California Enjoys Backyard Revolution Permits for cassettes, novelty apartments, extensions, and other annexes (or ADUs) have increased tenfold after state legislators passed laws that legalized statewide in 2016 and 2017. Oregon, Connecticut, and many other cities have similar laws in their books.
As a result of state law, local governments cannot prevent property owners from building ADUs. As a result, a company was born in California, offering factory-built secondary apartments. This is an affordable option to add another home to your property. For a state facing a serious shortage of new housing, this is just the beginning.
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There is the issue of rebirth. Homes built briefly dominated the US housing market in the 1960s. According to the 1972 census, these homes accounted for about 60 percent of all new single-family homes produced nationwide as small modular homes and mobile homes. Their numbers have dwindled to such an extent that the factory's role in building low-cost homes has been almost forgotten.
The Biden administration wants to put America’s house factories — those used to be a thing, really — back to work. A new housing plan by the White House offers a set of actions designed to close the nation’s massive affordability gap. Among its proposals are steps that would lower costs for manufactured homes by expanding financing options. It would also ease barriers around approvals and construction. One notorious regulation that could go up for review is a longstanding rule that manufactured homes must be delivered with a chassis still attached, even if the homes are built in place permanently. It’s an under-the-radar regulatory tweak that could make a big difference for those most in need.
“Just removing regulations like that, so that the manufactured homes can be their best selves, is the easiest, smallest thing to do. It’s not going to be revolutionary. It’s going to shave maybe a couple of thousand [dollars] at most off the price of a new manufactured home,” says Salim Furth, senior research fellow at the Mercatus Center at George Mason University. “But given that that is the entry-level ownership product in the American market, when you’re moving that bottom rung even a couple inches down, it means a lot more people can get on the ladder.”
Factory Records
At their peak, manufactured homes accounted for 60% of new single-family houses in the U.S.
Sources: Minneapolis Fed/U.S. Census Bureau
One issue the Biden plan addresses involves financing. Most buyers looking to finance a manufactured home must rely on personal property loans known as chattel loans. The ostensible thinking here was clear enough: Manufactured homes placed on rented land are more like property than real estate, even if they never move. But these chattel loans have worse interest rates and shorter repayment terms for borrowers than traditional mortgages do, making them more expensive. The White House announced that Freddie Mac will consider the feasibility of purchasing these loans, with the hopes of supporting more market activity and bringing down interest rates. Both Fannie Mae and Freddie Mac are looking at more creative financing solutions to give low-income buyers and renters access to manufactured housing communities.
Investment firms such as Blackstone Group and Apollo Global Management have also taken notice of mobile home parks in particular. From a landlord’s perspective, these communities are an ideal form of passive income, since for the most part landlords merely need to maintain the land and utility connections. Accordingly, acquisitions by these groups are often followed by lot rent hikes. Local tenant protections rarely apply to low-income mobile home owners, because technically, they aren’t renters.
Backing by Fannie and Freddie could make these properties even more attractive to investors. Fannie Mae is already in the tricky position of providing renter protection for RV residents by getting investors to agree to fairly standard rules for landlords. A borrower, such as an investment company, that purchases a community home could benefit from price incentives if the company agrees to one-year ground leases, 30-day notice periods for ground rent increases, and other basic protections from which it benefits. As the White House tries to make it easier to build prefab homes, it tries to ensure they remain an affordable option. The fact that Fannie Mae has become the guarantor of basic tenant rights is a sign of the precarious situation of the housing community, a major source of low-income and unsubsidized housing for veterans, the elderly and the elderly. disabled.
Another element of the White House plan is to remove barriers to construction and sales. According to James Schmitz, an assistant professor at the University of Minnesota, the ordinance was a restriction on homes manufactured in the 1970s. It comes down to building codes. In the 1960s, only about 25% of the entire United States had a formal building code. Factories that produced small modular homes often competed with traditional "stick" home builders to produce homes in unconstrained areas. While the factory is winning: In 1973, the manufacturer shipped 580,000 units, almost four times the size of a single-family home compared to ten years ago.
Trailer park spots are stuck due to HUD code rules that even permanent homes must have structures.
Facing pressure from the stick-builders — and to some extent from housing manufacturers too — Congress passed a law in 1974 that required the U.S. Department of Housing and Urban Development to come up with a national code for manufactured homes. This made at least some sense to the manufacturers, since more and more cities were adopting building codes. Navigating all these local codes would be impossible for a factory building and shipping homes nationally or even regionally. To this day, manufactured homes are approved and stamped by HUD, not local inspectors.
But this national HUD code didn’t work out in the manufacturers’ favor. It included the rule that manufactured homes must come with a chassis still attached. The agency also created a separate category for factory-built housing: small-scale modular homes that were manufactured then assembled on-site versus mobile homes that were assembled then delivered whole. This was a double-whammy for the once broad and thriving housing factory sector. Manufactured housing (mobile homes) had to abide by a new, stricter national code; modular housing (factory-built homes) had to abide by local codes, dooming manufacturers trying to build housing at scale.
In a 2020 paper for the Federal Reserve Bank of Minneapolis, Schmitz argues that HUD was captured by the National Association of Home Builders, the interest group for the stick-builders, and as a result the lower-cost manufactured homes were suppressed by regulations while traditional single-family homes got subsidies. "That's one of the reasons production went to hell," he says.
In a 1982 report, the Reagan administration acknowledged that federal policies had made manufactured homes unnecessarily expensive. In 1981, manufactured homes accounted for a large proportion of new single-family homes, but that proportion is declining. 29%. Most of them still sell for less than $50,000. “The Building Standards Act, enacted by Congress in 1974, ensured safety and durability standards for these units,” the HUD report reads. “But the true long-term cost of such manufactured homes has been much higher than necessary, because of inequitable treatment by governments and financial institutions.”
Schmitz says that lawmakers and regulators at all levels exploited bias against mobile homes as a way to legally restrict manufactured homes. Manufacturers themselves came up with the widely used term “mobile homes” as an answer to “trailer parks.” Unlike the trailers used by people as they searched for work during the Great Depression, mobile homes were simply permanent homes that were delivered by truck. With the HUD code rule that even permanent homes had to have a chassis, the stigma of the trailer park stuck. Local governments, in the suburbs especially, zoned manufactured housing into the least desirable locations. In 2019, only 94,600 new manufactured homes shipped in the U.S.
“Most suburbs have pretty effectively eliminated the possibility of putting down a significant number of manufactured homes,” Furth says.
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With the housing plan, the Biden administration is laying the groundwork for a rise in “gentle density,” meaning the kinds of homes that add to the supply of low-cost housing without triggering opposition from neighbors. For example, the Urban Institute estimates that an increase in the share of U.S. homes with ADUs from 1.6% to 3% over the next five years would deliver nearly 1.2 million new housing units. This will help build the 7 million rental homes needed to bridge the gap in affordable housing.
But if you can block affordable housing where it is most needed, those efforts will be thwarted.
The recent Biden Housing Scheme also proposes policies that facilitate affordable housing subsidies and zoning laws. However, some of these efforts
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