Manufactured Homes: Quality Affordable Homeownership For First-Time Homebuyers
Policymakers are looking for ways to improve affordability by increasing the supply of entry-level housing, including manufactured homes.
Most renters in the United States say they would like to own their own homes. But with a limited supply of entry-level or affordable options available, many find it difficult to buy. Making it easier to buy manufactured homes could be part of the solution for first-time homebuyers and middle – or lower – income families that may not have enough savings for a down payment or the income to afford such an expensive purchase.
Prospective buyers face significant obstacles, in part because of high home prices, which have risen much faster than inflation in recent years. The median sales price in the first quarter of 2023 was $416,100,an increase of 26% at the beginning of 2020. So policymakers are looking for ways to improve affordability by increasing the supply of entry-level housing, including manufactured homes.
Manufactured homes are affordable factory-built residences that are installed in one to three sections after being delivered to residential property. The majority of the building process is automated and standardized to one federal specification, (HUD Code), which reduces costs compared with site-built or even modular housing. Note: Manufactured homes are the only form of single-family home that are subject to a federal building code.
These homes come in all size ranges and can be built to look like other single-family homes: They can have pitched roofs, be affixed to foundations, and be owned as real estate just like site-built homes (which are assembled on their permanent house location). Notably, about two-thirds of all owners of manufactured homes also own their land.
A recent study from the Joint Center for Housing Studies (JCHS) at Harvard University, funded by The Pew Charitable Trusts, found that manufactured homes cost far less than similar site-built homes.
Several factors determine the cost of a manufactured home – as paid by the homeowner – including the kind of structure being built and and the financing used.The JCHS study found that the smallest of these homes, known as single-section or single-wide, have the greatest costs savings compared with a site-built home of a similar size. However, even larger manufactured homes will be up to 50% less expensive than a similarly sized and equipped traditional site-bult home. These estimated savings are consistent with findings from a prior manufactured housing cost-saving study published in 1998 by the National Association of Home Builders. Indicating that these benefits have endured over multiple decades.
Manufactured homes can be financed in various ways, but the greatest savings are achieved with a traditional home mortgage that covers both the home and the land. For a borrower to qualify for a mortgage, most states require the home to be attached to a foundation and be titled as real estate, which means it must be sited on owner-occupied land. Another common type of financing is a personal property chattel loan that covers just the home and not the land. Such loans are an important source of financing for those who cannot get a mortgage but generally carry higher interest rates. These borrowers include many who own both the land but title them separately, or those who rent the land.
Sources: Rachel Siregel & Alan van der Hilst, Pew Charitable Trust – Joint Center for Housing Studies (JCHS) at Harvard University
