Last month, members of Congress were treated to a hands-on look at manufactured housing – the sector of the housing industry that holds the greatest promise for meeting our nation’s affordable homeownership and rental housing challenges.
The U.S. Department of Housing and Urban Development’s (HUD) “Innovative Housing Showcase” on the National Mall in early September featured several manufactured homes located just a few miles from the Capitol. The concept is simple. Manufactured housing takes advantage of the significant cost savings of manufacturing a home in a factory and then placing it on the land, rather than building a home from the ground up.
UMH Properties was proud to be a co-sponsor of this event. UMH owns and operates more than 140 manufactured home communities across the country, where families own their own manufactured home or rent a home from the community owner. UMH communities are diverse and vibrant, with playgrounds, swimming pools, community facilities and other desirable amenities.
It is important to keep in mind that manufactured homes are the only one The homeownership option is governed by a national, uniform set of strict construction and safety standards: the HUD Code.
And at a time when policymakers are lamenting how difficult it is for young families to purchase their first home, manufactured housing is by far the the most affordable option for homeownership. Last year, the average price for a manufactured home was about $125,000, while the average price for a site-built home was more than $400,000. And the average income for a buyer of a manufactured home was about $61,000, while the average income for a buyer of a site-built home was more than $136,000.
Over the past few decades, we have seen significant innovations in the manufactured housing industry. Mortgage loan manufacturers and sources such as FHA and Fannie Mae and Freddie Mac have worked together to make possible what is called “Cross mod” homes – new homes with high-quality amenities, but at a price that is much more affordable than site-built homes.
UMH Properties is proud to be a leader in another innovation: the use of manufactured housing communities to deliver affordable rental housing, whether in hybrid communities that include both homeownership and rental, or more recently in rental-only communities.
But more can be done. And Congress and federal agencies can be partners and catalysts.
The industry was encouraged by the inclusion of Section 301 in the “Road to Housing Act”a bill passed by the Senate Banking Committee in July and rrecently adopted by the Senate as part of the “National Defense Authorization Act”. The bill will now go to the House of Representatives for consideration.
Section 103 of this bill would eliminate an outdated requirement that a manufactured home be placed on a permanent chassis, a change that would increase the production of affordable manufactured homes.
This bill also authorizes grants for the preservation of existing manufactured home communities.
UMH Properties prides itself on investing tens of millions of dollars in private capital to purchase older communities and finance the rehabilitation of streets, sewer and water lines, and other deteriorating infrastructure that the previous owner often did not have the funds to complete.
Federally appropriated funds could further this objective. But if Congress funds such subsidies, it should not exclude for-profit community owners from the subsidies or give preferential treatment to so-called “resident-owned communities” (ROCs) – which is all too often the case “property of the resident” in name only, with residents not even entitled to profit if a community is sold for a profit.
As Congress considers housing legislation, it must also take action to restore HUD as the sole national regulator of manufactured housing and safety standards. Because a rider was left without debate in a 2007 energy bill, DOE has attempted to impose energy standards that conflict with HUD standards, which would add about $5,000 to the cost of each new manufactured home. Congress must restore HUD’s supremacy on energy standards.
Tax policy is also important. It recently passed tax bill including a $25,000 per person deduction for tip income. This allows lower-income restaurant workers to report their income without paying federal income taxes. This can help them qualify for a mortgage loan to purchase a newly built home or purchase a home they are currently renting.
More can be done in the area of tax policy. The tax bill expanded opportunity zones, which create incentives for long-term investments to revitalize distressed communities. Affordable housing for workers is critical for companies investing in or expanding in opportunity zones.
Thus, Congress should expand the source of eligible investment funds to include a certain amount of ordinary income when such funds are invested in affordable manufactured housing communities located in opportunity zones.
Loan programs from federal mortgage agencies (FHA, RHS, VA, Fannie Mae and Freddie Mac) can also help. These programs finance 65% of all new mortgages (Page 8, Urban Institute Mortgage Chartbook). But together, they didn’t finance a single piece of personal property last year. In fact, this disconnect stems from the fact that personally owned homes make up about 70% of the manufactured housing market.
These agencies can also assist with loans to manufactured housing communities with affordable rental units. These communities can be more difficult to finance, due to the complexity of perfecting a lien on each rental unit. UMH commends Fannie Mae for being an innovator in financing these loans – and we hope other federal agency mortgage programs will follow suit.
Local communities across the country can also help with affordable manufactured housing. Unfortunately, too often communities adopt discriminatory zoning laws that unfairly exclude manufactured housing. This must change.
For example, UMH has experienced this in Coxsackie, New York, where village officials repeatedly rejected well-planned designs for a community and ultimately resorted to rewriting the village’s zoning code to prevent UMH from building a manufactured housing community on land it purchased for that purpose.
The solutions to meeting our nation’s affordable housing needs lie in delivering on the promise of manufactured housing. Let’s make this a priority.
Sam Landy is the president and CEO of UMH Properties.
This column does not necessarily reflect the opinion of HousingWire’s editorial staff and its owners. To contact the editor responsible for this piece: [email protected].
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