Factory-built homes could help solve housing crisis
EUGENE, Ore. — As a boy in the late 1950s, Terry McDonald watched as workers built an 80,000 square-foot manufacturing plant in an industrial neighborhood on the west side of Eugene. Long after childhood, McDonald felt an affinity for the factory, where American Steel once fabricated heavy-duty logging equipment until the timber industry waned in Oregon.
Now, as the executive director of the local Society of St. Vincent de Paul, McDonald has made a career of turning other people's castoff goods into cash to support low-income housing and the charity's other anti-poverty initiatives. He easily imagined a creative reuse for the midcentury factory, a space flooded with natural light from paned-glass windows high above the manufacturing floor.
"I looked at this building and said: 'Someday, I would like to own that building,'" McDonald said. "Old industrial buildings are just kind of fun."
Over the next year, McDonald and his team will transform the massive space into a nonprofit manufactured home factory capable of producing as many as 80 homes a month. Known as the HOPE Community Corporation, it's a unique nonprofit venture, supported by $15 million in housing money from the Oregon legislature. Once the group is up and running in 2023, HOPE could employ more than 100 people to build factory-built homes for low-income families, at a time when many states face a critical housing shortage.
Nationwide, there's an estimated shortage of about 3.8 million housing units. The shortfall has many causes, including growing investor ownership of homes, but it stems largely from a construction slowdown that began in 2008 during the Great Recession and never regained the momentum to meet present-day need.
There are repercussions not only for homelessness but for nearly everyone looking for a place to live — buyers can't afford ever-increasing prices, and renters face escalating rents. Apartments are scarce, too, especially those for lower-income renters, according to a recent study by the National Multifamily Housing Council and the National Apartment Association. Three states alone, California, Florida and Texas, will require 1.5 million new apartments by 2035, the study found. As supply chain bottlenecks persist and interest rates and borrowing costs rise, the housing shortage could worsen without intervention.
Because manufactured homes are built on an assembly line, they're less expensive and faster to construct. They're seen as essential for providing new housing, especially for lower-income buyers who may have been priced out of site-built homes or expensive rental markets. Many housing experts see factory-built homes as an effective way of meeting current housing needs, especially in rural areas.
"The importance of manufactured housing for addressing our current affordability crisis is just immense, because manufactured housing is half the cost to build of traditional, site-built construction," said Esther Sullivan, a sociology professor at the University of Colorado Denver and the author of "Manufactured Insecurity," a book that examines challenges faced by residents of American mobile home parks. "I'm not trying to say it's perfect … but there's just a lot of opportunity to capitalize on the cost savings that comes from factory production."
The average factory-built home costs $106,000 to build, compared with $351,000 for site-built homes, said Lesli Gooch, chief executive officer of the Manufactured Housing Institute, a trade organization that in June exhibited some of the industry's newer home models on the National Mall in Washington, D.C.
The techniques used in factory-built homes are the difference between $72 and $140 per square foot in construction costs, Gooch said, though some of those estimates, as with all construction, may have increased recently because of inflation and supply chain issues.
Cheaper doesn't mean it's shoddier, Gooch said. Factory-built homes are constructed on an assembly line with the precision and quality that comes from a controlled building environment, she said. They also must meet the national construction and safety standards of the U.S. Department of Housing and Urban Development, which has building inspectors on site in factories.
"Sometimes people have preconceived notions about what a manufactured home is," she said. "That notion is not what's being produced today."
Manufactured homes are factory-built structures built after 1976 to HUD codes. Before that, they were called mobile homes or trailers, terms no longer a part of federal law or common usage. Manufactured homes are delivered in one piece, unlike modular housing, which also is built mostly in a factory, but assembled from multiple components on site and subject to local building codes.
The Biden administration's Housing Supply Action Plan released in May specifically supports the production of new manufactured housing and new ways of financing such homes. States such as Oregon have begun to respond, with zoning rules that allow more types of mobile homes, in more locations. So have many cities, Gooch said, among them some in Tennessee that have begun allowing so-called CrossMod homes that look more like site-built homes, but are made in factories.
Yet barriers to owning a manufactured home remain nationwide. Many low-income buyers don't have access to traditional mortgages to purchase new homes, and instead rely on personal property loans. Such loans can have higher interest rates, as well as fewer of the protections of federally backed mortgages, including forbearance when owners fail to make payments.
Manufactured homes also can have complicated ownership structure. In mobile home parks, people may rent the lot, but own their own home; outside of parks, they are more likely to own both the home and the land it sits on.
As important as it is to build new homes, it's also a priority to maintain existing manufactured housing stock, said Heather Way, a law professor at the University of Texas School of Law and an expert in preventing displacement. It can be done with zoning, she said.
In Austin, Texas, a city facing rapid gentrification in some neighborhoods, the city rezoned mobile home parks in a way that prohibits them from being torn down and converted to other uses. Way also worked on statewide legislation passed in 2019 that made it easier for people who inherit manufactured homes with murky titles to get the same sort of property tax exemptions as those who inherit more traditionally built homes.
Legislation passed in Colorado this year offers more protections to tenants who own manufactured homes in mobile home parks, Sullivan said. If owners of mobile home parks put them up for sale, tenants have 120 days to purchase the parks. The law also gives local governments more ability to step in and buy the parks, too. And if mobile home park owners convert their parks to other uses, they must compensate people who rent lots the cost of moving their homes. It costs on average $7,000 to move a manufactured home to a new site, and most stay once they're in place.
Some simple approaches can help communities maintain existing manufactured housing, or add to it, Sullivan said. Cities can add language to their comprehensive growth plans that acknowledges the importance of manufactured housing in their communities. States and housing nonprofits also can support efforts on the part of tenants to organize as resident-owned communities, by providing low-interest loans to buy the land and legal and financial support.
That's what's happening in the fire-stricken southern Oregon community of Talent. There, the nonprofit CASA of Oregon is helping future residents acquire and manage a mobile home park where all but 10 of the 98homes were destroyed by fire in 2020. If the timing works out, CASA hopes to supply the park with homes purchased from the HOPE factory run by McDonald.
After fires destroyed thousands of manufactured homes in southern Oregon in 2020, regional HUD officials "heard loud and clear from community members" about their housing needs and hopes for the future, said Margaret Salazar, the federal agency's Northwest regional administrator. People crave opportunities to own their own homes, she said. Many of the people who lost homes to the fires in 2020 are Latino.
"That is a huge part of our strategic plan is expanding homeownership opportunities that are sustainable, and that are really rooted in our work on racial equity as well, and on addressing racial disparities in home ownership," Salazar said. "Low-income folks, working people are really looking for creative opportunities to be able to become homeowners. And so, I see this as another opportunity."
As homes roll out of the HOPE factory, McDonald said he's not yet certain how they will be priced. St. Vincent de Paul already owns eight Oregon mobile home parks for residents with low incomes, which was part of the impetus for starting a factory, McDonald said. He couldn't find enough homes to replace some of the aging stock at their existing parks.
Their goal is to offer affordable homes, built sustainably and with fire resilient materials. The homes also will come with energy efficient appliances and features that keep utility costs low for their future owners. McDonald already is working with the Federal Home Loan Bank of Des Moines to design loans to help people buy the homes the Eugene factory will produce.
"So, the goal on this is to try and basically hit a home run all at one time," he said. "This is a model where we can actually succeed in helping address one slice of the issue, but it's an important slice."
Stateline is a nonpartisan, nonprofit news service of the Pew Charitable Trusts that provides daily reporting and analysis on trends in state policy.