Investments in the US manufactured housing sector

In the current uncertain market environment, investment opportunities with highly stable cash flows are particularly attractive. A good example of such investments with relatively low risk is in the manufactured housing sector in the United States.

November 2, 2023

Key takeaways

The CSA 2 Multi-Manager Real Estate Global investment group has had exposure to this niche residential sector since 2019. In Q2 2023, a further investment in this sector was decided upon with the same partner, the largest private owner of manufactured homes in the US. 

Affordable housing increases demand for MH

The US manufactured housing market has been experiencing consistently high demand on the part of low-income earners for a long time now. In an environment of rising mortgage interest rates for residential property, low rents make this type of housing even more appealing. The current offering, especially in the area of institutional providers, is very limited. The reasons for this are muted interest from project developers that can generate higher profits with other uses, especially multi-family dwellings, as well as regulatory obstacles at the local authority level.

Sustainable capital expenditure with stable cash flow

Cash flows in the manufactured housing sector are extremely stable. When investing in manufactured housing properties, the CSA 2 Multi-Manager Real Estate Global investment group pays particular attention to sustainable capital expenditure. In the joint venture with a Canadian pension fund, compatibility analyses form the basis for rent increases, infrastructure development, and social and environmental compatibility. The CSA 2 Multi-Manager Real Estate Global portfolio encompasses more than 7,300 residential units in 12 US states. The Investment Committee recently decided on a follow-up investment of over USD 50 million in another manufactured housing portfolio with the same partners, which is currently being implemented.

Dwelling options

  Government assistance Institutional managed MH (pad+home) Multi‑family rental Single‑family rental Single‑family ownership
Typical costs/month USD 850 or below1 USD 1'2002 USD 1'5003 USD 1'6004 USD 1'9005
Relative cost to manufactured housing 30% lower 1x 25% higher 33% higher 58% higher
Typical employment  Food and services support staff Services staff, factory workers, retirees Urban mid‑company employees Education, sales staff, lower management Mid-corporate employees/managers
Amenities No Yes Some No No

Manufactured housing compared to other residential options in the US, as well as average monthly spending and typical gainful employment. Source: Macquarie, March 2023

1 Bureau of Labor and Statistics, October 2022. Assume 30% income contribution for voucher assistance and based on average individual earned income of ~US$34,000.
2 RHP average costs of brand new 3-bed manufactured home. Institutional MH is even more affordable for residents moving into used homes (e.g. 5 –10 years of vintage which is about ~65% of the brand-home home price).
3 Comparable 3-bed apartment rental (Source: Macquarie research).
4 Comparable single-family rental (Source: Macquarie research).
5 Comparable single-family ownership (Source: Macquarie research).

Revenue growth forecast (2023-2026)1

The Manufactured Housing sector is expected to perform well through to 2026 given its defensive nature and robust demand. Source: Green Street Advisors, data as of December 2022
Manufactured housing communities offer attractive, affordable homes and are in high demand in the United States. Source: RHP Properties, Inc.

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1 Average same-store revenue growth based on Green Street Advisors metric combining changes in rents with changes in occupancies.

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