Manufactured housing is key to affordable homeownership
Last week, the Biden Administration rolled out a major initiative to take immediate, tangible steps to increase the supply of affordable housing. The Manufactured Housing Institute (MHI) is encouraged that two important components of this package are steps to boost the supply of manufactured homes and a commitment to work with local governments to reduce exclusionary zoning.
We also hope that broad initiatives in the plan, such as down payment assistance, rehab and retrofit of existing homes, and the Federal Financing Bank will be focused on this market segment.
More than 22 million people have chosen manufactured housing because of its affordability and value. Manufactured homes are often available at lower monthly payments than other rental options. The median household income of manufactured home residents is $30,000 per year, which is less than half of the median household income of an owner of a single-family home. Last year, manufactured homes accounted for almost 10% of new single-family home starts.
According to a 2020 HUD report, “Factory-built housing has undergone many physical changes that have made it more similar to, and in many ways indistinguishable from, conventional site-built housing…Quality improvements in construction and installation practices have increased durability so that the life expectancy of factory-built housing increasingly is comparable to that of site-built or onsite housing.”
MHI looks forward to implementation of last week’s initiative — and has some suggestions on how to build on those efforts.
For many, the homeownership journey begins by trying to figure out how much house you can afford. “Take precautions and make sure you’re not overbuying.”
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First is financing. Last week’s announcement commended the Federal Housing Finance Agency (FHFA) for recently authorizing Fannie Mae and Freddie Mac to purchase loans for single-section manufactured homes. But there is more that FHFA — and the GSEs — can do.
Fannie Mae and Freddie Mac have a statutory “Duty to Serve” (DTS) manufactured housing and are both developing their DTS plans for the next three years. Unfortunately, their preliminary DTS plans actually call for a decrease in loan purchases of real estate manufactured homes. These plans should be revised to increase purchase of such loans — consistent with last week’s announcement.
Also, since chattel loans (home-only manufactured homes) make up 75% of new manufactured homes, it is critical that Fannie and Freddie DTS plans have a strong chattel loan component. Their key objective should be to establish a flow program where all chattel loans that meet minimum underwriting requirements can be purchased by Fannie and Freddie, along with a program for efficient securitization of those loans
The Federal Housing Administration (FHA) also has a big role to play. Fannie and Freddie have led on revising appraisal standards for Title 2 CrossMod homes, which offer amenities comparable to site-built homes. FHA should follow suit and do the same. FHA also needs to rejuvenate the Title 1 chattel loan program, which only financed 33 homes last year — through actions like raising loan limits to keep pace with inflation, updating the origination fee cap, and aligning policies more with the Title 2 program.
A second area of opportunity is zoning. Last week’s announcement made it a priority to explore federal levers to partner with local governments to reduce exclusionary zoning. As MHI has documented with dozens of examples in recent comment letters, NIMBYism with respect to manufactured homes is unfortunately alive and well in many local communities.
The Department of Housing and Urban Development (HUD) has an important role here. All manufactured home residents enjoy the benefits of strong national uniform HUD construction and safety standards — the HUD CODE — which governs new manufactured homes.
A 2000 law created what is called preemption or supremacy, which states that when HUD manufactured housing construction and safety standards are in effect, a locality does not have authority to establish different standards. The statute requires this provision to be “broadly and liberally construed.” Therefore, HUD can and should use this tool to push back against local zoning that inappropriately seeks to keep out manufactured homes.
HUD can also promote its affordable housing agenda by accelerating the approval of updates to HUD Code standards approved by the Manufactured Home Consensus Committee (MHCC), a nonpartisan panel of experts charged with this task. Too often, HUD approval of these updates has languished.
A third area of focus should be regulatory policies. Of particular concern is a proposed rule currently out for comment by the Department of Energy (DOE). As drafted, the rule would impose new energy standards that do not take into account the special characteristics of manufactured homes and would raise the cost of a new manufactured home by thousands of dollars, despite a statutory requirement for a cost-benefit analysis.
MHI will be submitting comments on how to modify that proposed rule to further energy efficiency, but without undermining last week’s administration announcement to boost housing affordability.
Finally, MHI awaits Congressional action on the Budget Resolution which authorizes hundreds of billions of dollars for affordable housing in a Phase 2 Infrastructure bill. Just as the administration did last week, we hope Congress will use this opportunity to include sensible policies to promote our most affordable homeownership option — manufactured housing.
Lesli Gooch is the CEO of the Manufactured Housing Institute (MHI).