Blog Posting # 825; Copyright 3 January 2024. EducateMHC
Know this! HUD-code manufactured housing (‘MH’) is federally-regulated, performance-based, affordable-attainable, factory-built housing (i.e. a type of offsite construction). Land lease communities (a.k.a. manufactured home communities & ‘mobile home parks’) comprise the commercial real estate (‘CRE’) component of MH; and, along with various forms of housing finance (e.g. chattel or ‘home only’ loans & real estate-secured mortgages), characterize the post-production segment of MH.
EducateMHC is the official MH historian, trade term & trend tracker, as well as perennial information source. Contact EducateMHC via (317) 881-3815; email gfa7156@aol.com, and www.educatemhc.com, to purchase Community Management in the Manufactured Housing Industry (A copy should be in every land lease community office nationwide!), & SWAN SONG – History of land lease communities & official record of annual MH production totals since 1955.
And my autobiography, From SmittyAlpha6 to MHMaven, describes personal combat adventures in Vietnam as a USMC lieutenant, a 45 year entrepreneur business career in MH & community ownership, as well as freelance consulting and authoring of 30 nonfiction texts.
George Allen is the sole emeritus member of the Manufactured Housing Institute (‘MHI’), a founding member of MHI’s National Communities council (‘NCC’) division, an RV/MH Hall of Fame enshrinee, as well as Allen Legacy columnist and editor at large for MHInsider magazine.
HAPPY NEW YEAR 2025!
“…the U.S. Census bureau today projected the U.S. population will reach 341,145,670 at midnight EST on 1 January 2025. This represents an increase of 2,640,171 (0.78%) from 1 January 2024, and up 9,696,329 (2.93%) since Census Day (April 1) 2020.” Now you know something few others do!
Will 2025 MH Production Surpass 2024?
It’s fairly certain 100,000+ new HUD-Code manufactured homes will be produced by year end 2024; the first time since years 2021 & 2022. Hopefully that momentum will carry us over into year 2025. To that end MH aficionados should reread Harvard University’s Joint Center for Housing Studies report that debuted on 23 January 2024, titled: ‘Five Barriers to Greater Use of Manufactured Housing for Entry-Level Homeownership’, by Chris Herbert.
“The sharp rise in home prices and interest rates over the last few years has pushed homeownership out of reach for millions of renters. Under these conditions it is more important than ever that affordable homes are available for entry-level homeownership. Thanks to lower production costs; indeed, the construction cost of a basic single-section manufactured home is roughly 35 percent that of a comparable site-built home. While the savings for larger homes is smaller, it is till significant, with a double-section home costing 60 percent, and a CrossMod™ home (which most closely resembles site-built housing) costing 73 percent of comparable site-built homes.”
“Despite these savings, manufactured housing production remains depressed. During the 1980s and 1990s, more than 250,000 homes were produced on average each year, amounting to 25 percent of the volume of single-family construction. In recent years manufactured home production has just topped 100,000 units annually, about 10 percent of the volume of new single-family homes.”
“Given the cost advantages and unmet need for more entry-level housing, why has production of these homes remained so low?” – and what needs to be done to address said barriers?
Well, that’s what Harvard’s JCHS report purports to do; but first a couple comments on the quoted paragraphs above:
- Once again MHI’s CrossMods™ design is hinted to be an answer to HUD-Code housing’s production slump of the past 14 years (i.e. since industry’s nadir year 2009, of only 48,789 new homes produced). However, with CrossMod™ production totals being so difficult to ascertain, one wonders just how much of an ‘answer’ this new design is?
- When one pens a line referencing MH production between ‘1980s & 1990s’, insiders wonder: ‘Just how much does this writer know about ‘what really happened’ before and right after 1998, when sloppy MH sales and finance shenanigans were commonplace?’
Without further ado, here’re the five key barriers Harvard’s JCHS identifies for relative to MH production.
Negative Perceptions of Manufactured Home Quality. “Older manufactured homes (specifically pre-1974) were of poor quality and limited aesthetic appeal, and serve as basis of popular conception. However, newer homes are of much higher quality, with multi-section homes often indistinguishable from site-built housing.” I’d add here that the absence of a brick exterior veneer, as well as gutters and downspouts, add to this misconception. “Further, studies have found that when the home and land on which it is sited are jointly-owned, these homes appreciate (in value) at rates very close to site-built housing.” Again, all true enough, but it’s these price margins and degrees of ownership that contribute to the eminently affordable nature of HUD-Code manufactured homes ‘in & out of’ land lease communities. (Lightly edited. GFA) GFA) What would YOU do, if anything, to address this perception barrier?
Restrictive Zoning and Land Use Regulation. “Manufactured homes are often prohibited in zones set aside for single-family housing absent a special permit. State laws preventing the outfight exclusion of manufactured housing can help, but these laws typically do not address design restrictions that are important barriers, including roof pitch, cladding, foundation heights, lot sizes, and setback requirements.*1 “…a statistically significant association with stricter regulation and a lower likelihood of any (manufactured) homes being sited in a community.” With that said, how to convince conventional homebuyers, paying mortgages on $500,000 houses, to welcome new manufactured homes valued around $200,000 into their neighborhoods – and not be concerned about reducing the value of their housing investment? What would YOU do, if anything, to address this land use barrier?
Market Conditions. While strict land regulation generally results in fewer manufactured homes, this barrier can be – and has been, offset by the trifecta of lower land costs, lower density development, and lower household incomes! So, favorable market conditions like these can encourage a shift from NIMBY to YIMBY attitudes.*2 What would YOU do, if anything, to ameliorate these market conditions?
A Unique and Limited Supply Chain. Manufactured homes are often purchased from independent (street) MHRetailers, before or after they’ve found land of their own – whether scattered building sites conveyed fee simple, or rental homesites within land lease communities.*3 In the former instance homebuyers obtain real estate-secured financing (i.e. conventional finance) or, in the latter instance, as homebuyers/site lessees, obtain chattel or personal property loans, a.k.a. ‘home only’ loans. Another limiting factor in the supply chain has been the location of factories. At the turn of the century there were more than 300 plants, today only 140 . “And factories need to be located within 500 miles of the home site to manage transportation costs.” To this end, the SECO team in Atlanta, GA., has created the ShowSearch telephone app, providing such key information to prospective MH homebuyers!*4 What would YOU do to address these unique and limited supply chain issues?
Access to Mortgage Financing. “A final constraint is the difficulty homebuyers face in accessing mortgage financing.” (This barrier was touched on in the previous paragraph). “Manufactured homes are generally considered personal property unless owners take steps to change the legal designation to real property, which is necessary in order to be eligible for mortgage financing.” Furthermore, “the titling process differs by state, and can be complex and time consuming, requiring the home be permanently affixed to a foundation.” However, “if the home is personal property it must use ‘chattel’ loans that bear higher interest rates and have shorter loan terms which can erode the home’s cost advantages.” And frankly, it’s more difficult to obtain chattel loans for manufactured homes. What would YOU do to address this uncertain access to mortgage financing?
One area that has been receiving increasing attention of late, relative to maximizing the “cost advantages and affordable homeownership opportunities offered by manufactured housing”, has been the role public and nonprofit sectors could play in overcoming some of the aforementioned barriers. What are your thoughts to this end?
I hope some or all this motivates you to consider existent and new ways to address five production barriers to selling and siting more HUD-Code manufactured homes nationwide. To this end, please communicate your ideas and suggestions to me via gfa7156@aol.com
End Notes.
- Cladding = ‘metal bonded to an inner core of another metal.’ Maybe exterior veneer siding?
- NIMBY = Not in my back yard! & YIMBY = Yes, in my back yard!
- Independent (street) MHRetailer is a trade term coined by MH industry consultant William Carr of Iowa. And, since roughly 2009, land lease community owners/operators, recognizing the paucity of independent (street) MHRetailers, started aggressively marketing, selling, and oft financing new manufactured home transactions on-site within land lease communities.
- For more information, visit SECOconference.com And know the SECO team also hosts periodic MH2X one day seminars that teach community owners/operators how to market and sell new manufactured homes onsite. The goal of MH2X is to help the HUD-Code manufactured housing industry to double annual production during year 2025!
Postscript. If you’ve read this blog carefully, you see that initiatives originating with the SECO team are 100% manufactured housing industry focused! The ShowSearch telephone application is nothing sort of revolutionary where sourcing new HUD-Code housing is concerned – specifically, a new digital means identifying factory sources of new HUD-Code homes nearby! And the MH2X program’s one day seminars exist nowhere else in the U.S. If you haven’t attended one to date, plan to do so during year 2025! Bottom line? As revolutionary as these two new tools are, you’re only hearing about them here. Why? Because, like other supposed advances in the MH industry (e.g. MHI’s CrossMod™ home design), if it does not originate in a certain manner, it receives scant attention from ‘powers that be’ in this industry. So, reach out now via SECOconference.com and learn all you can about the ShowSearch phone app, the next MH2X program session, and date of the next national SECO Conference during fall 2025. Also know SECO principals will be present at the Louisville MHShow 15-17 January. If you don’t know them personally, look me up at the show and I’ll be pleased introduce you! GFA
George Allen