Manufactured housing communities (MHCs) have compressed from average cap rates near 7.5% a decade ago to roughly 6.5% in 2025, and the resilience behind that move is what makes the asset class worth a closer look. Investors weighing where to place capital before the 2026 publish window should understand both the pricing trend and the structural reasons MHCs hold up when other property types soften.
Cap Rate Trends
Cap rate compression in the MHC space has been steady rather than sudden. Several forces drove the shift from roughly 7.5% to 6.5% over ten years.
- Institutional capital entered the space. Larger buyers accepted lower yields in exchange for stable cash flow, pulling cap rates down across well-run communities.
- Supply stayed constrained. Local zoning rarely permits new community development, so existing parks face limited new competition.
- Lot rent grew consistently. Annual increases in the 3% to 5% range supported rising net operating income, which buyers capitalized into higher valuations.
The result is a 100 basis point move that reflects how the market reprices durable income.
Why MHCs Outperform in Downturns
The clearest argument for MHCs is what happens to occupancy and collections when the broader economy contracts. Three factors carry the most weight.
Homeowners Stay Put
In most communities, residents own their homes and rent only the land. Moving a manufactured home can cost several thousand dollars, so turnover stays low even during financial stress. That cost of exit anchors occupancy.
Affordable Housing Demand Rises
When household budgets tighten, demand for the lowest cost housing options grows. MHCs often sit well below the rent of nearby apartments, which keeps waitlists full during the periods when other asset classes lose tenants.
Operating Costs Are Contained
Because the operator owns the land and infrastructure rather than the homes, capital expenditures per pad stay lower than the per-unit costs of multifamily. That keeps margins steady when revenue growth slows.
Low turnover plus rising affordable housing demand plus contained operating costs is the combination that separates MHC performance from most commercial real estate during a recession.
How This Shapes a Portfolio Allocation
For investors building exposure, MHCs function as a defensive sleeve rather than a high-volatility growth bet. Our income strategy reflects this with a 10% target return, framed as a target and not a guarantee, drawn from the steady cash flow these communities generate.
- Treat MHC exposure as ballast against cyclical assets.
- Underwrite lot rent growth conservatively rather than assuming compression continues.
- Focus on communities with verifiable occupancy history above 90%.
You can review how we structure these holdings on our income fund page and see the underlying assets that support the strategy.
If you want to evaluate manufactured housing as part of your allocation, explore the investor opportunities available now and request the current offering details.