Nearly every US politician is talking about improving housing affordability, and most of them are looking intently for villains to blame for today’s high home prices. Despite rhetoric to the contrary, the price escalations in recent years have not been driven primarily by “speculators” or short-term rentals, and there does not appear to be a bubble. Rather, there is a fundamental imbalance between housing supply and market demand, especially in the for-sale market.

The United States presently has an estimated shortage of 3–5 million housing units. That shortage is most acute in the market for entry-level homes, typically defined as those that are 1,400 square feet or smaller. Since the late 1970s, builders have produced roughly the same number of these homes on an annual basis, even as the US population has increased by over 50 percent.

With tight labor markets, surging materials costs, and now high interest rates, the cost of on-site home construction has increased sharply. Consequently, some developers have turned to manufactured housing, where the dwelling is constructed in a factory and then installed on the building site, to meet demand for entry-level homes. While many people associate manufactured housing with mobile homes and trailer parks, modern production methods and design improvements have made today’s manufactured homes look nothing like their antecedents. Yet, land and construction regulations that were written to restrict house trailers limit the deployment of modern manufactured housing. A few policy changes and zoning fixes could bolster its use and provide more options for Americans who want to become homeowners.

No longer a trailer / Today’s manufactured home is the only form of housing subject to federal regulation under the Manufactured Home and Construction and Safety Act, overseen by the Department of Housing and Urban Development. These homes must be permanently placed on a steel chassis and consist of a minimum of 320 square feet and be at least 8 feet in width. (Trendy “tiny homes” are not considered manufactured housing.) The federal standard also has guidelines for room size, fire safety, heating, cooling and plumbing systems, framing, insulation, wind load, and installation. They are certified and labeled in the production factory. Without the label, the homes cannot be called manufactured housing. Other factory-built rooms, interior spaces including garages, and homes—often referred to as prefabricated or modular—are not deemed manufactured houses under the act and are subject to local and state building codes.

To monitor compliance, HUD has delegated authority to 13 states and private sector organizations that inspect manufactured housing factories. Since the 1990s, the department has periodically upgraded its standards. Recently, both HUD and the Department of Energy have begun rulemaking to impose new energy and safety standards to reduce utility bills and carbon pollution.

States can require more stringent requirements beyond the federal standards. For example, in the aftermath of Hurricane Andrew in 1992, Florida mandated a specific manner and number of ties to affix manufactured housing. Many manufactured homes now perform as well as site-built homes during extreme weather events.

Been here before / Manufactured housing has been an important source of housing in the United States for a long time. These homes have their roots in the early travel campers of the 1920s and were used as temporary housing for public works employees during the Great Depression and World War II. After the war, as the United States faced a severe housing shortage, families turned to manufactured housing. The industry responded by creating innovative models with more spacious layouts and modern amenities such as washing machines.

Around this time, many manufactured housing communities had their start. Households could purchase and finance a home through the dealer, much like buying a car. Quickly, however, the sector had to compete with a recovered and robust residential housing sector using site-built construction for homes that could qualify for federally backed home financing—unlike manufactured housing.

Manufactured housing stock currently consists of 6 million units and constitutes the largest share of unsubsidized low-income housing in the nation. Today’s manufactured homes have tight building envelopes (that is, a well-made exterior that protects the interior), energy-efficient appliances, and often have features such as porches, garages, and bay windows akin to local housing design.

Historically, the ability to produce homes has relied on locally available land, labor, and building materials. Regulations have caused land prices to skyrocket, often because of artificial scarcity driven by restrictive zoning categories and land-use regulations. (See “Build, Baby, Build!” p. 64.) Layers of environmental review, special purpose permitting, rezoning requirements, and often contentious rounds of public hearings add expense and uncertainty that discourage developers from building entry-level homes. The National Association of Homebuilders has estimated that regulations account for nearly one-fourth of the final price of a new single-family home.

Other factors have raised housing costs of late. Higher capital costs have increased the costs of developing new projects, and ongoing labor shortages in the building professions will probably continue because of demographic shifts and tightening immigration policies. Factory-produced homes can address many of these challenges: a recent study from Harvard University’s Joint Center for Housing Studies found that manufactured homes can be as much as 46 percent cheaper than site-built.

If policymakers want to use manufactured housing to improve housing affordability, they must reform two areas of regulation: discriminatory zoning and the titling of manufactured housing.

Zoning / Today, zoning and land-use regulations are under increasing scrutiny, as they have a significant effect on the ability to develop various forms of housing, such as duplexes, rowhomes, and multifamily buildings. Many states and cities explicitly ban manufactured housing, typically motivated by long-held stigmas about the social and economic effects manufactured homes (and their occupants) have on neighboring properties.

Land-use legal scholar Daniel Mandelker of the Washington University School of Law has outlined 18 common zoning and land-use categories of regulation that either outright forbid the placement of manufactured housing, impose stringent exclusionary design prerequisites, or require obtaining special permits that are not imposed upon site-built single-family homes. For example, one common statute, especially in municipalities, prohibits the placement of single-wide manufactured homes even though they could easily work as in-fill for many cities struggling to replace aging housing stock.

While several states have prohibited such bans at the local level, other communities have adopted or are considering regulations that would de facto push out the dwellings. For instance, some places require that manufactured homes be situated on parcels of land ranging from one to 10 acres even if such a minimum requirement does not apply to site-built homes. Other restrictions on manufactured housing include limits on the home’s age or requirements for specific architectural design features that do not apply to site-built single-family homes.

Titling / Given their legacy as travel campers, some states only allow manufactured housing to be titled as personal property, not real property, even if the home is affixed to a foundation on owner-occupied land. This has significant implications for financing, as traditional mortgage financing is limited largely to real property. Personal property financing (also called chattel financing or lending) does not have the full range of consumer protections available to traditional mortgage borrowers.

Further complicating matters is that more than 50 percent of manufactured homes are financed through personal property loans, which often have relatively high interest rates and fees. Many consumers are not aware that there are other (albeit limited) options: Fannie Mae and Freddie Mac have a statutory mission mandate under Duty-to-Serve that requires them to create products and programs to serve the manufactured housing market.

Finally, titling has tax implications that can affect the affordability of the homes. Some states levy taxes on personal property. For example, in some states, vehicle owners must pay a personal property tax levied on the value of their car. The tax rate for personal property differs from the rate levied on real property. Depending on the location, the personal property rate may be significantly higher than for a site-built home. To address the titling issues, states must examine their titling regulations for both real and personal property. New Hampshire broadly allows manufactured housing to be titled as real property, and it offers a model for other states looking to review their titling regulations.

Unleashing change and growing supply / There are innovations in the residential sector that can boost the creation of new housing. One of these is manufactured housing. But for potential homebuyers to take advantage of this, policymakers must liberalize land-use and zoning regulations and states must reform titling policies regarding manufactured housing.

And as long as the federal government remains intensely involved in subsidizing home ownership—albeit with questionable effects on home ownership rates—it is worth asking whether its policies should continue to effectively exclude manufactured homes from this largesse—or put traditional homes and manufactured homes on the same financial footing by reducing such subsidies.

Readings

  • “Comparison of the Costs of Manufactured and Site-Built Housing,” by Christopher Herbert, Chadwick Reed, and James Shen. Joint Center for Housing Studies of Harvard University, July 2023.
  • “Duty to Serve: The Purpose of Fannie Mae and Freddie Mac and Early Lessons Learned in Underserved Housing Markets,” by Jim Gray and George W. McCarthy. Lincoln Institute of Land Policy, 2021.
  • “Getting Zoning for Manufactured Housing Right,” by Daniel R. Mandelker. Lincoln Institute of Land Policy, 2023.
  • “Government Regulation in the Price of a New Home: 2021,” by Paul Emrath. National Association of Home Builders, May 5, 2021.
  • “New Evidence Shows Manufactured Homes Appreciate as Well as Site-Built Homes,” by Laurie Goodman, Edward Golding, Bing Bai, and Sarah Strochak. Urban Institute, September 13, 2018.
  • “Zoning Barriers to Manufactured Housing,” by Daniel R. Mandelker. Washington University, 2016.