The federal government may increasingly be eyeing manufactured housing as one potential solution to ease shortages of affordable homes across the country. Mortgage financing giants Fannie Mae and Freddie Mac announced plans in January to purchase more manufactured housing loans over the next three years. Further, the U.S. Department of Housing and Urban Development recently announced it is reviewing regulations surrounding manufactured housing.
Manufactured homes are built in a factory and then relocated to a home site. They differ from prefab homes, which have parts made in a factory but are then mostly constructed on-site. Manufactured homes, once referred to as mobile homes, often cost a fraction of median price of a new single-family home, such as $45,000 versus $323,000, respectively.
Manufactured housing saw a major growth in the mid-1990s when credit was looser, but has since seen production plummet.
“There’s clearly an affordable housing gap that’s growing and growing and growing,” Laurie Goodman, vice president of the Housing Finance Policy Center at the Urban Institute, told Curbed.com. “Manufactured housing is every bit as good as site-built housing in most cases. Why has the number of manufactured housing units not gone up to where it was before?”
Financing a manufactured housing has grown more difficult since the 1990s. Defaults on manufactured housing loans piled up in previous years, and lenders faced the difficulty of repossessing a manufactured home. The sector has largely struggled to recover ever since.
Mobile homes are classified as either a real estate property or personal property. Buyers can finance a purchase through a traditional mortgage if the property is classified as real estate. However, the majority of manufactured loans are financed as personal property with a chattel loan, which usually come with high rates and shorter loan terms.
Further, a challenge of mobile homes is that they tend to depreciate in value, unlike site-built homes. Also, zoning restrictions and the “not in my backyard” attitude hampers the growth of these communities.
Fannie Mae plans to purchase around 30,000 manufactured housing mortgage loans over the next three years. It is also working on developing a pilot program for purchasing chattel loans and supporting the financing of manufactured housing communities.
Daniel Mandelker, a professor of land use law at Washington University in St. Louis, also believes HUD’s review of building regulations with manufactured housing could play a role in possibly helping to destigmatize the housing sector.
“If they start working on a model state [zoning] law and start funding pilot projects, that would bring some attention,” Mandelker told Curbed.com. “I think that would be very helpful.”
Source: “Can Manufactured Housing Ease America’s Affordable Housing Crisis?” Curbed.com (March 2, 2018)
