Manufactured homes, which tend to be a more popular choice in rural areas, could help significantly in providing more affordable housing, but policymakers will need to make some changes for that to happen, according to a new report examining the issue. 

The Urban Institute recently released a report looking at the role manufactured homes could play in easing the housing shortage. According to the report, by Karan Kaul and Daniel Pang, it would take an additional 3.8 million units to meet demand. In fact, the National Association of Realtors estimates that a slower annual pace of residential completions from 2001 to 2020 relative to the annual pace from 1968 to 2000 has resulted in at least 5.5 million fewer units being built from 2001 to 2020.

“We’re somewhere in between 3 to 6 million units short compared to where we ought to be, and that can largely be attributed to under-building in the last decade or so after the housing bubble,” Kaul said in an interview with the Daily Yonder. 

Manufactured housing is more prevalent in rural areas, according to Prosperity Now. In 2017, manufactured housing made up about 3% of all urban housing and 15% of all rural housing, according to the American Housing Survey.

The report examines some of the ways manufactured homes — the preferred term over “mobile homes” after the Housing and Urban Development created and implemented codes in the 1970s for increased safety — could be applicable to the current housing shortage. 

To start with, it’s more affordable to own a manufactured home, according to the report. It says the average sales price for manufactured homes in 2021 was $108,100, excluding land, according to the U.S. Census Bureau’s Survey of Construction and its Manufactured Housing Survey. As of January 2022, the average sales price had increased to $122,500, due to consumer demand, high inflation, and continued labor shortages. In comparison, the average price of new site-built homes in 2021, excluding land, was $365,900. In 2021, the average size of newly constructed site-built homes was 2,544 square feet compared with 1,497 square feet for newly built manufactured homes.

“The average price of manufactured homes last year was about a third of the average price for a site-built home excluding land. And so that’s a huge, huge advantage right there,” Kaul said. 

Still, there is prejudice about manufactured housing, but Kaul believes that is going away as more people realize that manufactured homes can be quality construction. 

Kaul said manufactured homes have traditionally been more of a rural product than an urban one, and he believes that will remain the case. 

“But the point of paper is that because of the affordability crisis that we’re seeing, everywhere…the economics of buying a manufactured home for a homebuyer has just improved drastically because of the price differential that exists today between the two types of housing. The same holds true for homeowners in rural areas,” he said. 

Unlike in urban areas, Kaul thinks zoning is probably less of an issue in rural areas. More than half of all manufactured homes are located in rural areas around the country and these types of structures make up 13% of all occupied homes in rural and small-town communities, according to the Housing Assistance Council.

Still, financing can be difficult, he said. 

“Again, it affects both rural consumers as well as urban consumers, because at the end of the day, if that financing is difficult, and that financing is largely offered to lenders that operate either regionally or nationally, it affects both rural as well as the urban consumer,” Kaul said. “So you fix that you make it easier for folks living in the Heartland to actually become manufactured home buyers.”

The report notes that chattel financing — or what is also known as personal property not affixed to the land —  is more expensive than mortgage financing. Loans to finance personal property carry higher interest rates, shorter terms, and fewer consumer protections than loans on homes titled as real property.

“Chattel financing is basically financing that you secure that only pays for the cost of the structure, not the land,” Kaul said. 

It’s important to have both options, Kaul said, because some people may not be able to afford the land or the land may be unavailable for purchase. 

“You can’t force people to get a certain type of financing, or force them to encumber the land when they don’t want to,” he said. “I think you have to have optionality. There’s a lot that could be done in terms of making it easier for people to access chattel financing without paying these astronomical costs.”

Republish our articles for free, online or in print, under a Creative Commons license.