Manufactured Housing Communities Make for Worthy Competitor in Multifamily

The McAnuff Group
Sep 18, 2017
2 min read

After reading this September report by Fannie Mae, a company which has only just begun their venture into manufactured housing lending on a pilot program but has a tremendous research department, traditional stick built multifamily housing is feeling the pressure from the surge in interest mobile home parks and MHP investors which is driving them to work harder at their promotions and affordability. This tells us that while we already know we are viable competitors, the traditional multifamily is finally catching on to the MHP market presence. Competition will get stiffer. MHPs will have to up their game. But, the good news is, they already are.

Now that MHPs/MHCs are gaining substantial traction with an influx of new investors, savvier investors and owners, combined with huge strides in the lifestyle quality of manufactured homes at all sizes and levels, the traditional "affordable" multi-family real estate is starting to feel the effects of a customer base shift. The result is that their marketing efforts have to work harder, the asset managers have to become more creative, and the analysts have to think more "affordably" when setting and calculating rents.

This report also tells us that while there may be some slight pullback in the market from months prior for manufactured housing, it won't be long term. We'd call this an adjustment. As competition becomes stiffer between traditional stick-built multi-family and manufactured housing communities, both sectors must be on their game regarding attracting their target audience. While manufactured housing is making huge strides in affordability and getting closer to zero-sum energy on a daily basis, apartments are slower to transition. In fact, one of the biggest pros to manufactured housing vs. apartments and other rentals is home ownership, which could be even less than the sum total of rents for a period of time. That's a very attractive selling point.

Here are some key points we found most interesting from the Fannie Mae Multifamily Market Commentary.

* "According to Datacomp/JLT, there are only about 38,000 existing MHC properties, of which only a few communities are expanding, and nearly no new communities are being built." (NOTE: the figure of 38,000 conflicts with the long-standing word-of-mouth figure of 50,000 nationwide by those who are experts in the industry. Until all states require registration and licensing, we may never know how may MHCs there actually are!)

* "...currently only eight new MHC properties are estimated to be under construction or expansion, as illustrated in the map and table below." (NOTE: we follow the news on our industry daily. We are pretty certain this figure is inaccurate. We know for a fact from following the news that there are other new MHPs being built and expanded in Texas alone. No Texas projects are listed here.)

* "...the average MHC cap rate remains well above the national multifamily average cap rate of 5.7 percent as of mid-2017"

* "Private investors, which include privately owned companies and real estate developers, represented 69 percent of MHC purchase volume through mid-August 2017, followed by public REITs at 16 percent."

For the full Fannie Mae report as a PDF, please click here.

For a web version of the document, please go to: http://www.fanniemae.com/resources/file/research/emma/pdf/MF_Market_Commentary_091517.pdf