I raised rabbits for many years in a colony situation and have to disagree with Jay in that we collected and used their droppings very effectively this way.
We enclosed an approximately 12x 20 foot space with 7 'welded wire fencing. It was not fastened tightly and it angled outwards slightly so that it was wobbly enough to deter any raccoon or cat trying to climb in. Since the welded wire has 2x4" holes- big enough for bunny kits to escape through- we added 3 feet of poultry fencing to the bottom , all the way around. 6 inches of it was bent to run along the ground, so they could not dig underneath. Then.....all the way around the inside, we overlapped another 3 feet of poultry fencing that lay on top of the ground all the way around the "coop". This kept them from tunneling out close to the fence. This was secured with earth staples.
But, in the middle of the pen was an area without anything on the ground. This was where they would dig their burrows. Eventually there was a network of underground tunnels and burrows where they would go to keep cool in summer, warm in winter and to have their kits. Heat is a big killer of rabbits and we never lost any to heat with this system. If you get a lot of rain, it can be helpful to have some kind of roofing over an area to keep the tunnels from flooding.
When the kits were about 10 days old, they would emerge from the burrows and start eating with the others. We had 20 to 80 bunnies in a colony like this, including the bucks. When they became mature they would start fighting, so we would have to cull to make sure there weren't too many at one time.
Rabbits tend to self-regulate their numbers based on available space in a colony, so if the population became too large , they would have smaller litters.
We really enjoyed giving them a chance to live a somewhat "natural " life, running and hopping and digging and interacting with one anther. I could never have my bunnies in cages again after seeing how well they thrived in this kind of environment.
And twice per year, we would go in and harvest already-composted manure. Gold for the garden!
Joel Salatin's son has raised rabbits for many years and they put Basic-H in the water to keep them from getting parasites. We did have pinworms in the rabbits before we did this. But other than that the rabbits were extremely healthy. Joel's son did a lot of "linebreeding" , as did we, and we never had problems with the close breedings even after 8 years of not introducing any new genetics. If you start with healthy genetics, it makes all the difference.