4 Reasons MHCs Outperform Despite Volatility
GMF Group's Gabe Monfried on what makes manufactured home communities so stable.
Manufactured housing communities are becoming a hot topic for investors, and it’s easy to see why. Thanks to a surge in demand that exceeds supply, their appeal as a solid and dependable investment has only grown stronger.
What truly sets MHCs apart is their ability to remain stable and resilient, even when the economy takes a hit. In fact, they’ve even earned a reputation for being “recession resistant,” a rare and valuable trait in today’s real estate market. So what’s their secret for outperforming during times of economic volatility? It’s a combination of factors, including long-term stability, lower operating costs and the ever-growing need for affordable housing.
1. Life Cycle
The average manufactured home stays on a lot for 50 years. Tenants tend to stay for approximately 14 years—far longer than the two-and-a-half-year average for traditional multifamily tenants. This long-term stability is a draw for investors since it reduces resident turnover, ensures more predictable cash flow and minimizes disruptions.
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Another key factor is that MHCs are the largest form of unsubsidized affordable housing in the U.S. This means they’ll always be in demand, no matter what’s happening in the broader economy. This steady demand means these communities are less vulnerable to the kinds of volatility that can affect other housing types during uncertain times.
2. Demographics
MHCs serve a wide demographic, including families and senior citizens. These groups, primarily made up of working-class individuals, are typically more settled than younger populations that may relocate more often for job or education opportunities. This means tenants are likely to stay in place for longer periods, reducing vacancy rates and enhancing stability for investors.
Additionally, MHCs are well positioned to meet the needs of an aging population. Besides offering an affordable option, they can also provide a sense of community. Residents can utilize shared spaces and activities to create a close-knit environment that fosters long-term satisfaction. The blend of affordability, stability and connection ensures that demand for MHCs remains high.
3. Lower operating costs
Another advantage of MHCs is their lower operating costs compared to traditional apartment buildings or single-family homes. These communities typically require less maintenance, utilities and staff. This efficiency allows MHCs to maintain profitability even while addressing property needs. Since MHCs are cost-effective to run, there’s more room to invest in property upgrades that make communities even more enjoyable for residents.
4. Low vacancy
Finally, vacancy rates in MHCs are consistently low. Many of the country’s existing MHCs were built between the 1950s and 1990s, and zoning laws and red tape have slowed new developments. MHCs represent just 6 percent of the nation’s housing stock, which creates fewer challenges in filling vacancies.
MHCs stand out as one of the most resilient and recession-resistant asset classes in real estate. Their unique combination of low turnover, long-term stability, cost-efficiency and broad tenant base means they can outperform other housing types during market uncertainty.
For those looking for a resilient asset class with strong growth potential, MHCs present a compelling opportunity.
Gabe Monfried is a co-founder & managing partner of GMF Group, overseeing all of the firm’s investments, strategic initiatives and fundraising.
