Manufactured home parks are poised to benefit from affordable housing policies as the government seeks to increase the supply of affordable and pre-fabricated homes, experts told Western Investor.

“We’re always talking about housing crisis or affordability crisis, and I think modular homes fit right in to solve that issue,” said Chris Rust, senior vice-president with CBRE Ltd., who recently listed a 100-lot modular home development opportunity for $10.6 million in Chemainus, B.C.

“It’s a more efficient way to produce housing,” he said. “Manufacturers are popping up and they are all going to need a place to put these homes.”

Manufactured home parks, recovering after being hit by post-COVID interest rate hikes, are viewed as investments that can offer steady cash flow and hands-off management. With mom-and-pop owners retiring, more opportunities are coming to market and institutional players are getting in on the action.

But the parks can vary in quality and infrastructure, and are being hampered by tenant-focused policies, costly upgrades for aging assets and even public stereotypes.

“Many municipalities have a really hard time, despite this affordability push, to actually zone land ‘mobile home park.’ They’re all scared of it. They think that somehow, they’re downgrading their town or their community rather than bringing in affordability and homeownership,” said Eugen Klein of Royal LePage Westside Klein Group in Vancouver.

There are just under 900 manufactured home parks in B.C., with about 50,000 pads, compared to over 2,000 parks in Alberta and 4,000 or 5,000 in Washington State, he said. B.C. park vacancies are less volatile due to the constrained supply, but provincial policies and rent controls deter owners from making capital upgrades to B.C. parks built in the 1960s and ‘70s, Klein said.

Bill Summers of Coldwell Banker Executives Realty in White Rock, B.C., said despite this, manufactured home parks are a solid investment.

“It’s affordable housing, which is in super high demand,” he said.

Summers said vacancies are very rare in well-managed parks, ensuring stable cash flows from tenants who lease the pads and own the housing units located on them. This makes them a hands-off investment, one that Summers said can double in value within 10 years.

All owners do is supply the services to tenants’ pads and maintain common area, he said. He currently has 11 listings – “more than I’ve had in a long time” – mainly due to investors retiring and divesting.

Not all parks are made equal, however. Some have city water and sewer, while others rely on their own systems which may require hiring a water management company.

Some older parks also require electrical upgrades, Summers said.

“You’ve got to make sure the backup power’s on and pumps are working properly and tanks, [and] the purification system is good,” he said. “So there are some liabilities with that, but those are what make a park good.”

Klein said cap rates for manufactured home parks can be tough to gauge because many have excess land, market-lagging rents, tenancies coming due, room for home upgrades, and other uses like marina, agriculture and highway commercial.

“The analysis for each park is usually a little bit unique,” he said, saying a five- or 10-year pro forma can help investors better understand an asset.

Despite long-term value sometimes being obscure, institutional demand points to strong fundamentals.

In April, Toronto-based Firm Capital Property Trust agreed to purchase a half interest in a 10-property portfolio in Alberta and Saskatchewan for $218 million through a joint venture with SunPark Communities LP.

SunPark president Michael Phillips said large packages are hard to come by in a fragmented market. He said the Prairies tend to have better-located communities in primary and secondary markets served by municipalities, whereas in B.C. and Ontario, they are typically located in tertiary markets requiring private water.

“We view it as a stable asset class from both an investment standpoint but also an ownership standpoint for tenants,” he said. “It’s affordable, bread-and-butter housing that is well located.”