 continuous square miles of vacant land in Chicago. But now you run up against some other issues.

Zoning is the first one. Chicago's zoning is very strict and exceedingly tough to change. Residential property can only be built in residential or mixed use zones. High density residential (such as apartment buildings) can only be built within certain subdivisions of those residential and mixed use zones.

As developers and business owners in the city well know, getting a zoning change for even the smallest alteration can be a real pain. I can guarantee that any land you find in Chicago large enough to hold a trailer park will not be zoned as such, because there are no other areas besides Harbor Point where they are currently allowed. You're looking at getting the alderman involved and a wait time of months, if not years, while the Chicago Plan Commission and the city council consider your application.

Any zoning change is going to get some nosy neighbors offering their input. There's certainly a class-based stigma against trailer parks that would bring out the NIMBYs in full force. There are neighborhoods with vacant land to spare, but one word about installing a concentrated group of low income residents in even a normal stick built building prompts havoc at local town hall meetings.

If you manage to get your zoning variance, then you're going to run up against the Chicago building code. Chicago is the only city in the country that still uses its own home-grown building code instead of the Uniform Code used by the rest of the country. This means that factory-built housing that would be perfectly fine anywhere else is not necessarily going to be legal here.

Case in point: modular housing has been around for over a century now. You've probably seen pieces of modular homes on the highway, carried on those "Wide Load" trucks with the flashing lights. They're built in sections and then assembled on site.

In fact, remember what I said about manufactured housing being scarce in Chicago? That's not entirely true. The vintage two-flats you see all over the place in Chicago came from a related movement that arose around the same time as modular housing and could be called a very early version of "manufactured housing." People have simply forgotten that they started out this way. The only difference is that in the case of the two-flat, the manufacturer sent materials and blueprints for you to assemble on your own, kind of like the IKEA flat-pack version of a modular home.

Despite being praised for their eco-friendly and rapid construction process, the first modular home didn't go up in Chicago until late 2010. It took the developers four years of revising their plans and wrangling with the city to get the building permit, and that was the bells & whistles LEED Platinum certified version of manufactured housing that didn't come up against NIMBY protests.

So while it may be physically possible to built a trailer park in Chicago, once you get to the legal side of things you've got a lot of hurdles to clear. But suppose you grease the require palms and assuage the angry NIMBYs and still want to go through with your trailer park concept. That still leaves...

Financially Possible

We already stated that Harbor Point Estates got a $26.5 million TIF grant from the city for their landfill about 10 years ago. That was part of the full $287 million price tag required to expand the site from about 150 trailers and RVs to just shy of 1000. A three bedroom rental at Harbor Point Estates runs you $1150.

So, $287 million for about 850 housing units on about 1200 acres of land. If you built a city block worth of high rises you could house that many people in 5% of a single acre.

By comparison, Wolf Point East, currently going up in River North, has a construction cost of approximately $350 million and will have about 700 apartments. An apartment at sister building Wolf Point West goes for anywhere from $3690 to $5700 per month.

So let's do the math here on a fully rented trailer park as opposed to a fully rented high rise apartment building.

Harbor Point Estates has 1000 units. I know that they also sell mobile homes but for our purposes let's suppose that they only rented them. At about $1000 per month per unit, they earn about a million dollars per month in rents. That means they would pay off their $287 million construction costs in 23 years.

Wolf Point East will have 700 apartments earning about $4700 per month provided that they're all full. This means that they are earning about $3.3 million in rents per month and will pay off their $350 million construction price tag in eight years, and that's without selling off a single one.

Of course not 100% of rents can go to paying off construction costs. There are overhead expenses such as property taxes, maintenance, marketing and staff salaries. But that 15 year payoff difference tells me that while a trailer park might be financially possible there are better ways to spend your money, like a high rise in River North or 5 million shares of Starbucks stock.

TL;DR

Chicago is too much of a weirdo city to have trailer parks. There's too little land remaining and the building costs are too extreme to create them. We have a different building code from the rest of the country. Our neighborhood identities are too firmly fixed and class-based. Any developer that's serious about their trailers is going to redirect their funds to another city that's more receptive. After all, if you're building housing in a factory it doesn't really matter if you send the product to Chicago or to Des Plaines.

However, I predict that as the demand for low income housing increases and trends like the tiny house movement keep popping up, the demand for manufactured housing will increase in proportion. It may not be trailer parks that break down the barriers, but rather container homes and modular homes. But once those are permitted, mobile home parks will probably follow. It will probably take another few decades, and who knows if by then we will still be in a situation where large amounts of low income housing are needed. But nobody predicted what happened to Wicker Park over the span of two decades either, so maybe in the future we will see the second Chicago trailer park pop up near you.

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