Partners (Winter 2002)


Manufactured Housing Overview

What is Manufactured Housing?

The manufactured housing industry is divided into two periods — before and after the adoption of the HUD Code in 1976. In 1976, the U.S. Congress directed the U.S. Department of Housing and Urban Development (HUD) to develop a federal building code to ensure appropriate construction and safety standards for manufactured homes. Often referred to as the ‘HUD code,’ it is the only federally administered building code, and it preempts all state and local building codes.

Homes built in the factory prior to 1976 are referred to by the industry as mobile homes. These homes often support the stereotypical image of trailers and are plagued by significant safety concerns. In an effort to change this image, the industry lobbied to change all references from mobile homes to manufactured housing, which is now the popular term for any home built entirely in a factory after 1976 under the HUD code. The code was updated again in the 1990s to improve energy efficiency and wind resistance.

Manufactured homes are frequently confused with other forms of factory built housing, including modular or pre-cut homes, but there are several differences. First, the federal HUD code only applies to manufactured homes. For all other forms of factory built housing, state and local building codes apply.

Secondly, manufactured homes must be built on a chassis, which allows them to be transported on their own wheels. Other factory built housing is transported on flatbed trucks. The chassis requirement continues the perception of mobility, although in reality, most new manufactured homes are rarely moved from their original location. The chassis requirement has also limited design innovation, as homes must be built to comply with state highway regulations to fit under bridges and overpasses. Thus, manufactured homes are still characterized by the long, rectangular shape of their predecessor mobile homes.

The Industry

The manufactured housing industry grew significantly throughout the 1990s reaching its height in 1998 when over 372,000 new homes were shipped nationwide. The past several years have not been as strong, with new home shipments and industry profits decreasing significantly. (See Industry Perspective for in-depth analysis of industry trends).

The downward trend comes despite the growing recognition of the affordability of manufactured homes. In addition, quality and design continue to improve. For example, the industry recently revealed a new innovation creating two story homes for an urban subdivision.

In 1999, the total economic impact of the industry was $34.5 billion. The industry is particularly important to the economy in southern states, where several of the largest manufacturers are located and provide both income and jobs to the region. One in every six housing starts nationwide in 2000 was a manufactured house. In the South, manufactured homes account for an even greater share of new single family housing. In 1999, 35.4 percent of the nation’s population lived in the South, but 66.1 percent of the manufactured homes were located in the region.

On a per capita basis in 1999, the rate of new manufactured homes per 1,000 residents in Tennessee, Alabama, and Mississippi was three times the national average. In Tennessee and Louisiana, the number of new manufactured homes placed was at least 60 percent of the number of new single family home starts, and in Alabama and Mississippi, new manufactured homes actually exceeded new single family homes.

The majority of existing manufactured homes in place, particularly in the South, are single-section homes. These homes are only about 14 feet wide, and they provide the image of trailers that defines the general public’s perception of manufactured housing. In the past decade, doublewide or multi-section homes have become more common. These homes are created by joining two or more of the single sections together to form larger homes that are more comparable to site-built homes in terms of size, space, and appearance.

The placement of doublewide units has increased significantly in the South and has recently outpaced the placement of new singlewide units. However, approximately 75 percent of the new singlewide units placed in 1999 were still located in the South.

The price of manufactured housing has increased in the past five years, but it is still significantly less expensive than site-built single family homes. Nationwide, in 1999, the average price for a manufactured home was $43,600. Singlewide units averaged $31,800, and the average price for a doublewide was $50,200. This compares favorably to the average price for a new single-family home of $126,035.

Manufactured homes that are installed today typically include ad-ons such as porches and garages.

In the South, the average price of a singlewide unit was $31,300, and the average price for a doublewide was $49,300 versus an average price for a single-family home of $113,920.

Buyer Demographics

Manufactured homes are typically associated with a lower income population, but the homes are starting to appeal to several market segments. The median household income of manufactured home owners in 1999 was $26,900, compared with the median household income for the United States of $39,660. However, there is also an increasing segment of manufactured home owners with annual incomes over $50,000 and an overall net worth over $100,000. This higher income market segment tends to be older and live in subdivisions or resort communities.

This trend provides an indication that manufactured housing is becoming a more desirable option, particularly in areas with high land costs and home prices. However, the homes purchased by this new market segment often include many upgrades and additional community amenities, which increase the cost beyond what many would consider affordable.

Minorities have not traditionally chosen manufactured housing, although the number is increasing. In 1999, only 9 percent of the manufactured home owners were African American and 4 percent were Hispanic. The majority of the African-American manufactured home owners are in the South. The underrepresentation of minorities in this market is likely a factor of the primarily rural concentration of manufactured homes and the correspondingly lower concentration of minorities in these areas.

Siting and Placement of Manufactured Homes

The majority of existing manufactured homes are located in rural areas, and the image of the dilapidated trailer park dominates the public perception. This pattern is starting to change, however, and most new homeowners are locating outside manufactured home communities on privately owned land.

The U.S. Census estimates that in 1999, 68 percent of the new manufactured homes were placed on private property. In many southern states, this percentage is even higher. Tennessee has one of highest rates with 81 percent of new manufactured homes placed on private land. Homeowners who are choosing to locate in communities are generally choosing subdivisions, which offer other services and amenities. Approximately 50 percent of existing homes are located on leased land. Land ownership has important implications for the financing of these homes.

The majority of manufactured homes are placed on non-permanent foundations. The homes are placed on piers or blocks and secured with tie-down straps, which are then hidden by a vinyl skirting around the bottom of the home. Although this approach meets safety regulations, it perpetuates the stereotypical image of the older mobile homes. As the stock of manufactured homes is changing, however, more buyers are looking at permanent brick or masonry foundations, which are typical of site-built homes.

Common Concerns With Manufactured Housing

The criticisms of manufactured housing persist despite the growing presence of these homes across the country. The concerns associated with the old mobile homes are primarily related to their safety. The adoption of the HUD code and subsequent amendments to the code in the 1990s in conjunction with the industry’s continued technological innovation and use of improved materials have eliminated most safety concerns for new manufactured homes. Most consumers are satisfied with the quality of their new homes. Complaints are more often regarding installation, which is done by the dealer or a local contractor and not closely regulated.

Critics argue that manufactured homes have a negative impact on the property values of surrounding site-built homes. However, several studies have looked at this issue, and no direct evidence has been found to support this claim.

There is also a concern that residents of manufactured homes place a disproportionate impact on public services because they pay lower taxes than the owners of site-built homes. Since most manufactured homes are titled as personal property, they are not subject to property taxes, although property taxes are paid on the land on which the home is placed.

Homes placed on private property can be packaged with the land and titled as real property, which would require the homeowner to pay the same property taxes as a comparable site-built home. Local government in communities with a large number of manufactured homes should consider advocating this option to ensure they are collecting appropriate tax revenue.

Many developers are now creating entire subdivisions of manufactured housing.

Most of the concerns with manufactured housing are based on the negative public perception of the homes. As a result, zoning for manufactured homes in residential areas and for manufactured homes communities is a challenge. Most communities permit some manufactured housing in residential areas, although it is frequently restricted, and some communities ban singlewides completely. Frequently the land zoned for manufactured housing communities is in the least desirable locations within a community.

Design innovations for the homes and improved quality of the manufactured home communities should encourage greater public acceptance. However, like other affordable housing, manufactured homes will continue to raise the “NIMBY” reaction (“Not In My Back Yard”) which is a continuing challenge for the industry.

The ability of manufactured homes to appreciate is also a big concern. Most manufactured homes are titled as personal property and financed like an automobile. Similar to a car, the home loses value immediately when it leaves the retailer’s lot, and the buyer can quickly owe more than the house is worth. However, there are some examples of homes appreciating over time, particularly new multi-section homes placed on permanent foundations. The location and other market factors also impact the ability of the home to appreciate, which is the case with most site-built homes.

Appreciation is critical in the overall assessment of the affordability of these homes, particularly for low-income and first time homebuyers. The Ford Foundation recently funded the first large-scale national study on appreciation in manufactured housing, recognizing that the benefit of these homes was limited if homeowners were not building equity.

Conclusion

Manufactured housing has become a significant component of the housing stock nationwide. The improved design and relative affordability makes it attractive, particularly to lower income and first time homebuyers. Challenges persist in this industry, particularly in regards to the negative perception historically associated with manufactured housing. Also, a significant issue to be addressed is the financing system that has traditionally been used in the industry. Despite these challenges, the industry has grown dramatically and made many improvements. With the continued increase in housing costs nationwide manufacturing housing has the potential to be a viable affordable housing option.

 


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