Mobile Homes Move Into Investors’ Sights

Total investment in the manufactured housing sector surged 23 percent in the second quarter.

Manufactured housing has outperformed most other commercial real estate sectors during the downturn, underscoring the growing demand for affordable homes in a time of economic turmoil. Stabilized occupancy in the nation’s manufactured housing communities remained near an all-time high at 94.5 percent in the second quarter, according to a market report by JLL, while the price per pad grew 6.6 percent from the first quarter of 2020.

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New Jersey-based UMH Properties, a real estate investment trust that owns and operates a portfolio of 123 manufactured home communities, is among the industry players that have thrived in recent months. The company reported in its second-quarter earnings call that rent collections were in line with pre-pandemic levels, at 98 percent during the quarter and 95 percent for the month of July.

A shortage of affordable housing in the U.S. has buoyed demand for manufactured housing communities, which comprise about 9 percent of new single-family construction starts, according to data from the National Low-Income Housing Coalition. Image courtesy of myMHcommunity.com
A shortage of affordable housing in the U.S. has buoyed demand for manufactured housing communities, which comprise about 9 percent of new single-family construction starts, according to data from the National Low-Income Housing Coalition. Image courtesy of myMHcommunity.com

Same-property occupancy rates rose 250 basis points to 85.8 percent year-over-year, UMH added, translating to an increase of 500 revenue-producing sites.

“The migration of the population away from cities and out of apartments is further increasing demand at our locations,” said Samuel Landy, the REIT’s president & CEO.

Investors are interested in the niche asset class and they continue to consolidate ownership. Transaction volume in the market hit $821 million during the second quarter, jumping 23 percent compared to the first three months of the year, even as deals tumbled across other property sectors, JLL reported. Institutional capital represented 28 percent of investment volume year-to-date, the highest percentage yet. Blackstone kicked off third-quarter activity by announcing its intention to buy a $550 million (40 parks) portfolio from Summit Communities.

“These owners have largely driven year-over-year occupancy gains through investments into new and used inventory to support manufactured home sales and rental programs,” Landy noted. “Additionally, with many residents having an equity interest in their home, the stability and growth of homesite rents have generated attractive returns for investors.”


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Read the October 2020 issue of CPE.