Tiny houses are hot, ADUs can be useful and yurts are intriguing in a weird sort of way, but as everybody tries to ease our housing crunch, much attention is being focused on something that has been around for decades: Manufactured housing.
“This isn’t the manufactured housing that people think of from the ’70s and ’80s,” said Sarah Marchant, the chief operating officer for New Hampshire Community Loan Fund.
Changes in construction, standards, design and financing have made all the difference in factory-built houses that some still call “mobile homes.”
“There are some incredibly cool models, innovation, around manufactured housing,” she said.
This year has seen a flurry of state and federal legislation trying to increase the amount of housing that people can afford.
On the state level, Gov. Ayotte has signed 10 bills designed to ease the housing crunch, from making it easier to build an accessory dwelling unit (ADU) to requiring residential development in some commercial zones to allowing high-rises of up to four stories with just one stairwell. Another one gives yurts “modeled after traditional nomadic dwellings” a more formal definition.
For manufactured homes, however, the significant change is the federal Road to Housing Act passed by Congress, which went into law this month without President Trump’s signature. Prominent in its provisions is an obscure-sounding change that could make a big difference: Removing the requirement for a supporting frame called a chassis.
No more chassis
A permanent metal chassis has been required for manufactured homes since the 1974 law that created the national codes for manufactured homes (from the federal Department of Housing and Urban Development). The idea was that the house could be easily moved, a legacy of their evolution from trailers.
But it turns out that “mobile homes” usually aren’t mobile. As few as 5% of these houses are ever moved after they get an initial placement, and for them the chassis is an expensive add-on that accomplishes nothing. Advocates have long sought to remove the requirement, saying that making the chassis optional makes it easier to add basements or second stories to mobile homes, and to design new footprints and layouts.
“If people read like there’s no permanent chassis — that’s basically like a permanent home, just happens to be built in a factory. It increased conversation,” said Rob Daprice, CEO of New Hampshire Housing. “More states talking about manufactured housing as real estate.”
Note that New Hampshire law still defines manufactured housing as requiring a chassis, since the law follows national HUD codes. This will have to be changed by the legislature.
As an example of modern variations, Marchant pointed to Crossover Modular Homes or CrossMods, which are put on foundations, are net-zero ready, have traditional roof pitch and require some on-site construction, making them hard to distinguish from “stick-built” homes. They can even be made as duplexes, as was done in a complex in Plymouth.
“There are several other innovations. The removal of chassis requirement allows for those innovations to really take place,” Marchant said.
Manufactured vs. modular homes
Confusingly, however, removing the chassis requirement also removes one of the major differences between manufactured and modular homes. These two categories of housing can be hard to separate: As an example, CrossMod is categorized as manufactured housing even though it’s called modular.
Basically, manufactured homes are built almost entirely in a factory and moved to a site, while modular homes are built only partially in a factory, then assembled on site amid more construction. More importantly, modular homes are usually treated like site-built homes when it comes to mortgages, zoning and other permits.
Modular homes are also more expensive than manufactured homes, often on par with site-built homes. Marchant pointed to an often-overlooked reason for that cost difference: Modular homes are subject to state building codes while manufactured homes are subject to the national HUD code.
“(State) building codes follow national code, but with local variations, so it’s harder to achieve economies of scale. Every state is different,” she said. “The beauty of manufactured homes is the HUD code. It is the one code, a true national standard, and doesn’t have local jurisdiction. That is what allows the cost savings.”
Differences in building codes are an example of an invisible variation that can make a huge difference in the long run. Another invisible change included in the Road to Housing Act will make a big difference elsewhere but not in New Hampshire.
The federal law allows states to title manufactured homes as real estate like a house, rather than as property like a car. That makes them eligible for traditional 20- or 30-year fixed-rate mortgages, which can save huge amounts in financing costs over the life of the loan and also provide stronger consumer protection.
However, the legal change won’t make a difference here. New Hampshire, unique among states, has always allowed manufactured homes to be titled as real estate. That’s one of the reasons we have a relatively high percentage of manufactured homes.
No longer depreciated assets
Borrowing money is, of course, vital to buying a house, by far the costliest thing most people will ever purchase. Marchant said the improved quality of manufactured homes has made them a better investment.
“I think in the past five years we’ve really evolved the financing for them,” she said.
Part of that is better construction standards, which helped remove a huge drawback to old-time mobile homes: the fact that they lost value over time, or depreciated, while homes that are built on site gained value, or appreciated.
“They are absolutely appreciating assets now,” Marchant said. She pointed to a study that found that in New Hampshire, new manufactured homes “appreciated faster than site-built housing.”
Since manufactured homes cost less than half as much as a similar traditional home, this makes them a valuable tool for bringing people into the market.
“We did just under 100 mortgages for manufactured homes last year, and almost 70% were first-time homebuyers. They are truly an option to get into the market and build equity,” Marchant said.
Marchant said some other changes in the Road To Housing Act, like allowing more access to government-backed financing, should “encourage other banks to get into this business. The more entities are willing to finance, the more competition there is, and the more options for buyers.”
Who owns the land
Another major difference in manufactured housing compared to site-built housing is land ownership. It is common for people to own their manufactured home but not the land it sits on, dating back to the idea of a “trailer park.” This greatly limits the ability to get financing because without land ownership, the borrower has less collateral to offer the bank, which usually means they have to pay higher interest on smaller loans.
Despite recent changes, that’s still a big drawback. For example, much attention has been given to the fact that the Road to Housing Act largely prevents national private equity firms from buying single-family homes as part of large-scale investments, which critics say is a big factor in continuing price increases. But that ban does not apply to manufactured housing communities. “It doesn’t give any protection to residents in those communities,” Marchant said.
The Monitor has reported on cases of national financial entities buying such communities and sharply raising land rents, driving out homeowners.
Marchant said a few banks are wrestling with the issue of how to get financing for manufactured homes when the owners don’t have their own land.
How much of a difference all this will make remains to be seen, but if nothing else, it’s a recognition that lawmakers realize that the current system is failing people.
“None of this stuff is going to bring down people’s housing costs overnight. But these are all incremental improvements, small steps in the right direction,” said Daprice.
