Are Mobile Homes the Solution to America’s Housing Crisis?

High mortgage rates, lack of supply and elevated prices of homes have made the dream of owning a house for a lot of first-time buyers out of reach. But some experts suggest that one option that could help ameliorate the challenge of affordability in the housing market—manufactured homes, which cost $129,000 on average.

These homes, which are built and then placed on a lot, cost less to build, according to a recent study from researchers at Harvard University’s Joint Center for Housing Studies, which could also mean that they’d be cheaper to buy than traditional homes. The researchers point out that building a basic manufactured home could cost 35 percent less than a typical home.

“Although adding the cost of land to these homes reduces the magnitude of the cost savings, the advantage can remain substantial—particularly in areas where land costs are low,” the study said.

The average price of a manufactured home costs about $129,000 as of August 2023, according to the U.S. Census Bureau.

Mortgage rates hit their peak of 8 percent—the highest level they reached since the beginning of the century. The high cost of home loans has hurt the supply of homes as it led to a freezing of the used homes market, where sellers became reluctant to put their homes on the market out of concern that they would be forced to replace them with more expensive mortgages. This, in turn, helped push up prices.

The median sale price of a home costs more than $361,000, a 5.5 percent increase in a year in what is the biggest price jump since October 2022, according to Redfin. This makes monthly payments a new homeowner will have to pay up about $250 to nearly $2,600 a month for the four weeks ending December 2023, Redfin pointed out.

In the past, manufactured homes proved a useful alternative, according to the Harvard researchers.

“A 2001 analysis of the gains in ownership among low-income households during that period identified manufactured housing as a particularly important pathway into homeownership, accounting for more than a quarter of all low-income homebuyers in 1997,” they wrote.

They looked at monthly median costs of these homes, and found that a manufactured home would mean outlays of $660. Those who own the land where the homes are built would pay monthly payments of nearly $500 less than the $750 those who do not own the land their homes sit in.

One of the challenges in the scaling up of manufactured homes is that regulations have made it tough to build such homes near traditional neighborhoods.

“These zoning restrictions are motivated, in large part, by the negative perceptions of the quality of manufactured homes that lead jurisdictions to segregate and limit this form of housing,” the Harvard researchers point out.

Another challenge that exists is that financing for the building and owning of manufactured homes can be complex, compared to a traditional mortgage.

“To be eligible for mortgage financing, manufactured homes must be titled as real estate, which is a separate—and sometimes difficult—process from having the home sited,” according to the Harvard study. “The alternative is to finance these loans as personal property using home-only or ‘chattel’ loans, which have interest rates much higher than mortgage rates, reflecting the higher risk for lenders when land is not part of the loan collateral.”

The complexity of securing a mortgage can lead to higher interest rates for a home loan.

“These higher interest rates, combined with shorter loan terms, result in much higher monthly payments that can erode or even eliminate the cost advantage of producing these homes,” the Harvard study said.

Newsweek contacted Harvard’s Joint Center for Housing Studies for comment via email on Tuesday. We will update our story with any fresh responses they provide.

Update 2/6/24, 1:00 p.m. ET: This article was updated with a new headline and more background.

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