Manufactured Housing: Not What You Think
April 2007 Manufactured Housing--What Is IT? | Advantages of Manufactured Housing | Who Lives in Manufactured Housing? | Issues Affecting Manufactured Housing | Conclusions | Selected Charts | Individual Development Accounts | State Manufactured Housing Landlord-Tenant and Sale of Park Statutes If you mention "manufactured housing" to someone, the listener probably will envision a mobile home, in the past referred to as a "trailer," located in a rural field or in a "trailer park." Manufactured housing today, however, is much more than that and frequently is indistinguishable from traditional construction, commonly referred to as "site built housing." Manufactured housing runs the gamut from the traditional mobile home to large structures. It can provide an affordable alternative to site built housing in many areas, making its use more desirable to those addressing the lack of affordable housing. As manufactured housing has evolved, a number of issues, many unique to mobile homes, have also arisen that state, local and federal governments have been, and still are, required to address. This paper looks at the variety of manufactured housing, as well as state efforts to address some of the unique issues this genre of housing raises. Photos are compliments of The National Modular Housing Council The Manufactured Housing Institute (MHI), the trade association for all types of factory built housing, provides definitions for the various types of such housing on its Web site (http://www.manufacturedhousing.org/). The definitions below are taken from the MHI Web site.1 *Manufactured housing refers to "homes built entirely in the factory, transported to the site, and installed under a federal building code administered by the U.S. Department of Housing and Urban Development (HUD)." The code became effective in 1976 and "regulate(s) manufactured housing design and construction, strength and durability, transportability, fire resistance, energy efficiency and quality." The code also "sets performance standards for the heating, plumbing, air conditioning, thermal and electrical systems." Any items added to the housing on site (e.g., garages, decks, porches, etc.) are built to applicable local, state or regional building codes. *Modular homes are factory built "to the state, local or regional code where the home will be located." They are transported to the building site from the factory and installed. *Panelized Homes are factory-built homes in which panels—a whole wall with windows, doors, wiring and outside siding—are transported to the site and assembled. The homes also are required to meet the state or local building codes of their installation sites. *Pre-Cut Homes are "factory-built housing in which building materials are factory-cut to design specifications, transported to the site and assembled." These homes include kit, log and dome homes and any of these types of homes are required to meet local, state or regional building codes. *Mobile Homes refer to those manufactured homes produced prior to the HUD building code taking effect in 1976. Most of these homes were built to industry standards that were eventually enforced by 45 of the 48 contiguous states. For purposes of this document, ease of understanding and consistency, the terms factory-built housing and manufactured housing will be used interchangeably unless otherwise noted. So why use manufactured housing? There are a variety of reasons.
Cost Depending on the purchaser's area of the country, according to the MHI, "construction cost per square foot for a new manufactured home averages anywhere from 10 percent to 35 percent less than a comparable site built home, excluding the cost of land." This lower cost can mean a smaller mortgage (and lower payments) for the purchaser or, perhaps, more house or amenities for the same price as traditional construction. Many factors contribute to the price of manufactured homes including, as one would suspect, features, floor plans, and details. In general, "the sales price for a new manufactured home ranges from under $20,000 for a single-section home with basic features to prices in excess of $100,000 for a deluxe multisection home." In some areas of the country, manufactured housing provides a viable, affordable housing alternative for many people. Why does manufactured housing cost less? Producers of manufactured housing can take advantage of economies of scale when purchasing construction materials and equipment and when hiring laborers. Additionally, since manufactured housing is built in a factory, weather delays are usually only a factor for the brief on site work period so there are fewer lost building days. Building supply inventory can be better protected from weather and theft in a factory than on a building site. Faster to Construct It takes approximately 6 to 8 weeks from the time a purchaser says "I want that one" to the time the house is on site and ready for move in. Depending on the season and the area of the country, a manufactured home can be ready for occupancy much quicker than a site built house. Movable or Not? Technically, some types of manufactured housing can be moved to different locations if the need arises, although moving is generally not recommended. The manufactured housing used after a disaster is brought in, set up, used for a period of time and then removed for sale or reuse in other areas. Those who use such housing while awaiting the completion of a site built house may also then move it or sell it with the understanding it will be moved. Furthermore, those who reside in such housing on leased spaces may decide to move the house in the event the community is sold or converted to another use. The MHI estimates that approximately 22.5 million people live full time in more than 10 million manufactured homes throughout the United States. The average age of an owner is 54 and the average household size is 2.3 people. Slightly more than half are employed full time and have a median annual income of $28,000. About two-thirds of manufactured housing units are located on private property with the remainder in land-lease communities, referred to as mobile home parks. Given these advantages, why would a homebuyer not purchase a manufactured home? Again, there are a variety of reasons, some traditional and some historical, that cause homebuyers to steer away from manufactured housing. In the past, financing has been difficult to secure; such homes have been titled as personal property rather than real property; the units frequently were of questionable quality; local ordinances precluded manufactured homes from non-park areas; and other residents opposed the siting of manufactured housing either singly or in a mobile home park facility near their site built home fearing a negative impact on their property values. Another problem with manufactured housing is that unless a purchaser owns the property on which the manufactured housing unit sits, the prospect of having to move the house or lose it in the event a park is sold or converted to other use deters potential buyers. Additionally, many localities prohibit the location of factory built housing anywhere except in traditional manufactured housing communities. While two-thirds of the manufactured housing units are located on private land and the majority of all manufactured housing units never move once placed on any site, only about one-third of all manufactured housing units are titled as real property. The remainder are titled as personal property, equivalent to a car or camper. Such titling makes financing harder to get and can preclude some federal and state tax advantages available to site built housing owners. In some states a manufactured home title may designate it as personal property until installation is complete. Once that is done the title can be converted to a real property title. Manufactured homes are eligible for the government-insured loans available through the Federal Housing Administration (FHA), Veterans Administration (VA) and the Rural Housing Services (RHS). As the face of manufactured housing has changed, some traditional lending institutions have started providing loans. The most common financing mechanism, however, is still through the retailer that sells the manufactured housing unit2. *Tenant Issues Some types of factory built housing, specifically what the industry refers to as manufactured housing, are located on leased land parcels in parks. The resident may own the unit but rent the land space on which the unit is located. In other words, the resident is both homeowner and a renter. This may work well for all involved. However, if the park rents increase drastically or the park owner decides to sell the land to someone else, the homeowner/park resident may have a difficult time. Given the $28,000 median annual income for park residents that was mentioned above, homeowners may have a difficult time meeting any drastic rent increases from the park owner. Even more problematic are parks that close due to the current owner's decision to change the land use or sale of the park to a new owner who plans to use the land in another way. As was mentioned previously, the home technically may be movable; however, the reality is that moving such a unit once it is installed is difficult, complicated and expensive. To further complicate matters, there may not be a viable alternative park or location for the homeowner to move the unit. *State Responses States have addressed the unique issues affecting factory built housing, particularly manufactured housing, in a variety of ways: - California, Florida, New Hampshire and Rhode Island provide that residents or non-profit organizations must be given purchase preference in any sale of a park. Washington had a similar law but it was declared unconstitutional as a takings violation.
- California, Delaware and Oregon have trust funds that are available to resident groups to aid in the purchase of parks.
- California, Oregon and Washington also provide technical assistance to resident groups that purchase parks.
- New Hampshire provides for co-operative ("co-op") ownership of parks. Under this arrangement owners of the housing units in a park purchase, own and operate a park through a corporation they establish. The owners elect directors and officers. The park cannot be sold without the approval of the members of the co-op. In the event of a sale, the proceeds of the sale that exceed each member’s share and home value go to a 501(c)(3) non-profit3.
- Arizona, California, Delaware, Florida and Washington provide state funds to assist park residents in the relocation process; Florida and Nevada require the seller to provide relocation assistance.
- Vermont provides a capital gains tax break to park owners who sell to park residents rather than another party.
- Oregon recently enacted legislation to provide a personal income tax credit to most qualifying manufactured homeowners who are involuntarily moved due to a park closure or conversion and a capital gains tax break to park owner who sell to selected groups, including residents. The measure becomes effective in 2006.
- Several states have recognized the unique difficulties faced by a park resident in actually moving and have established procedures and requirements on how lot rents can be increased. Florida, Minnesota, Nevada, Rhode Island and Vermont have enacted statutes pertaining to the specific procedures that must be used to increase lot rents and/or the amount by which the rent can be raised.
- More than 40 states now provide a process under which the title to a manufactured home can be converted from personal property to real property, typically upon permanently affixing the home to a foundation.
- Twenty-five states have enacted laws prohibiting local governments from discriminating against manufactured housing. Generally, these statutes permit other local requirements, such as set backs, foundations, building codes and landscaping, to apply. The chart below indicates those states that have enacted such statutes.
The use of various styles of manufactured or factory built housing can provide a viable housing option in many areas, particularly high cost areas or low density areas where site built housing may cost a great deal more than many people are willing or able to pay. Such housing comes in a variety of styles and genres and, depending on the type of manufactured housing, must meet either a HUD established building code or local and state building requirements. State and local governments have renewed focus on such housing, particularly since it presents an affordable and increasingly acceptable housing alternative. Selected References | This report is part of the Affordable Housing Project of the National Conference of State Legislatures and received funding support from the Fannie Mae Foundation. | Notes 1. http://www.manufacturedhousing.org/understanding_today2004/fact_built.htm 2. HUD 3. "Promoting Economic Security for Manufactured Homeowners in Parks: New Hampshire’s Pioneering Co-op Model,” Paul Bradley, New Hampshire Community Loan Fund. Housing |