Research Finds Manufactured Housing Could Help Address Housing Supply Shortage

A new report published by the Urban Institute, “The Role of Manufactured Housing in Increasing the Supply of Affordable Housing,” finds that manufactured homes offer an affordable alternative to site-built homes and could help bolster affordable housing supply. While production of manufactured housing has decreased over the last several decades, demand for manufactured housing is back on the rise, particularly among younger households. Manufactured housing affordability likely plays a role in this increased demand, as the average sale price for a manufactured home is more than $250,000 less than that of a site-built home. Despite increased demand, the authors of the report suggest that in order for manufactured housing to offer a real solution to supply shortages, more financing options with better terms need to be made available.

Since the financial crisis of 2007-2008, housing production has been historically low. Between 1959 and 2006, 7.8 units on average were constructed per 1,000 people every year. Construction dropped to approximately 2 units per 1,000 people in 2007-2008, and despite gradual increases, only 5.1 units per 1,000 people were constructed in 2021. The report notes that while boosting the supply of multifamily housing would most efficiently address the current housing supply shortage, manufactured homes could offer a viable and affordable solution in less dense suburban and rural areas.

Demand for manufactured housing is on the rise, particularly among younger households, many of whom have been priced out of the current housing market. Shipping of manufactured homes increased 12% between 2020 and 2021, and as a result of increased demand, producers faced a backlog of 47,000 manufactured housing units by the end of 2021. Younger buyers have purchased manufactured homes at a higher rate in recent years. In 2018, 52% of manufactured homebuyers were younger than age 45. In 2021, this increased to nearly 56%.

Manufactured homes offer a more affordable alternative to site-built homes, and their quality has increased significantly over the last several decades. The average sales price of manufactured homes in 2021 was $108,100, compared to $365,900 in site-built homes. While manufactured homes are on average smaller than site-built homes, the price per square foot of manufactured homes is still half that of site-built homes. The quality of manufactured homes has also increased significantly. Of manufactured homes built between 1970 and 1979, 9.3% were deemed inadequate 10 to 20 years later. Among manufactured homes built between 1990 and 1999, 2.4% were deemed inadequate 10 to 20 years later.

Though manufactured homes present one possible solution for addressing the affordable housing supply shortage, access to financing options remains limited. Manufactured lending is concentrated among only a few lenders, and interest rates for personal property – or chattel property – are much higher than rates for home mortgages. The authors suggest that to address this problem, the federal government should expand its role in personal property markets by increasing the number of FHA chattel lenders and raising loan limits for chattel property to bring them more in line with market prices.

Read the report at: