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What a 30% Unemployment Rate Really Means To Manufactured Housing Investors

Updated: May 19, 2020

Unemployment data and its unknown future is quite disconcerting for investors at the moment (at time of writing, COVID-19-related lockdowns are still in effect for most locations).

Current unemployment peak estimates are in the neighborhood of 24% with some credible targets exceeding 30%. But what is that really? 30% of what? According to the US Bureau of Labor and Statistics, the unemployment rate is based on the % of Working Age Americans (not the Labor Force). This group constitutes people 16 years of age and older currently residing in 1 of the 50 states or the District of Columbia, not in an institution (e.g., penal and mental facilities, homes for the aged, etc), and who are not on active duty in the Armed Forces. The diagram below from the US BLS is helpful for visually mapping out the complexity built into the definitions. In RED, we added the pre-COVID-19 percentages of working age Americans in the Employed, Unemployed and Not In The Labor Force segments. This is our starting point for understanding the overall financial impact on our tenant base during a 30%-projected unemployment environment.

Our concern is classifying the incomes of working age Americans as “at-risk” or “safe” and excluding those that did not have an income previously. This allows us to identify the true change in the employment level.

Moreover, a 5% unemployment rate is considered “normal”. Therefore, a 30% unemployment rate must be discounted by roughly 5% to understand the impact of the change.

Making Sense of a 5% vs. 30% Unemployment Scenario

The key Takeaways

  1. Employment and receiving income are not the same.

  2. ~25% of the working age population receives income from Social Security and/or Disability.

  3. The government employs about 15% of the entire working age population. Looked at slightly differently, of those with a job, 25% are employed by the government.

  4. ~37% of incomes are “durable”.

  5. A 30% unemployment rate will hurt private sector employees and self-employed individuals more than public or military employees (as has been the case historically).

  6. Assuming public sector and military jobs remain strong, almost half of all private sector and self-employed individuals would become unemployed in a 30% unemployment scenario.

  7. ~18% of the working age population had no pre-Covid-19 earnings (students, unpaid house workers, previously unemployed)

Public Assistance Beneficiaries (~10% of the population) are not an exclusive group and were therefore excluded from this analysis. An individual can be employed and receive public assistance (i.e. SNAP, Medicaid, etc.), therefore a job loss does not put these additional sources of income at risk. Instead, it provides a buffer for those who had previously not qualified for unemployment benefits.

Does 30% Unemployment mean that 70% are gainfully employed?


Consider this, only 60% of working age Americans were "employed" at pre-COVID-19 unemployment rates of 5%. If we re-frame the question to "What % of Americans will retain their income if we reach 30% unemployment?" the answer becomes easier to find.

Our research indicates >56% of Americans have income that will remain or increase as unemployment peaks. Moreover, that metric does not include any private sector workers.

How is that possible?

Nearly 37% of the working age population’s income will be insulated from interruption (16% collecting SSI + 6% collecting Disability + 15% with jobs in the public sector) . ~19% of the working age population’s income can only increase as they were not previously working (5% previously unemployed + 14% unpaid homeworkers, students, other). Should any of this non-participating population secure employment, overall household earnings would experience an incremental gain. Most relevant to our analysis, assuming public-sector and military employment remains unchanged, ~50% private sector joblessness would be required to reach a 30% aggregate unemployment rate. Even in such an extreme situation, ~60% of all working age Americans would still retain income (37% durable incomes + 22.5% private sector employees).

The math suggests that a 30% unemployment rate actually means ~60% of Americans are earning income instead of ~80% (when the nation is fully employed).

Impact on Mobile Home Park operators

In the case of MHPs, residents own their unit and only pay rent on the land it sits on. Therefore, they are highly incentivized to remain current on rent and utility payments (for those unfamiliar with the Mobile Home Park Investing, the investor usually owns the land and infrastructure while the tenant owns the home). Rent collections should track closely with the respective unemployment rate. Therefore, a 60% rent collection rate would act as a fundamental floor. Operators would need to determine if this floor is above or below their "break-even" monthly cash-flow. At a 60% collection rate, an average stabilized MHP is likely above this level (where the property is self sustaining). Adding other factors affecting income durability are included, such as Unemployment Benefits and government Stimulus, collection rates are likely to enjoy a material margin of safety. Mismanaged properties or operators in the middle of rehabilitating the area will be less likely to enjoy the same cushion.

How might Stimulus and Unemployment Benefits impact tenant cash flow?

We used data from States where Damris Capital has manufactured housing communities to stress-test a hypothetical tenant's income situation. Assuming a 6-month unemployment scenario (median duration of unemployment benefits in these states), we are able to evaluate the margin-of-safety UEBs and government Stimulus will provide to this hypothetical tenant should they be required.

After all the worst case scenario is that 100% of an operators' tenants become unemployed.

We calculated the median income per week and normalized it into a monthly UEB payment the hypothetical tenant could expect. Commonly available pad rent metrics were used to evaluate what percentage of pad rent the UEB payment would provide. The table below shows the summary of this calculation:

Single-earner/dual-earner households receiving unemployment benefits require just 7-15% of their benefit to cover 100% of their MHP pad rent. This leaves ~90% available for other expenses. Furthermore, it is possible that the future stimulus proposals may extend the duration of UEB.

The simple fact is UEB and Stimulus provide a bigger safety net to low-income renters than higher income renters.

While the $1,200 stimulus check (per tax filer), represents a median of 4.4 months of pad rent in our example, it might represent only 4.4 days in a NYC condo.

What About The Self Employed?

A frequent point of contention with unemployment statistics is they underweight the Self-employed. Our analysis estimates ~30% of the working age population is considered Self-Employed. This group’s income is buffered by self-employment insurance benefits of up to $600/week. The New York Times recently released a surprising statistic showing the Self-Employed receiving benefits greater than their normal salaries in more than half of the United States.


A surprisingly high percentage of Working Age American's incomes are insulated or disconnected entirely from the economic cycle. For investors, what matters most is the earnings durability and "safety nets" of their tenants.

Investors are right to be concerned about historic unemployment rates. However, it is important to consider the definitions and real world implications of those rates before making an investment decision.

Rising unemployment will certainly have an impact on all rental property investors. Understanding the nature and source of tenant income, as well as how non-employment earnings and benefits may hedge an inevitable job loss, help to quantify that impact.

A recession is unpleasant for all, but is most felt by those whose suddenly experience income insecurity due to the lag between job loss and receipt of any available assistance. Part of being responsible investors and operators is ensuring cash reserves are maintained. It is much easier to be compassionate to those less fortunate when you have that flexibility.

Lastly, understanding worst case collection scenarios will help prepare and protect your investment. After all, you need to be positioned to take advantage of the new opportunities that are never that far behind a crisis.

We remain positive on the MHP asset class as a long term hold.


  1. At the time of writing the author holds a sizable position in a Diversified Mobile Home Park Portfolio through two private equity funds managed by Damris Capital for Accredited Investors.

Reference Sources In The Analysis:


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