How Manufactured Housing Can Fill Affordable Housing Gaps

Manufactured housing is one of the most affordable homeownership options available and is one potential solution to the nation’s affordable housing crisis. The per square foot cost of producing a manufactured home is less than half the cost of constructing comparable stick-built, single-family detached homes because of greater supply-chain flexibility, regulatory consistency, and lower on-site labor costs. This puts manufactured-housing developers in a position to close local affordable housing gaps more quickly than traditional home builders, yet planners often underestimate manufactured housing’s potential for alleviating affordable housing supply shortages.

We spoke with Casey Dawkins, a professor of urban studies and planning at the University of Maryland and a research associate at the National Center for Smart Growth, about existing barriers to manufactured housing and how communities and states can overcome these restrictions.

Many communities strictly regulate the location of manufactured housing. What are some examples of these regulations, their origins, and their impacts?

Although all manufactured housing is regulated in accordance with a single building code administered by the US Department of Housing and Urban Development (HUD Code), land-use regulations vary from community to community and often impose significant barriers to the placement of manufactured housing. Many local land-use regulations prohibit manufactured housing outright, restrict manufactured housing units to mobile home parks, underzone land for manufactured housing, or impose stringent design requirements that are disproportionately burdensome to manufactured housing producers. For example, many local ordinances require that manufactured homes comply with minimum roof-pitch requirements, but these restrictions make manufactured homes difficult to transport due to height restrictions on major highways. My research suggests that regulatory barriers such as these restrict the local supply of manufactured homes.

Regulatory barriers to manufactured housing are often adopted in response to NIMBY [“not in my back yard”] opposition, motivated in part by the perceived lower quality of manufactured housing units. With the HUD Code and innovations in the manufactured housing industry over the last several decades, this concern is unfounded, as the quality of contemporary manufactured housing units is often comparable (PDF) to other similarly priced stick-built homes. Furthermore, the additional security and quality control measures within manufactured housing plants protect manufactured housing units from theft and weather damage during the home assembly process. 

Aside from regulatory barriers, are there other barriers that prevent the increased adoption of manufactured housing?

The availability of mortgage financing is one concern. Many states still treat manufactured housing as personal property, making it difficult for prospective buyers to qualify for traditional mortgages. Fannie Mae recently introduced a new mortgage product, MH Advantage (PDF), that may expand financing options for those seeking to purchase manufactured homes, but to qualify, the homes must have roof pitches of six inches or greater, must meet certain energy efficiency standards, and must meet certain interior finishing and exterior siding requirements.

For developers of manufactured housing subdivisions, it may also be difficult to obtain traditional forms of construction financing. Homes must be purchased from manufacturers before being shipped to a development site, but construction lenders are often reluctant to finance off-site manufactured home purchases as part of a traditional construction loan.

Another barrier is the manner in which manufactured homes are traditionally sold. Many manufactured housing dealers sell manufactured homes on retail lots similar to automobile lots. This marketing and sales approach perpetuates the perception that manufactured homes are “mobile” homes rather than permanent homes on a fixed foundation. Marketing homes in this manner also makes it difficult for prospective buyers to assess a home’s fit with its natural and man-made surroundings.

Manufactured housing is unevenly spread across the country. How would easing regulatory barriers affect both rural and urban communities?

Regulatory barriers to manufactured housing are pervasive but often differ in type and severity between rural and urban areas. In rural areas, local land-use regulations often restrict manufactured homes to mobile home parks while simultaneously limiting the number of land parcels zoned by right for parks. In urban areas, outright prohibitions on manufactured housing or onerous design requirements are more common. Land costs are also higher in urban areas, which makes the development of greenfield manufactured housing subdivisions cost prohibitive. In a few urban communities, such as Oakland, California, and Seattle, Washington, manufactured housing developers have economized on high land costs by combining individual manufactured units into multifamily housing arrangements. Manufactured housing also offers an innovative solution to scattered-site infill lot development in urban communities with a large supply of vacant land.

The manufactured home’s primary disadvantage from a marketing standpoint—its “mobility” and disconnection from the land—can be an important advantage from an affordability standpoint. The largest component of housing costs in urban and suburban areas is the cost of land. If this cost is absorbed by a community land trust or other public or nonprofit entity, manufactured homes can be sold at much lower prices, enabling unique “shared equity” homeownership arrangements for prospective low-income homebuyers.

What policies and strategies can local, state, and federal governments undertake to spur the creation and preservation of manufactured housing?

Local governments can play an important role by retooling regulations to ensure manufactured housing is treated the same as traditional stick-built, single-family detached housing. While certain foundation requirements may be necessary to ensure manufactured homes are securely attached to the ground, it is not necessary to relegate manufactured housing to exclusive zones or subject manufactured housing to overly burdensome design requirements.

The city of Oakland (PDF) provides one example of how supportive regulations can facilitate affordable manufactured housing strategies. The city has permitted manufactured homes on permanent foundations in all residential areas since 1980. Since then, developers and nonprofit housing providers have turned to manufactured housing to deliver low-cost urban housing solutions. One local nonprofit, Oakland Community Housing Incorporated (OCHI), has been a leader in the use of manufactured housing in its affordable housing developments. In its Linden Terrace development, OCHI placed eight two-story manufactured homes atop ground-level garages that were then sold to low- and moderate-income households.

States can also play a role by requiring that all manufactured homes on a secure foundation be considered as real property for local titling and taxation purposes and requiring that local land-use regulations not differentiate HUD Code–compliant manufactured housing from traditional stick-built housing. The state of Washington (PDF) is exemplary in this regard. Following a strong grassroots campaign led by local manufactured housing advocates, the state government of Washington adopted a law prohibiting discrimination against manufactured housing in 2005. The law spurred local regulatory reform, a deal with a regional power company to subsidize energy efficiency upgrades in manufactured homes, and several model manufactured home communities that attracted national media attention for their innovative designs.

It may also be time to revisit the HUD Code to update it in accordance with contemporary industry practices. To facilitate the production of multifamily and other innovative manufactured housing types, HUD should consider streamlining its alternative construction letter approval process. The HUD Code itself could also be a source of local regulatory barriers if communities refer to HUD Code compliance to differentiate manufactured housing from other forms of stick-built housing. In communities with additional regulations that apply only to HUD Code–compliant housing, manufactured housing producers may shift to modular forms of construction or other types of factory-built housing to avoid additional regulatory hurdles.

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