Housing imbalances at UC Berkeley show how good intentioned policies and legislative action can lead to unintended consequences that can take years...
White House Push for Increased Housing Supply and Implications for Manufactured Housing
Biden Administration puts forth a series of strategic measures aimed at increasing the supply of housing units across the country.
White House Aims to Boost Housing Supply
In late May, the Biden Administration put forth a series of measures aimed at increasing the supply of housing units across the country along with strategies to make housing more affordable for those in lower income brackets. One of these measures centers around support for the production and availability of factory-built manufactured housing. 1Manufactured housing as an industry has benefited immensely in recent decades from technological and production improvements which has led to a finished product which is of higher quality and materially more similar to traditional “stick built” housing than was historically the case.
Manufactured Housing Loans
One area where advancements have not been made is in the end user financing of the homes. Purchasers of new manufactured homes must rely on personal property financing, or chattel lending rather than conventional mortgage financing...with chattel lending characterized by substantially higher interest rates and shorter term structures. Under the new proposed plan, Freddie Mac will complete a feasibility assessment for the requirements and processes necessary to support loan purchases of personal property manufactured housing loans. If regulatory approval is obtained, Freddie Mac will purchase these loans and assist with product design and support future loan purchase capability. Also, Fannie Mae and Freddie Mac have revised purchase targets for manufactured housing loans, which should provide greater liquidity for manufactured housing and increase delivery of the product. 2
UMH Properties To Provide Attractive Financing
The availability of attractively priced financing for manufactured homes has been an industry challenge for many years and the widespread bundling and securitization of manufactured housing loans would go a long way towards bringing down the cost of ownership and making ownership accessible to a wider number of purchasers. A publicly traded REIT dedicated to manufactured housing, UMH Properties (UMH), recently announced that they would provide financing to residents within their communities for new homes at an interest rate of 4.99%, which is very close to where traditional mortgage rates are today. This attractive level of financing compares to chattel lending rates which are typically 400-700bps above traditional mortgage rates. 3 UMH is comfortable in underwriting borrowers for factory-built homes which meet the fit and finish of their communities. This program allows the company to generate a positive spread on loans over their own cost of capital while also passing the savings onto their residents.
HUD Plans To Assist With Challenges
The department of Housing and Urban Development (HUD) is planning to make it easier to finance new units and help manufacturers update their designs to meet evolving consumer demands, including increasing the usability of the Federal Housing Administration (FHA) Title I loan program through Ginnie Mae’s platform. 4
HUD To Implement Incentives
The plan also includes incentives to state and local governments for land use and zoning reform, rewarding jurisdictions that put land-use policies in place which promote density and rural revitalization. These incentives include a grant program which would reward communities that eliminate barriers to affordable housing and provide for permitting of manufactured housing communities. While it is difficult to exact local level change via Federal level programs, any attempt to improve on the current hodgepodge of local practices is welcome. The Manufactured Housing Institute (MHI) has been warning of the growing trends of municipalities to use zoning and other land use regulations to restrict or eliminate manufactured housing in their jurisdictions. Methods for restricting or excluding manufactured housing altogether have included zoning bans, lot size requirements and density restrictions. 5
The Strength Of Manufactured Housing
Manufactured housing has been one of the most resilient and best performing property sectors of all publicly traded REIT categories, achieving an unprecedented 18.9% compound annual total return for the 10-year period ended May 31, 2022. 6
BPS: Basis points - A customary unit of measure for interest rates and other percentages in finance. One basis point is equal to 1/100th of 1%. BPS is used to indicate the percentage change in a financial instrument.
1] Housing Supply Action Plan: White House
 Housing Supply Action Plan: White House
 UMH Properties: 1Q22 Earnings Webcast
 White House: Housing Supply Action Plan
 Manufactured Housing Institute – Blog Post: Unfair Zoning Laws Can Restrict Manufactured Home Placement
 NAREIT; May 31, 2022
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