Housing market crisis: removing this phrase from the 1974 law would boost affordable housing

The U.S. housing market crisis has been marked by tight inventories and high prices, but two economists pointed to a source of affordable housing that could be unlocked by amending a 1974 federal law.

More precisely, removing five words from the National Manufactured Housing Construction and Safety Standards Act would increase the demand for and availability of manufactured housing, according to Lee Ohanian and James Schmitz, economists at UCLA and the University of Minnesota, respectively.

In an op-ed published Tuesday in the Washington Post, they said amending the law to eliminate the requirement that manufactured homes must be “built on a permanent chassis” would make them more attractive to consumers, save them money and be safer. , providing a “first step in bringing back this once-popular housing alternative.”

Just before that law was passed, 1 in 3 single-family homes produced in the U.S. were manufactured, meaning they were built entirely in a factory and delivered to customers on a wheeled chassis. They were so popular, economists said, that in 14 states in the early 1970s, at least half of the homes were manufactured.

After receiving the manufactured home, buyers typically discarded the chassis and attached their new home to a permanent foundation. But the 1974 law meant the chassis had to stay in the house, making them less aesthetically appealing to consumers while the stigma against living in a “mobile home” in a “trailer park” grew, Ohanian and Schmitz explained.

And not being able to secure the manufactured homes to a permanent foundation made them less safe in severe weather conditions such as tornadoes, they added.

“These factors led to significantly lower demand (and production levels) for manufactured housing, and reduced sales led to higher prices,” the economists said, noting that only 9% of new single-family homes currently They are prefabricated homes despite being 52%. cheaper per square foot than a traditionally built home.

Eliminating the requirement for a permanent chassis would also make it easier to finance a manufactured home, they said. Because they can be moved, private mortgages are generally not available for manufactured homes and are instead often financed like cars, which have higher interest rates.

Ohanian and Schmitz estimated that consumers would save about $175,000 with a manufactured home if they bought one that was the average size of a new home (2,559 square feet), and described it as “nothing short of a turning point in housing affordability.” living place”.

Rep. John Rose (R-Tenn.) introduced legislation to eliminate the permanent chassis requirement from the 1974 law, economists noted.

“Congress should pass that bill,” they said. “It could transform the dream of homeownership for millions of Americans into a reality.”

Meanwhile, the real estate market continues to suffer from a shortage of supply. Realtor.com has estimated that there are 36% fewer homes for sale now than before the pandemic. This is because the recent rise in mortgage rates created a lock-in effect where homeowners with low rates are unwilling to sell their current home and buy another one at a much higher rate.

High rates have also slowed new home construction, which has been a consistent source of new home supply while existing housing inventory remains tight.

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