Investing in Manufactured Housing Communities: A Different Perspective

Manufactured housing communities (MHCs) have been drawing increasing interest among institutional investors, shining a spotlight on this unique commercial real estate sector. The MHC market has become more institutional, with some institutional owners freeing up capital to focus primarily on the MHC market.¹

The misconceptions about MHCs have been numerous over the years. However, with changes to housing regulations, MHCs have evolved from what many once viewed as trailer parks for low-income residents to beautiful, safe, affordable, and active communities meeting the needs of approximately 22 million people.²

Highlights³

• 43,000+ manufactured housing communities nationally
• Cost to build manufactured homes average $86.62 per sq. ft. traditional “site-built home” $165.94 per sq. ft.⁴
• 59% of new homes placed in manufactured home communities
• National average monthly site rent $683
• 95% average national occupancy rate

Manufactured housing and MHCs serve a critical function in providing affordable housing as they are the lowest cost option for many with nearly 4.3 million manufactured housing sites across the United States.³ The average cost for a new manufactured home in 2023 was $124,300 as compared to an average cost of $514,000 for a traditional “site-built” home.

An Exceptional Real Estate Investment Sector

1. MHCs are the top performing sector across economic cycles, historically delivering strong performance during recessions and economic upswings.

1. Limited MHC supply is due to the difficulty to gain approval for new developments.
2. MHC occupancy rates reached 94.7 percent in 2023, with impressive gains in the Midwest and Southwest.¹
3. MHC rents are growing, rising 1.5 percent in the fourth quarter of 2023. Rents have increased by 7.3 percent year-over-year and now average $679 per month.¹
4. Strong resident loyalty with a recent study revealing an average of 60 percent of residents are extremely/very satisfied with their community.⁴ 
5. Solid MHC demand interacts with a very restricted new supply environment, as net deliveries of new pads has hovered near zero for several years.
   
   Manufactured Housing Completions & Demolitions (2000 to Q2 2024)⁵

Looking Ahead

Manufactured housing will continue to fill a vital need for U.S. affordable housing. As millennial homebuyers continue to grapple with record-high home prices, limited supply, and rising interest rates, and baby boomers retire and downsize, demand for the manufactured housing sector is likely to remain high. The sector is also expected to see strong interest from lenders, especially Fannie Mae and Freddie Mac, as these communities serve their mission of providing financing for affordable housing quite nicely. With this, the prospects for attractive returns in the MHC sector look very strong.

1 https://www.globest.com/2024/04/22/trends-in-the-manufactured-housing-unlocking-investor-opportunities/

2 https://constructioncoverage.com/research/states-investing-most-in-manufactured-housing#:~:text=Currently%2C%2021.2%20million%20Americans%20live,in%20the%20U.S.%20each%20year

3 https://mhinsider.com/manufactured-housing-industry-trends-statistics/

4 https://www.census.gov/data/tables/time-series/econ/mhs/annual-data.html

5 Fannie Mae. Multifamily Affordable Housing Market Commentary. September 2024.