Bang for Buck? Replacing Pre-Fab Housing

Rural residents find that manufactured housing can be an affordable avenue for home ownership. But older homes built before construction improvements are more likely to be substandard. An October 15 webinar will discuss how nonprofit housing programs can best focus their energies through increasingly popular replacement programs.

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EDITOR’S NOTE: Manufactured housing is popular in rural areas. Forty-four percent of the nation’s 7.1 million manufactured homes are located in nonmetro counties. But older homes suffer from deficiencies like high energy and maintenance costs. In response, more than a score of affordable housing programs in 15 states have initiated projects to replace older manufactured homes with new models.

To have the biggest impact, replacement programs need to look carefully at some key assumptions, says Matthew Furman, a fellow in community and economic development at Harvard University. Furman will be part of a free webinar (details below) on Wednesday, October 15.

In this article, Furman introduces some of the concepts he’ll discuss in the webinar.

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In recent years, there has been an upsurge in interest among nonprofits in the potential of manufactured housing to act as an affordable housing resource, particularly in rural areas. National organizations, including the Corporation for Enterprise Development (CFED), the National Consumer Law Center, the Housing Assistance Council (HAC) and NeighborWorks America, have devoted significant attention to manufactured housing. The interest of these entities in manufactured housing is grounded, at least in part, on recognition that factory-built housing offers an affordable avenue to homeownership for low- and moderate-income households.

Despite manufactured housing’s potential to act a source of affordable home ownership, it has long been marginalized by policymakers and communities. Three core concerns have encouraged opposition to manufactured housing:

  • Skepticism of the durability of construction.
  • Doubt regarding the long-term value of the housing.
  • And community animosity toward the structures and their residents.

The hundreds of thousands of dilapidated manufactured homes that are in use today, many of which are relics from the 1970s and 1980s, have furthered these perceptions.

Since 2000, many nonprofits and government entities have attacked the negative perceptions associated with manufactured housing by sponsoring programs that seek to replace those substandard homes with state-of-the-art, energy efficient units. As national organizations consider scaling up these programs, it is important for us to ask: What has worked and what hasn’t in this policy space?

Photo via Next Step
An interior view of a new manufactured home. Construction standards changed in 1976, but the stock of substandard homes includes many that were built much later.

There are more than 25 manufactured housing replacements programs in the United States, as identified by reviewing scholarly efforts, news reports and reports produced by nonprofits and advocacy programs. These programs exist in 15 fifteen states, and their collective impact over the last decade can be estimated to be between 500 and 750 units. These programs represent the broad variety that has organically emerged in this policy area. Replacement programs have operated at almost every conceivable geographic scale: the town, the county, the region and the state. These programs have employed a variety of funding mechanisms, from federal grant funds to conventional lending, in order to improve the housing stock.

            Although all of these programs are unique, they face common uncertainties:

1.     What model year manufactured homes should be targeted for replacement? While the popular narrative holds that pre-HUD code (1976) manufactured housing is the “worst of the worst,” Census Bureau data suggests that a greater percentage and raw number of manufactured homes produced between 1975 and 1995 are in substandard condition. While limiting programs to pre-HUD code units simplifies administration and helps to conserve scarce funds, the practice should be replaced by a need-based system that prioritizes poor condition units.

2.     Should manufactured housing replacement be subsidized?  It has been argued that energy savings and conventional financing reduce the need for financial subsidies for manufactured housing replacement. Program experience suggests that ancillary cost increases due to replacement, such as higher taxes and insurance rates, throw this arithmetic into flux. Low- and moderate-income homeowners have also proven to be wary of taking on any debt. Sustainable subsidies, such as tax increment financing and revolving-door loan funds, deserve additional attention.

3.     What programmatic features are key to success? The experiences of housing professionals indicate that the key to successfully improving the housing stock via a manufactured housing replacement program is flexibility. Responding to challenges creatively and altering a program on the fly are necessary, because clear best practices have not yet emerged in this policy area.

To adequately answer these questions, housing professionals need to devote considerable attention and resources to studying factory-built housing replacement in the coming years.

On Wednesday, October 15th at 2 p.m. Eastern, Matthew Furman and NeighborWorks America’s Rural Initiative will offer a webinar on substandard manufactured housing and the programs that seek to replace it. RSVP here

Matthew Furman is an Edward M. Gramlich Fellow in Economic and Community Development at Harvard University.

 

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