Could Biden's Strategy to Boost 6% of America's Affordable Housing Help Alleviate Housing Costs?

The growing concern about housing affordability has brought manufactured homes into the spotlight. Representing 6% of the nation's housing stock, they provide a significant portion of low-cost housing, without government subsidies. Manufactured homes have become a key focus for affordable housing solutions, as they offer a low-cost alternative in the housing market.

New Policy Changes to Boost Production

The Biden administration has introduced regulatory changes to promote the production of manufactured housing. These adjustments, led by the Department of Housing and Urban Development (HUD), are designed to make manufactured homes more attractive and safer. A notable change is the allowance for single-family manufactured homes to include up to four units, potentially increasing their share of single-family home production, which has declined from its peak decades ago. HUD also simplified certain inspection requirements and allowed for more open floor plans, which could enhance both the production and appeal of these homes.

Challenges of Land Ownership

Despite the positive steps, a critical issue with manufactured housing persists: land ownership. Manufactured home owners often do not own the land on which their homes are placed, instead renting space in trailer parks. These homes are difficult and costly to move, with relocation expenses reaching up to $10,000, an amount many residents cannot afford. Additionally, finding a more affordable plot of land is often impossible, as local regulations can block the establishment of new mobile home communities. As a result, residents are often left with no choice but to accept rising rents from park owners, making them financially vulnerable.

Investor Influence and the Rent Trap

Real estate investors, including private equity firms and notable figures like Warren Buffett, have increasingly purchased trailer parks, leading to rent hikes as they renovate and improve properties. While some residents welcome these changes, those who cannot afford the increased costs face significant hardships. This situation underscores the broader inequities of the current ownership model in the manufactured housing sector.

Depreciation and Financial Struggles

Unlike traditional homes that tend to appreciate in value, mobile homes depreciate over time, much like cars. This depreciation is largely because the land beneath the home is not owned by the resident, a key factor in property value. As a result, loans for manufactured homes tend to have shorter terms and higher interest rates than conventional mortgages. This prevents mobile home owners from building equity, leaving them at a financial disadvantage in the long term.

Vulnerability to Natural Disasters

Another concern is the susceptibility of mobile homes to extreme weather events such as hurricanes, tornadoes, and floods. Although newer models are built with wind resistance in mind, older units remain particularly vulnerable. As climate change fuels more frequent and severe weather events, these homes face increasing risks.

The Core Problem

While building homes in factories makes economic sense, placing them on rented land presents a major flaw in the system. The lack of land ownership leaves residents in a precarious financial situation, undermining the long-term viability of manufactured housing as a solution to the affordable housing crisis.