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In a recent release, KBRA provides an insightful review of manufactured home communities (MHCs), highlighting their affordability, performance trends, and credit characteristics. This research comes at a time when MHCs are increasingly gaining attention as a viable affordable housing option, particularly as families face escalating single-family home prices and rising multifamily rents over multiple years. MHCs operate primarily as a land lease business, renting home pads to owners of prefabricated homes. Due to higher demand, MHCs have seen rising rents and occupancies. Despite being a small segment of the U.S. housing market, accounting for 6.4% according to the Census Bureau, MHCs are crucial. The Manufactured Housing Institute reports over 43,000 MHCs in the U.S., with almost 4.3 million homesites. Key Takeaways: Affordability Comparison: The Census Bureau indicates the average price for a manufactured home is $121,300, significantly lower than the $487,300 average price for a single-family home. Cost of Ownership: The average monthly cost to own a manufactured home is $1,317, compared to $2,188 for a single-family home, demonstrating substantial savings for homeowners. Zoning Regulations: A major barrier to MHC growth is local zoning regulations, which often limit the development and expansion of these communities. Increasing Demand: Demand for MHCs is rising, as evidenced by a 7.3% year-over-year (YoY) growth rate in average monthly MHC rents in 2023, the largest annual increase in the past two decades. In contrast, multifamily rents saw a 1.6% YoY decline in 2023, following two years of 23% YoY gains. Occupancy Rates: Average MHC occupancy for 2023 was 94.7%, comparable to multifamily occupancy rates, which stood at 94.5%. Securitization Trends: Between 2017 and 2023, $10.1 billion worth of MHCs were securitized, encompassing 1,384 MHC properties through Freddie Mac and conduit transactions. Credit Performance: The strong credit performance of MHCs is highlighted by a low aggregate Freddie Mac and conduit MHC delinquency rate of 0.32%, compared to 1.35% for multifamily properties. Historical Default Rates: Over a longer period, MHC loans have shown favorable credit performance, with a cumulative default rate of 8.1%, significantly lower than the 13.8% default rate for multifamily loans, as per KBRA’s November 2021 Conduit CMBS Default and Loss Study. As families continue to seek affordable housing options amidst rising costs in other segments, MHCs represent a critical component of the housing market. Their affordability, strong credit performance, and increasing demand underscore the importance of these communities in addressing the nation’s housing needs. #ManufacturedHousing #AffordableHousing #RealEstate #HousingMarket #MHC #HomeOwnership #RealEstateTrends #HousingAffordability #PropertyInvestment #CommercialRealEstate #KBRA https://lnkd.in/er4HJtY4
