No. 11 – May 11, 2022

 

 

Have you ever heard about Sears Kit Homes? Basically, if you subscribed to the Sears Catalog in the early 1900s (which was a really big way for folks to shop for a really long time), you could buy all of the supplies and plans (“everything from precut lumber and nails to the kitchen sink”) you needed to build a pre-designed home. The home would then be assembled on-site. 

 

Sears’ kit homes started at $659 which is about $1,898 today, adjusting for inflation. That doesn’t include the cost of land or setting up utilities, but given the high cost of materials today, it’s a bargain. For a frame of reference, the cost for materials today typically rings in at about $50/square foot – for a $2,000 square foot home, that’s $100k for materials alone. (Don’t get me wrong, that’s a big house lol.)

 

Sears homes were relatively inexpensive and apparently, anyone with basic skills could assemble one in 90 days. The company sold over 400 different home styles and thousands of them remain standing today, including one in DC that sold for $1.5M a couple of years ago. 

 

In essence, they took an assembly-line production model and applied it to home construction. The kit homes are a historical example of prefabricated or manufactured homes – the topic we’re digging into today. 

 

 

Manufactured homes are prefabricated in a factory and then assembled on-site LIKE LEGOS. My grandparents lived in a modular home for a bit – it was parked in a mobile home community for seniors and it shipped in two pieces on the back of a flatbed truck. I think folks who are somewhat familiar with modular homes tend to think “trailer park” or temporary housing (this has been part of the strategy for housing Ukrainian refugees in Western Ukraine). 

 

They are generally much cheaper to construct than site-built homes. According to the Manufactured Housing Institute, in 2019 the average price per square foot for a manufactured home was $57, compared to $119 per square foot for a site-built home. That’s an immense savings. 

 

 

But manufactured homes don’t have to look cheap, nor do they only need to take shape exclusively in land-lease communities (aka trailer parks). DC’s first multifamily property built with manufactured housing practices began to welcome residents last year! Modo DC is directly across the street from the Georgia Avenue metro station and is definitely luxury. According to the Washington Post, “44 custom-designed modular boxes were shipped from Pennsylvania and installed with a crane to create 16 of the 17 apartments in the building.” Pretty wild, right?!

 

Modo’s least expensive unit is a 3 bed/2 bath apartment starting at $3,750 per month, with furnished options available. I usually don’t love ultra-modern new buildings, but I think this one actually looks pretty good. 

 

I first started thinking about modular construction’s power while listening to an episode of KQED’s podcast, SOLD OUT: Rethinking Housing in America. The story covers FactoryOS, a prefabrication factory in Vallejo, CA. The factory is only about 20 minutes from where I grew up, and it used to build submarines for the military. Anyway, this episode is just shy of 20 minutes long – 10/10 recommend listening to it!

 

The industry is having a bit of a moment, with new companies popping up all over the place. From an apartment building in Seattle to a planned modular homes factory in Grand Junction, CO, even big-name companies like SHoP Architects are throwing their hats in the ring. 

 

If you’re curious what these factories actually look like, there’s some gorgeous imagery in this New York Times feature on FactoryOS. 

 

Because there usually is a catch. First, for buyers looking to get a mortgage for a manufactured home, there are quite a few barriers. In fact, in a lot of cases, they end up financing their home purchase through a chattel loan because their house is considered personal property instead of real property. Chattel loans tend to have less favorable rates than traditional mortgages, and because refinancing is rare for chattel loans, many borrowers weren’t able to reap those low-interest pandemic rates via a refinance.

 

According to the Urban Institute: 

 

“Manufactured homes had substantially higher [mortgage] denial rates than one-to-four-unit homes across racial and ethnic groups, and denial rates were even higher for loans not secured by land. For Black borrowers, more than 75 percent of applications for manufactured homes were denied in 2020, even of those secured by land.”

 

Of new housing starts (the metric the real estate industry uses to measure when a new home build project gets underway), only about 9% are manufactured homes, according to the Manufactured Housing Institute. 

 

This type of housing can also be subject to strict zoning laws, particularly when we talk about accessory dwelling units (or ADUs – which is confusing because the same acronym is used to describe affordable dwelling units) assembled in the backyard of a single-family home. 

 

And (because our government is antiquated/broken) there are HUD restrictions that get in the way of largescale adoption of manufactured homes. Proposed legislation introduced in the Senate in 2019 would have required HUD to “issue guidelines for including manufactured housing in state and local governments’ Consolidated Plans, which outline their housing and community development priorities when applying for HUD funding.” The bill died (lol). 

 

This bill would have been significant in that HUD funding acts as a sort of carrot, particularly given the ABSOLUTE CHOKEHOLD that NIMBYs have on local government’s power to implement any sort of affordable housing policy. The federal government’s main lever over housing policy is funding since it delegates zoning powers to the states, who in turn delegate them to local jurisdictions, in many cases.

 

Hopefully, I didn’t lose y’all! Basically, manufactured housing has a lot of potential to do a lot of good in support of fixing our broken housing system. It is subject to a number of barriers, but we’ll see where the next few years take us. Once the semester is over (next week!!!!!!), I want to try to tour the Modo building and film it for y’all! 

Until next week,

🧡 Dominique