Overcoming Misconceptions About Manufactured Housing Communities

Prosperity Now’s Doug Ryan shares possible solutions to the sector’s most pressing issues—from its reputation to the shortage of new development.

Doug Ryan, Interim Vice President, Policy & Applied Research, Prosperity Now. Image courtesy of Prosperity Now

The manufactured housing sector has no doubt experienced a boom since the onset of the pandemic. The ever-growing need for affordable housing and limited new development has attracted significant capital interested in a relatively risk-free asset type.

While investor interest is at an all-time high, the manufactured housing industry is still experiencing decades-old stigma. Doug Ryan, interim vice president of policy and applied research at Prosperity Now—a nonprofit dedicated to expanding economic opportunity for low-income families and communities—talked to Multi-Housing News about the many obstacles the industry still has to overcome: from NIMBYsm preventing new development to the misconception of poor build quality of individual homes.

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How has the manufactured housing sector performed this year, considering all the challenges brought on by the pandemic?

Ryan: It has done well, by the measures we have. New manufactured home shipments in 2021 are on pace to exceed 2020 and may exceed 100,000 units for the first time since 2006. That’s quite an improvement since bottom fell out for manufacturers in 2009.

Also, the sales prices are considerably higher than in previous years, though this reflects some of the same market conditions that the site-built sector faces. Labor, materials, shipping and other components are more expensive than in 2020, simply due to demand across the economy.

Do you think the recent influx of capital in the industry will have a positive impact? Why or why not?

Ryan: It’s not, since much of it is largely unregulated and often chases deals in markets without significant consumer protections. While some money is supporting homebuyer lending, much of it is in the purchase of manufactured home communities, where competition for deals is pushing up MHC sales prices, which leads to higher lot rents, resident insecurity and, often, the risk of resident displacement.

This, of course, predates COVID-19. Some states are regulating this, but most have to enhance resident protections, including intentionally supporting resident and nonprofit ownership of communities.

What are the main roadblocks for the construction of new manufactured housing communities?

Ryan: Land use rules, mostly. Local communities often forced MHC developers into non-residential zones and have actively excluded new development. State housing financing agencies, Fannie Mae and Freddie Mac, have supported the industry, but the challenges to new MHC development are multifaceted. State legislatures could do more to incentivize all sorts of housing options in response to the housing crisis, including the siting of new MHCs.

Image via Public Domain Pictures

Please talk about the stereotypes that you believe are the most harmful to the manufactured housing industry. 

Ryan: Housing quality is the top one. This falsehood permeates the land use, lending, appraisal and other sectors. That fee-simple manufactured homes depreciate compared to site-built in the same market is another. Data simply does not support these ideas. New manufactured homes, for example, are much more energy efficient than other housing options in the same market at the same price.

Finally, there remains a stereotype about people who live in MHCs—derisively referred to as “trailer trash,” and it seems unworthy of being our neighbors. This infects our policy discourse.

How can local authorities help improve manufactured housing sector’s NIMBY issue among residents when it comes to new development?

Ryan: First, eliminate any restrictions on the siting of MH in new developments, infill lots and other opportunities. The quality and aesthetic of manufactured homes do not justify this type of discrimination. Use of factory-built housing could lead to affordable homeownership opportunities across the U.S.

Localities that have housing trust funds, first homebuyer assistance programs and other resources should explicitly permit the use of manufactured homes and encourage state housing finance agencies to do the same.

How has financing for manufactured housing investors and developers evolved in the past years? What will be the biggest challenges in the manufactured housing financing landscape in 2022?

Ryan: There are two main threads. One is the emergence of new Fannie Mae and Freddie Mac products and initiatives to support the sector due largely to the federal law from 2008. They can do more, a lot more, but the programs to support higher-end homes and mission-driven community purchases should grow in the coming years.

The second is private equity and related sources of community funding. The amount of cash that investors have sat on since the end of the Great Recession is immense and constantly searching out deals. The MHC market operates in markets with generally weak state regulation and captive market participants—homeowners who face high barriers to relocate. This has, as noted above, forced huge sales price increases and rapid rent increases in some markets.

What role do you expect the manufactured housing sector to play in the real estate industry in 2022 and beyond?

Ryan: It has to play a key role. The affordable housing crisis is on the verge of becoming intractable. Factory-built homes can serve a significant share of the market if localities, lenders, policymakers and others drop their irrational biases against the sector. We need townhomes, du-, tri- and four-plexes, multifamily and small detached homes to meet the demand. Manufactured homes are positioned to address the latter.

That said, states and the federal government must be more intentional to regulate the sector. In communities, states need to ensure that residents have basic tenant rights and fair opportunities to sell their homes. The federal government and states can improve lending options for these homes in communities, too, which are generally excluded from mainstream finance.

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