States Take Crucial Steps to Expand Supply of Lower-Cost Single-Family Homes

The urgency to build more homes grows as the nation confronts a widespread housing shortage, estimated at 4 million to 7 million homes. To combat this problem, policymakers are embracing manufactured housing—homes built in a factory according to a federal standard—as a fast and efficient solution for communities that need new single-family homes. During the past five years, nine states have enacted zoning reforms to facilitate use of manufactured homes, which typically cost 45% less per square foot than traditional, site-built homes, as a housing option in more neighborhoods.

The impact and effectiveness of these new laws will need to be evaluated over time, but early indications from interviews with manufactured home developers, manufacturers, and other experts, as well as recent case studies and examples across states, show the potential of these policies to help bring more manufactured homes to market.

Build Communities Can Manufactured Homes Help Solve the Nation’s Housing Shortage?

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Local zoning barriers often rule out manufactured housing as a viable option for prospective homeowners, despite its affordability and its quality, which is now on par with site-built housing. Zoning laws and other factors—such as limited access to affordable loans with interest rates and consumer protections similar to those of mortgages—have contributed to persistently low manufactured home shipments in the past two decades. Currently, builders deliver about 100,000 manufactured homes per year,  approximately a quarter of the industry’s 1998 production level.

Manufactured homes: Safety and affordability

Modern manufactured houses are the only type of homes in the U.S. that must meet a single national standard: the Manufactured Home Construction and Safety Standards, also known as the Housing and Urban Development (HUD) code. In effect since 1976, the HUD code sets standards for construction and design, including fire safety, wind resistance, and durability as well as energy efficiency—and in 1994, it was upgraded to a higher level. The HUD federal standard, combined with the efficiencies gained from building the homes on an assembly line in a factory, results in significant savings for the homebuyer. In 2020, a new manufactured home installed on a foundation costs 35% to 73% as much as a similar site-built home. A buyer saved about $53,000 on the larger, highest-end manufactured home and more than $100,000 on a smaller, more modest model.

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In fact, in many places, especially rural areas and depopulated cities, a manufactured home is the only feasible way to build new single-family housing. Construction costs for site-built homes can sometimes exceed the home’s value, generating no profit for builders and developers and leaving them with little incentive to invest. Some rural areas also lack available workers to build new homes. In addition, if zoning laws prohibit manufactured homes, vacant lots remain empty and mortgage-qualified customers have few, if any, quality homes to buy.

Local zoning barriers to manufactured housing

Zoning policies do not reflect the quality of modern manufactured homes and often prevent communities from using them. These policies include:

• Explicit rules that limit locations of manufactured homes in certain neighborhoods.
• Design standards (e.g., roof pitch, cladding materials, foundation types) that apply only to manufactured homes and make it difficult or impossible to put manufactured homes in certain neighborhoods.
• Minimum lot size and street-setback requirements that erode the cost savings of using manufactured homes because land costs are high.

These policies limit manufactured homes as a housing option for qualified borrowers looking for a “starter” home, perpetuate affordability gaps, and bar people from attainable homeownership. Though manufactured homes are frequently allowed in rural areas, zoning restrictions in suburban and more metropolitan areas often allow these homes only in land-lease communities or “mobile home parks,” which are more likely to be located in areas prone to natural disasters or are cut off from community services such as municipal water and sewer. Yet these homes could be used as a lower-cost substitute for site-built, single-family homes in urban and suburban residential neighborhoods. Changing this type of zoning code could provide an important opportunity to 3.2 million renters across the country who can’t currently afford site-built homes. A new manufactured home, if available, would fit their budget.

When manufactured homes are allowed in neighborhoods and offered as real estate like site-built homes, the buyer can qualify for a mortgage, which typically has more affordable monthly payments compared with other forms of financing, such as loans for just the home. More importantly, the value of manufactured homes owned with land appreciates similarly to that of site-built homes.  

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Local stakeholders and policymakers are working together to expand housing supply with manufactured homes in an increasing number of communities. For example, developers are building new neighborhoods of manufactured homes in Hagerstown, Maryland, and North Knoxville, Tennessee. In California, manufactured homes can now be used as preapproved accessory dwelling units (ADUs), which streamlines both construction of the home and securing of the permits. In Detroit, a community land trust worked with partners to install new manufactured homes on previously vacant lots. In New York, the state Housing Trust Fund Corp.  is in the process of installing high-end manufactured homes on formerly vacant lots in neighborhoods in the cities of Syracuse and Schenectady, and the town of Newcomb. Many builders have found that by using manufactured homes, they can provide more single-family homes in places that need affordable options. But first, zoning regulations must allow them.

State-level zoning reforms

Many states have also tried to reduce zoning barriers to manufactured homes, putting them on an equal playing field with other single-family homes in residential zones. These reforms limit the authority of municipalities to impose unreasonable design and zoning requirements. (See Table 1).

For example, the Kentucky Legislature just passed a bill that prohibits local governments from adopting or enforcing zoning regulations that exclude or discriminate against qualified manufactured homes. This law specifies a list of compatibility standards that localities can adopt, such as the type and quality of exterior finishing materials, and that would not add too much extra cost for manufactured homes. In Maryland, the state now permits a manufactured or modular home in a zone that allows single-family residential use as long as the home is new and is or will be treated as real estate, like any other site-built homes. Therefore, Maryland manufactured home buyers can access mortgages that have lower monthly payments than other loans.

As more states remove regulatory barriers to factory-built housing, manufactured homes will help communities unlock a solution to their housing shortage. Additional lower-cost single-family homes will improve affordability and offer options for workers, first-time homebuyers, and older homebuyers who would like to move into a smaller house.

Rachel Siegel is a senior officer and Linlin Liang is a principal associate with The Pew Charitable Trusts’ housing policy initiative.