This blog highlights the findings of a May 2018 Realtor® University Center for Real Estate Studies[1] research paper that found that manufactured homes[2] have increasingly become safer, with customized designs that give them the look of site-built homes, while being highly affordable at half the cost of site-built homes. For 6.6 million households, manufactured homes are an affordable homeownership choice. The lower monthly housing costs makes homeownership more affordable—especially for lower-income households, retirees who may want to spend less on housing costs, and households who want to purchase an affordable second home for vacation use.
Manufactured Homes: An Affordable Homeownership Option
As of 2016, there were 6.6 million owner-occupied manufactured/mobile homes in the United States, 4.7 million of which were owner-occupied, a homeownership rate of 71 percent. The largest concentration of manufactured homes, as a share of the total housing stock, are in West Virginia, South Carolina, Mississippi, and New Mexico, with manufactured/mobile homes accounting for 15% to 25% of the housing stock. They are also more common in North Carolina, Kentucky, Alabama, Louisiana, Arkansas, Arizona, Wyoming and Montana, accounting for 10 to 14 percent of housing stock.
As of May 2018, 98,000 manufactured homes[3] were shipped in all states, an increase from the 92,900 shipments in 2017[4]. About 5,000 or more homes are shipped to Texas, Alabama, Florida, Louisiana, and Michigan.
Manufactured homes are an affordable option, especially for the lower income groups. Based on 2016 latest data, the median household income among manufactured homeowners was $43,900, about half the median household income among all homeowners. The median household income of manufactured homeowners is about the same as the median income of all renters, at $42,500. This indicates that renters can transition to homeownership without significant change in housing expenses via ownership of a manufactured home, if other factors that homebuyers look for are also met (e.g., accessible transportation, presence of a good school, other neighborhood qualities).
Manufactured homeowners typically spent $534 on housing cost, or about half the $1,220 monthly housing cost among all homeowners[5]. Because of the lower housing costs, only 13 percent of manufactured homeowners pay more than 30 percent of income on rent (cost-burdened). Meanwhile, 46 percent of renters are cost-burdened.
The head of households in mobile/manufactured homes tends to be slightly older than household heads in single-family units, at 57 years for owner-occupied mobile homes and 43 years old for renters. In many states in the Northeast, West Coast, and Florida, the median age among households living in mobile/manufactured homes was 65 to 74 years old in 2016.
Manufactured homes are also owned as vacation homes. Vacant mobile/manufactured homes made up 18 percent of mobile/manufactured homes as of 2013, and half of these units were seasonally vacant. Eleven percent of mobile/manufactured homes were also owned as extra units, and of these extra units owned, 60 percent were used for recreational purposes[6].
Cost Comparisons: Manufactured Home, Existing- and New Site-Built Homes[7]
Manufactured homes are much cheaper to manufacture compared to the cost of constructing site-built homes. According to estimate of the U.S. Census Bureau’s Manufactured Housing Survey, the average cost per square foot of manufactured housing in 2017 was $50.42, about half the cost a newly built home at $111.05.[8] Industry experts attribute the cost savings to the efficiencies of the factory-building process arising from economies of scale related to purchasing large and standard quantities of materials, and a controlled construction environment that avoids traditional home construction problems such delays relating to weather and damage to building products and materials.
A comparison of the housing costs for owning a manufactured house, an existing home, and a new-site built home shows is shown below based on 2017 prices (see Appendix 1 below for detailed calculations). On average, owners of manufactured homes who also own the land and file for conversion of the manufactured home as a real estate (on owned land) and are able to obtain mortgage financing expect to pay $1,300 per month (Option 3), which is lower than the monthly housing expenses compared to all other home ownership options: chattel financing for a manufactured home on leased land ($1,400), mix of chattel and mortgage financing for a manufactured home on privately owned land ($1,800), mortgage financing for an existing home on owned land ($2,100), and mortgage financing for a new site-built home ($2,800). There is a small difference ($300) in the monthly housing cost between mortgage financing for an existing home (Option 4) and a chattel financing of a manufactured home on owned land (Option 2) because the higher interest cost for a chattel, about 525[9] basis points higher than a mortgage partially offsets the cost advantage from purchasing a cheaper manufactured home.
For a household earning the median household income of $60,527 in 2017, the housing expenses for mortgage financing of a manufactured home on privately owned land amounts to 26 percent of income, making this the most affordable housing option. The next best affordable option is chattel financing of a manufactured home on leased land, with the debt to income ratio is 28 percent. Housing expenses for other options (Option 2, 4,5) are more than 30 percent of income, which makes a household cost-burdened .
Compared to manufactured home owners who lease the land (Option 1), manufactured home owners who own the land and obtain mortgage financing (via conversion of property as real estate) will be ahead by $155,900 in income and price appreciation gains after 20 years. Households who obtain chattel financing for a manufactured home on privately owned land (mortgage-financed) will be ahead by $35,900 compared to manufactured home owners who lease the land (Option 1).
The analysis shows that households will be financially better off owning a manufactured home on one’s own land and obtaining mortgage financing for the real property (house and lot). However, most manufactured home owners do not title their property as real property. Although 68 percent of manufactured homes were sited on private property (32 percent in communities)— which could enable them to be titled as real property and hence eligible for mortgage financing— only 17 percent were titled as real property. One reason is that manufactured homes are titled as personal property by default and homeowners must file for conversion of the chattel as a real property, and it appears that most manufactured homeowners do not opt to convert for a variety of reasons, perhaps relating to the perceived difficulties about the conversion process, or because they do not want to pay the higher property tax rates. More survey-based research on this area is needed to understand why manufactured homeowners don’t choose to convert their personal property into a real property.
Manufactured Home Regulations are Designed to Ensure Safety and Livability
The standards regulating the manufacture, transportation, and installation of manufactured homes have evolved and are vastly different from the poorer quality mobile/manufactured homes of the past. The seminal regulation was the 1974 National Manufactured Home Construction and Safety Standards Act (the Act) that was enforced on June 16, 1974 by the Department of Housing and Urban Development (Title 24 Code of Federal Regulations Part 3280, Manufactured Home Construction and Safety Standards, or The Standards). The Standards pertained to body and frame construction requirements, thermal protection, plumbing, heating/cooling, fuel, electrical systems, and the transportation system. Under the Standards, all units shipped out of a manufacturing facility required a certification label, also called a “HUD label” or “red tag”, that certifies that the manufacturer built the home according to the Standards.[10] Manufactured home standards include regulations that govern wind, roof load, and thermal standards specific to zones delineated by HUD. For example, manufactured homes going to wind II zone areas (typically hit by hurricanes) need to be built to withstand higher wind speeds, while manufactured homes going to areas that get heavy snowfall in the winter need to have roofs that can support a heavier amount of snow.[11]
Following the 1976 Standards, subsequent regulations in 1994[12], 2000[13], and 2010[14] further strengthened the product safety and quality, licensing and education of manufacturers and installers, and the dispute resolution for consumer complaints. These standards have resulted in little damage to manufactured homes caused by hurricanes, such as Charley (2004)[15], Katrina (2005)[16], and Dennis (2005).[17]
The damage assessment for Hurricane Katrina in Florida states:
The assessment found that of the 3,291 mobile homes located in the mobile home parks visited, only 12 were destroyed or were not repairable. Half of these homes were damaged by wind and the other half were damaged by falling trees. Generally, the homes damaged by wind had their roofs blown off. All the damaged homes were older homes built in the 1960s, 70s or 80s. None of the homes built after the 1994 revisions of HUD’s mobile/manufactured home construction standards received any significant damage. There was substantial flooding of some mobile home parks with water up to 12 to 18 inches. The water did not, however, get into the homes. No homes moved from their foundations.
New Manufactured Homes Can Be Designed to Look Like Traditional Homes
Today’s manufactured homes have designs and amenities that give them the look and feel of traditional site-built homes, from Cape Cod to Victorian styled-homes.[18] The Manufactured Housing Institute notes that floor plans range from basic to elaborate, with “vaulted or tray ceilings, fully equipped kitchens, walk-in closets and luxurious bathrooms”. Exterior siding can be “metallic, vinyl, wood or hardboard and stucco.” New roof designs are available, such as “pitched roofs with shingles and gabled ends.” Upgrades include “awnings, patio covers, decks, site-built garages and permanent foundations.”[19]
The total unit can vary in size, depending on whether the manufactured home is single-section (500 to 1200 square foot), double-section (1,000 to 1,200 square feet) or triple or multi-section (2,000+). Thus, the double- or multi-section homes can be as big as traditional site-built homes. Customers can choose from a variety of floor plans to make the total unit resemble the look of a site-built home. Below are new manufactured home designs.
Source: Jacobsen Homes
Source: Clayton Homes
Source: Champion Homes
Source: Clayton Homes
In summary, tighter design and installation standards after 1976 have increasingly made manufactured housing safer yet affordable compared to site-built housing, at about half the cost of constructing a site-built home. Manufactured homes are an affordable path to homeownership especially among lower-income households, as well as households seeking to purchase second homes for vacation or investor use. Another market may be retirees, who may be looking to spend less on monthly housing expenses rather than build equity. Households who own the land and who opt to convert the title of the manufactured home from personal property (chattel) into real estate have the opportunity to build more wealth compared with households who own the manufactured home and rent the land (as in land lease parks), with the wealth gains arising from lower mortgage financing costs (compared to chattel financing) and from the appreciation of the land.
Appendix: Cost Calculations
[1] The Journal of the Center for Real Estate Studies, REALTOR® University, Vol 6. No.1, May 2018. https://realtoru.edu/wp-content/uploads/2018/07/NAR_RU_JCRES_Vol6No1_WebVersion_final.pdf.
The views in this research paper are of the author’s and should not viewed as the adopted policy of the National Association of REALTOR®.
[2] A manufactured home means a structure, transportable in one or more sections, which in the traveling mode is 8 body feet or more in width or 40 body feet or more in length or which when erected on-site is 320 or more square feet, and which is built on a permanent chassis and designed to be used as a dwelling with or without a permanent foundation when connected to the required utilities, and includes the plumbing, heating, air-conditioning, and electrical systems contained in the structure. Source: Government Publishing Office, Electronic Code of Federal Regulations, https://www.ecfr.gov.
[3] Seasonally adjusted annual rate
[4] U.S. Census Bureau. with data provided by the Institute for Building Technology and Safety. The total may include shipments to Canada and Puerto Rico.
[5] In estimating the annual mobile/manufactured home costs, the U.S. Census Bureau includes personal property taxes, land or site rent, registration fees, and license fees on all owner-occupied mobile/manufactured homes. The U.S. Census Bureau calculates the “selected monthly owner cost” as the sum of payment for mortgages, real estate taxes, various insurances, utilities, fuels, mobile/manufactured home costs, and condominium fees.
[6] 2013 American Housing Survey National Tables, Table C-00-AH.
[7] The calculations in this blog are revised/updated calculations from the calculations in the May 2018 study.
[8] U.S. Census Bureau, Manufactured Housing Tables, Cost and Size Comparisons
[9]Consumer Financial Protection Bureau, Manufactured-housing Consumer Finance in the United States, September 2014, https://files.consumerfinance.gov/f/201409_cfpb_report_manufactured-housing.pdf. The Urban Institute estimate the difference between a chattel and mortgage rate at 441 basis points (Laurie Goodman and Bhargavi Ganesh, More Mortgages for Manufactured Housing Could Mean More Affordable Homes, Urban Institute, Housing Finance Policy Center for at https://www.urban.org/urban-wire/more-mortgages-manufactured-homes-could-mean-more-affordable-housing)
[10] Department of Housing and Urban Development, HUD Labels (Tags), https://www.hud.gov/program_offices/housing/rmra/mhs/mhslabels
[11] Department of Housing and Urban Development, Model Manufactured Home Installation Standards, https://www.hud.gov/sites/documents/225HUD.PDF
[12] Government Publishing Office, Federal Register / Vol. 63, No. 91 /Tuesday, May 12, 1998 /Rules and Regulations, Department of Housing and Urban Development, 24 CFR Part 3280, Manufactured Home Construction and Safety Standards: Metal Roofing; Interpretative Bulletin I–2–98, https://www.gpo.gov/fdsys/pkg/FR-1998-05-12/pdf/98-12341.pdf
[13] Department of Housing and Urban Development, Recent Program Activity, https://www.hud.gov/program_offices/housing/rmra/mhs/faqs72010
[14] U.S. Government Publishing Office, 24 CFR 3282 – Manufactured Home Procedural and Enforcement Regulations, https://www.gpo.gov/fdsys/granule/CFR-2010-title24-vol5/CFR-2010-title24-vol5-part3282
[15] Institute for Building Technology and Safety,http://www.aresconsulting.biz/publications/HurricaneCharley04.pdf
[16] Department of H Florida Highway Safety and Motor Vehicles, Mobile/Manufactured Home Damage Assessment from Hurricane Katrina, 2005. https://flhsmv.gov/pdf/dealerservices/mhdamage/hurricanekatrinareport.pdf
[17] Florida Department of Highway Safety and Motor Vehicles, Mobile/Manufactured Home Damage Assessment from Hurricane Dennis, July 20, 2005, https://www.flhsmv.gov/html/reports_and_statistics/mhd_reports/Hurricane%20Dennis%20Report.pdf
[18] Realty Times, “Mobile homes: Single Wide or Double Wide”, April 28, 2017,
https://realtytimes.com/advicefromagents/item/1001800-mobile-homes-single-wide-or-double-wide
[19] Manufactured Housing Institute, Manufactured Housing in the United States, http://www.manufacturedhousing.org/wp-content/uploads/2017/10/2017-MHI-Quick-Facts.pdf
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