Rising Demand for Manufactured Housing as Community Investors Take Note
(The following contains excerpts from an Outlook 2022 online report by MULTI-HOUSING NEWS titled Why Manufactured Housing is a Capital Magnet)
Manufactured housing continues to record rising demand from consumers seeking less expensive options, and investors are taking note. The industry is seeing an increasing influx of buyers eyeing the potential of manufactured home communities. This, in turn, is helping fuel a surge in the much-needed development of new stock.
According to Lesli Gooch, CEO of the Manufactured Housing Institute, the industry produced more than 100,000 units in 2021, the first time this has happened since 2006. Meanwhile, a nationwide shortage in the starter or entry-level home market is pairing with increasing prices. Gooch said while prices of manufactured homes have also increased, they still average about $87,000.
“We offer affordable home ownership,” she told Multi-Housing News. The popularity and desirability of what manufactured housing offers is being recognized by consumers.”
New Communities On The Horizon
Michael Callaghan, a managing partner with Four Leaf Properties, said there are hundreds of developers working on new communities across the nation but few of them will enter the market this year.
“There is a massive amount of activity going on, but the properties are not yet under shovel,” he added. “It takes a long time to get properties entitled and to build the infrastructure.
Callaghan wondered if the industry needed to experience the consolidation the sector is undergoing. “We need to get people to realize there are no more 300-to-400-home communities out there, we need to build them from scratch,” he said.
Gooch believes new investors can have a positive impact, particularly when it comes to overcoming zoning barriers that many municipalities have put in place to limit new communities. “These are mini-cities, so it’s important to have the capital needed to make sure a community is viable,” she said. “Institutional investors are much more able to do that.”
Jorge Figueiredo, vice president of acquisitions and asset management with Capital Square 1031, said that, from an operational perspective, the sector has performed extremely well in the past few years. Occupancy and rent growth have improved due to customer demand. “People are seeing manufactured housing for what it is – the most affordable type of living there is in this country,” he concluded.
The Great Recession that ended in 2009 shed a light on the opportunities that the niche provided, said Michael Glass, senior vice-president, division manager & national director for Marcus & Millichap’s Manufactured Home Communities Division. The pandemic caused investment professionals to look back and see what performed well during a difficult market.
The most desirable subsector, for investors, is senior living communities. Demand is so great that buyers are looking at smaller properties.
“The darling of manufactured housing space is senior living, ” said Glass. “When we list one of these assets, the demand is through the roof,” he said.
Positive Outlook For 2022 And Beyond
The outlook for 2022 and beyond appears to be quite positive. Gooch noted that President Joe Biden has included boosting manufactured housing as one of the pillars to address the national shortage of housing in September 2021. The administration announced it would help increase supply by expanding financing through Freddie Mac.
Gooch also said that HUD and Congress are working to overcome zoning barriers that hinder the development of new communities across the country.
While pandemic-related supply chain issues negatively impacted construction in other sectors in late 2021, manufactured housing was not as adversely affected because building takes place in factories.
“Because we’re in a factory-controlled environment, we can be nimbler, source alternative materials and overcome challenges, ” Gooch- said.
