Real Estate

Why Aren’t We Building More Mobile Homes?

Manufactured housing could ease the affordability crisis.

A trailer park in Santa Monica, Calif.

Photographer: Gary Friedman/Los Angeles Times via Getty Imag

People in West Virginia accepted delivery of a little more than 1,000 mobile homes last year, according to census data. Over the same period, homebuilders obtained permits to build about 2,000 single-family homes. In other words, roughly 1 Permits aren’t a direct proxy for mobile home deliveries, but they offer the most convenient method of parsing new homes by state. For-sale homes are typically completed six months after permits are issued, according to the National Association of Home Builders. one in three homes added to the state’s housing stock last year was a mobile home.

Surprised? That probably depends on how much money you make, what part of the country you live in, and how old you are. The average sales price of a new mobile home was $67,800 in April, compared with an average sales price of $380,000 for a site-built home. Three-quarters of mobile home residents have household incomes of less than $40,000. Mobile homes, which actually aren’t very mobile, are most highly concentrated in the South. More than 500,000 of them are in California, the most in the country, but in recent years new mobile home sales have made up a larger share of the housing market in Southern states, as the chart above shows.    

Age matters because mobile home sales peaked in the mid-1990s, when the structures made up one in three new homes sold nationwide. 2 Nationwide data are available for new home sales, so that’s what we’re using here.  Those hefty sales volumes were largely a product of loose lending practices, said Doug Ryan, director of affordable home ownership at the Corporation for Enterprise Development, a Washington-based nonprofit group. The loans started going bad—driving one major lender, a unit of the insurer Conseco, into bankruptcy—flooding the market with foreclosed mobile homes and limiting demand for new product.

That’s probably not the whole story. Mobile home shipments averaged out at around 250,000 a year throughout the 1980s, before the bubble inflated. Other reasons for declining sales include easier access to mortgages for site-built homes, an emerging wariness of mobile home loans on Wall Street, and the stigma attached to the product, which has been cycling through verbiage from "trailer homes" to the more current "mobile" or "manufactured" housing. 

Why have mobile homes held on in some states? They tend to do well in rural areas, as well as in parts of the country where they have a longer track record, said Jenny Hodge, vice president of research at the Manufactured Home Institute, an industry trade group.

A better question may be whether the waning prominence of mobile homes is a good thing or a bad thing.

The mobile home industry has a controversial past, with a reputation for selling poor customers shoddy products and expensive loans. In many cases, mobile home owners buy the structure they live in but lease the land on which it lies. There’s a cottage industry devoted to teaching investors to buy mobile home parks, who juice their profits by cutting operating costs and raising rents, Ryan said. Despite their name, modern mobile homes aren’t easy (or cheap) to move, leaving owners with little room to negotiate with their landlords.

The flip side is that mobile homes are cheap at a time when the home ownership rate is at a record low and a dwindling inventory of starter homes is driving up prices for first-time buyers. While mobile homes often make the most sense in sparsely populated areas, there’s no reason they can’t be used to increase the stock of affordable housing in U.S. cities.

“You can put them anywhere you have the land,” Ryan said. “What you’re up against is the stigma. You’d have people coming to the planning meetings and saying that you’re killing their home value.”

Maybe it’s time for another rebrand. The homes vary in size and price, but they're generally smaller than the typical site-built home. Instead of "mobile" or "manufactured," why not borrow the name for another kind of often prefabricated abode: the tiny house.

Before it's here, it's on the Bloomberg Terminal.