Los Angeles, California – Economists have identified a potential solution to the affordable housing shortage in the U.S. A simple amendment to a federal law dating back to 1974 could unlock a hidden source of affordable homes, according to experts from UCLA and the University of Minnesota.
Specifically, the proposal involves removing a requirement from the National Manufactured Housing Construction and Safety Standards Act. This change would eliminate the stipulation that manufactured homes must be “built on a permanent chassis,” making them more attractive, cost-effective, and safer for consumers.
Prior to the enactment of the 1974 law, a significant portion of single-family homes in the U.S. were manufactured. These homes were built entirely in factories and then transported to customers on wheeled chassis. However, the legislation mandated that the chassis remain attached, leading to a decline in demand as the homes became less desirable to consumers.
The economists behind the proposal argue that by allowing manufactured homes to be fixed to permanent foundations, they would be safer during severe weather conditions like tornados. Currently, despite being significantly cheaper per square foot than traditional homes, manufactured homes only account for 9% of new single-family homes in the market.
In addition to enhanced safety, the amendment would make financing a manufactured home more accessible. As these homes can be relocated, they are often financed similarly to cars, with higher interest rates. The potential savings for consumers could be substantial, with an estimated $175,000 saved on the purchase of an average-sized new home.
Legislation has already been introduced to eliminate the permanent chassis requirement from the 1974 law. Advocates believe that passing this bill could open up homeownership opportunities for millions of Americans, addressing the ongoing affordable housing crisis.
Meanwhile, the housing market continues to grapple with low inventory levels. According to reports, there are currently 36% fewer homes for sale than before the pandemic. This shortage, coupled with rising mortgage rates, has created a situation where many homeowners are reluctant to sell their properties and trade up to more expensive homes.
High mortgage rates have also slowed down the construction of new homes, further exacerbating the supply shortage in the housing market. While existing home inventory remains tight, builders are facing challenges in meeting the growing demand for housing.