KBRA Releasese Research – Manufactured Home Communities – Affordable Housing Alternative, but Limited Supply

KBRA on June 12, 2024 released research providing a review of manufactured home communities (MHC), including their affordability, performance trends, and credit characteristics. While manufactured homes have always presented an affordable housing option, they have recently been in the spotlight, as families are increasingly being priced out of other options due to elevated single-family home prices, as well as multiple years of rising multifamily rents. With higher demand for these homes, MHCs–which generally operate as a land lease business renting home pads to owners of prefabricated homes – have been experiencing increasing rents and occupancies. The sector is vastly undersupplied and still accounts for a modest proportion of the U.S. housing market, at 6.4%, according to the Census Bureau. The Manufactured Housing Institute (MHI) indicates there are over 43,000 MHCs in the U.S., with almost 4,3 million homesites.

Key Takeaways

• The Census Bureau reports that the average price for a manufactured home is $121,300, compared to an average price of $487,300 for a single family home.
• The average monthly cost to own a manufactured home is $1,317, versus $2,188 for a single-family home.
• A major barrier to MHC growth is local zoning regulations.
• Demand is increasing, as average monthly rents had a year-over-year (YOY) 2023 growth rate of 7.’3%, the largest annual increase in the past two decades; comparatively, multifamily had a 1.6% YoY decline in 2023 but that was following two years of 23% YoY gains.
• Average MHC occupancy for 2023 was 94.7%, which is comparable to multi-family (94.5%).
• During 2017-2023, $10.1 billion of MHCs were secularized (1,384 MHC properties) through Freddie Mac and conduit transactions.
• The aggregate Freddie Mac and conduit MHC delinquency rate of O.32% demonstrates the strong credit performance of this sector. The comparative multifamily delinquency rate is 1.35%.
• MHCs favorable credit performance is also shown over a longer period, with MHC loans experiencing a cumulative default rate of 8.1%, meaningfully below 13.8% for multifamily (based on KBRA’s November 2021 Conduit Default and Loss Study, which includes loans generally originated for securitization between 1955 and Q2 2020).