Raising the Floor, Raising the Roof
Raising Our Expectations for Manufactured Housing

For more information, contact:

Kevin Jewell, Polciy Associate
Kathy Mitchell, Research Manager
Rafael Ayuso, Media Director
Consumers Union Southwest Regional Office

May 2003

PDF Format

EXECUTIVE SUMMARY

Manufactured homes represent shelter and investment for millions of American families. Community development and low-income housing advocates need to understand the unique problems surrounding these homes, ranging from high pressure sales practices to inconsistent quality checks on installations, that can strip equity from the families who purchase them. These problems must be addressed before manufactured housing can be counted on to provide safe, durable, and asset-building housing to the public.
This report is intended as an introductory resource for non-profit developers, lenders, housing counselors, and advocates who wish to "raise the floor" of manufactured housing. In sidebars, we relate lessons learned from other groups who used manufactured homes in their developments or worked to improve the market for consumers in their area. We also direct readers to further resources about many of the topics addressed in this report.

General Summary

Promise: Manufactured homes are enticing. The modern factory environment promises to make housing an inexpensive commodity, create shelter quickly and efficiently, and give low income families amenities they fear they could not afford otherwise. The speed and reduced production cost of manufactured homes attract both developers looking to expand the stock of affordable housing in their community and consumers looking for the best deal for their home.

Problem Areas: We have identified the following problems which prevent manufactured housing from reaching its full potential.

High Pressure Sales: Sold off a lot like a car, high pressure commission driven sales can lead to inflated prices and hidden charges, meaning consumers can end up with a "bad deal."

Financing: The industry relies on the use of high-cost personal property loans which are often structured as to leave consumers with negative equity for years after purchase. This system also lacks checks, such as independent appraisals, which ensure transactions occur at a fair price.
Quality, Durability, Renewability: Manufacturers' drive to cut costs can also cut into quality of construction, as homes are often sold on floor plan and visual appeal rather then durablity and quality. Manufactured home designs and components can also be more difficult for consumers to remodel or repair at a later date.
Site Preparation and Installation: Poor site preparation, frequently the responsibility of an unprepared buyer, and improper installation can result in significant durability problems. Manufacturers have been slow to recognize responsibility for this vital construction step, but a home is only as solid as its foundation.
Warranty Service: Defects which appear after the purchase can reduce the value of the home if the consumer has problems getting service under the warranty.

Tenancy: Manufactured home owners who own their home but rent the land upon which it sits are often subject to increasing rents and unstable tenancy. High costs associated with moving the homes restrict homeowners' ability to avoide rent increases or address changes in the lease agreement.

Enforcement: If a problem arises after the purchase of a home, many manufactured home purchasers lack access to the courts because of binding arbitration agreements. Regulatory enforcement often fails to fill the gap.

Zoning: Historical stigma and visual aesthetics have caused many localities to limit manufactured home placement or development to certain areas of town.

Appreciation and equity building: While manufactured homes on owner owned land have similar average appreciation rates to site built homes, our research shows they are a riskier investment. Appreciation rates of manufactured homes show greater variance. Consumers and developers can make certain choices, such as owning land, to increase the appreciation of their units.

Recommendations:

Organizations can leverage their position to best address the problems facing manufactured home purchasers. Here are some general suggestions:

Developers: Non-profit developers can purchase manufactured homes from manufacturers, or even manufacture them. By bypassing or controlling the lending and sales practices common in the industry, developers can avoid many of the problems that plague individual consumers, while capturing the technological advantages of building a home in a factory.

Lenders: Community lenders can provide, for new and used manufactured homes, loan products which are structured to maximize equity building opportunities for consumers.

Counselors: Housing counselors can help consumers navigate the complex home purchasing maze by providing education and support that is relevant to families considering manufactured homes.

Advocates: Advocates can push for the legislative and regulatory reforms need to fix the manufactured housing industry and allow it to consistently provide safe, durable, and equity building housing to consumers.