In progressive-leaning neighborhoods across the country, yard signs like the one signal support for marginalized groups. But these same residents often protest and work to prevent efforts to build mixed-income affordable housing in their neighborhoods. Mobile homes, or technically manufactured homes, are among the most maligned forms of affordable housing. They are also the most economically accessible housing for many Americans.

Manufactured homes come in many forms. Entry-level models are broadly affordable for low and moderate-income Americans. Larger and higher-end models can meet the aesthetic and functional expectations in many communities across the country.

The Niskanen Center espouses more housing of all types, including manufactured homes. Recently, the Department of Housing and Urban Development (HUD) invited the public to comment on revisions to the Manufactured Home Construction and Safety Standards, also called the “HUD Code,” which regulates manufactured homes. In response, we offered our suggestions on how HUD can make it easier to build safer, more affordable, and higher quality manufactured homes — at least for the limited spaces where it is legal to place them. 

The HUD Code works best when it reduces the cost of entry-level manufactured homes and allows improved quality for high-end models. HUD proposed streamlining the code to provide standard approval, rather than “alternative construction” approval, of modern construction methods that allow manufactured homes to provide the aesthetics and build quality of site-built homes. The code changes will allow manufacturers to offer higher quality homes and install them faster. The attractive new designs will make it harder for communities to discriminate based on exterior aesthetics. 

Unfortunately, some critical improvements are still outside HUD’s control. For example, existing federal legislation requires manufactured homes to retain the trailer chassis that sits beneath every manufactured home, even after the house is permanently installed onto the land and hooked up to utilities. That adds unnecessary cost to manufactured homes for no meaningful improvement in durability. 

The proposed rule allows some multifamily manufactured housing, a critical step in the right direction of allowing manufactured housing to compete in regions with higher land costs. However, it is still being determined how the agency arrived at a maximum of three units.

We applaud HUD’s intentions to improve access to and quality of manufactured housing and encourage the agency to continue improving the code, especially by clarifying regulations around multifamily manufactured housing. 

September 19, 2022
Regulations Division
Office of General Counsel
Department of Housing and Urban Development 
451 7th Street, SW, Room 10276
Washington, D.C. 20410-0500 

Re: Proposed Rule Changes to 24 CFR part 3280, 3282, 3285, and 3286.

Dear Colleagues,

These comments are submitted on behalf of the Niskanen Center. The Niskanen Center is a nonpartisan 501(c)(3) think tank that works to promote an open society.

We applaud HUD for eliminating the previous ban on multifamily manufactured homes and for incorporating, through standard approval, construction practices long-proven in HUD’s “Alternative Construction” permitting. Access to abundant housing is a key policy goal that unlocks secondary policy benefits, including improved economic mobility and integration. HUD has several tools it can use to achieve these ends. These tools include HUD’s manufactured housing code, to which we address this comment today, in addition to HUD discretionary grant criteria and HUD’s Affirmatively Furthering Fair Housing rule (AFFH). 

HUD’s quality standard rulemaking–and the industry broadly–should seek to extend the differentiated product segmentation reach of manufactured housing across the widest possible range of incomes. HUD regulations should be flexible enough to accommodate production models serving the most price-sensitive consumers and accommodate models delivering new features, aesthetics, and other innovations that extend the appeal of manufactured homes “up-market”.

We commend HUD for facilitating already-proven construction methods that enhance the quality and durability of manufactured housing. Streamlined permitting of the construction methods behind innovative products like the CrossMod and other future competitors is essential to increasing competition and reducing non-land construction costs for the middle class. This streamlined permitting includes HUD’s proposal for standard “non-Alternative Construction” permitting for: Modern ridge roof designs, updated material reference standards, accessibility improvements for showers, modern energy-efficient appliances, and other process efficiencies.

Despite these benefits, the proposed rule changes alone will not remove every regulatory barrier to manufactured homes in the marketplace. State and local regulatory discrimination against HUD code housing remains a daunting barrier to this affordable housing option. The following sections detail our suggestions for rule changes and actions to maximize their impact.

Necessary rule improvements or clarifications:

We urge HUD to clarify that the proposed voluntary NFPA sprinkler standard shall, in the spirit of the Manufactured Housing Improvement Act, “broadly and liberally” preempt any design requirements of any state or local sprinkler mandates. HUD’s adoption of a voluntary standard would allow one national standard sprinkler design to meet state and local sprinkler requirements where such requirements already exist. Such a clarification would allow jurisdictions that currently require sprinklers to do so only by requiring implementation of HUD’s otherwise-voluntary standard. This would allow a local sprinkler requirement option without also introducing fragmented, jurisdiction-by-jurisdiction sprinkler design requirements that would threaten the economies of scale and certainty for manufacturers and consumers that the unified national HUD code has long provided.

We also urge HUD to raise or eliminate the 3-unit multifamily cap. The market demand for a multifamily product that has not yet been legal is uncertain, so it is difficult to discern in advance what other multifamily forms might otherwise be built absent the unit cap. Still, any unit cap must have a valid policy basis. Without such a basis, HUD should lift the cap and let manufacturers and consumers, acting under already-onerous local restrictions on multifamily housing, shape the market.

As a general consideration, HUD should both accommodate the entry level of the market and permit new, high-end construction methods. When assessing the costs and benefits of minimum quality and safety standards that raise the legal quality floor of HUD code construction, we urge HUD to consider that the housing alternatives for the marginal consumer priced out of an entry-level HUD code home are not new homes built to modern codes. The best alternatives to new manufactured homes are “filtered” and aging units built to much older codes; worse alternatives, including vehicular homelessness, are possible.

Quality rules that increase up-front purchase prices, but produce later savings to ultimately reduce the total cost of ownership, are appropriate. But the lifecycle cost analyses justifying those rule changes should include, in their sensitivity analysis, a scenario with a discount rate equal to an index average HUD code home chattel loan rate. Chattel loan rates can exceed OMB’s standard 3 percent and 7 percent real discount rates for cost-benefit analysis. Consumers must finance higher up-front costs that deliver future benefits with the current financing options. Actual financing costs must be considered in the lifecycle cost analysis to guarantee real, all-in consumer savings are achieved.

Further non-rule changes for improvements to the regulatory treatment of manufactured housing:

There are many related actions HUD could take to improve the effectiveness of the proposed rule changes beyond this particular rule under consideration. Here are some details of how HUD’s AFFH rulemaking and Intergovernmental Relations outreach could increase the efficacy of the proposed rule.

HUD experts in manufactured housing should participate in the future development of HUD’s Affirmatively Furthering Fair Housing rulemaking to ensure that AFFH standards support increased access to HUD code homes. Bans on HUD code homes in residential zones are among the most reliable “red flags” for identifying a jurisdiction’s intent to segregate residents by income without a valid public health/safety/welfare justification. Various other exclusionary zoning and building requirements typically accompany such bans on HUD code homes, including: multifamily housing bans, high minimum lot sizes on sewered land, and strict floor area and building envelope geometry rules that exclude affordable housing typologies from all construction methods. Discriminatory regulations targeting HUD homes also hone in on unique characteristics of HUD code homes, such as roof pitch and the presence of a steel chassis.

HUD’s Intergovernmental Relations staff should coordinate with HUD’s manufactured housing staff experts to promote state-level reforms allowing easy conversion of HUD code homes from personal chattel property into real property. Many states allow permanently affixed HUD code homes to transfer their titles from the state’s mobile vehicle regulator into a real property title with the same legal status as a site-built home. If every state adopted this equal treatment of HUD code homes, all other state, local, federal, and Government-Sponsored Enterprise mortgages and policy support for site-built real property improvements would apply, greatly expanding access to this inherently affordable housing type.

HUD’s Intergovernmental Relations staff should coordinate with HUD’s manufactured housing experts to inform Congress of the remaining barriers to the success of manufactured housing that cannot be cleared by administrative rulemaking and require legislative relief. This should include the legislative barrier requiring that the costly steel chassis for HUD code homes cannot be removed or recycled even for homes that will be permanently affixed to the owner’s land.

More generally, HUD should update grant scoring and prioritization across the board to reward jurisdictions that proactively permit multifamily housing of all construction methods–including site-built, modular, manufactured, and panelized–to incentivize jurisdictions to make reforms that extend the intent and impact of the proposed rule. Without further state and local reform, HUD’s proposed legalization of multifamily manufactured homes will still face strict municipal bans on multifamily housing that persist on a supermajority of residentially zoned land in the United States.

Respectfully Submitted,

Alex Armlovich, Senior Housing Policy Analyst
Andrew Justus, Housing Policy Analyst
Social Policy Team
Niskanen Center
Washington, D.C.

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