Manufactured homes currently provide 8.4 million affordable, unsubsidized homes across the United States, with an additional 100,000 new units entering the housing market each year. Unlike the mobile homes of the past, today’s manufactured homes, built to HUD Code standards, undergo rigorous quality control and must pass independent inspections before they leave the factory.
These homes achieve their cost advantage over traditional site-built homes by being constructed in a factory setting, where a consistent workforce operates more efficiently compared to a job site with subcontractors frequently coming and going. According to the Harvard Joint Center for Housing Studies, excluding land costs, a manufactured home can be 27% to 65% less expensive than a comparable site-built home.
Since our last publication, two key reforms have moved forward: one legislative and the other administrative. The first is a legislative move by Senate Banking Committee Ranking Member Tim Scott (R-SC), who introduced the ROAD to Housing bill. The bill aims to eliminate the “steel chassis” mandate, a crucial aspect of HUD Code reform that cannot be fixed by rulemaking alone. The bill proposes a state-by-state voluntary opt-in for an off-chassis manufactured home option. By removing the permanent chassis requirement, the bill would reduce the costs of each HUD Code home by $5,000 to $10,000 and enable more flexible floorplans.
Second, HUD released a much-anticipated final rule updating its national building code for factory-built manufactured homes. The new rule permits up to four homes per structure, introduces new multi-story designs, and allows for the use of improved materials and layouts–overall reducing red tape for popular existing designs. These changes aim to make HUD code units more competitive in suburban and urban markets with higher land costs, marking the first significant shift since the HUD code was adopted.
Chassis reform on the ROAD to Housing
Earlier this month, Ranking Member Scott introduced the ROAD to Housing Act, which includes several housing policy reforms. A key provision of the bill is the removal of the permanent chassis (or frame) requirement for HUD Code manufactured homes. Since the presence of a permanent chassis is part of the definition Congress established for manufactured homes in 1974, only Congress–not HUD–can amend this definition.
By allowing off-chassis manufactured homes, the bill gives consumers access to more efficient designs that will enable more architectural floor plan flexibility. The architectural flexibility offered by off-chassis designs would allow manufactured homes to integrate more seamlessly into existing single-family neighborhoods, building upon the achievements of current “CrossMod” designs. These off-chassis models could also reduce costs by $5,000 to $10,000 per home, as the steel chassis could be reused for multiple units rather than being a fixed part of each one. Additionally, this change would make two-story manufactured homes more feasible, as it eliminates the need for a heavy trailer chassis between the first and second floors.
The ROAD to Housing Act creates a mechanism for states to update their manufactured home definitions to include off-chassis models. Industry leaders emphasize that this step is crucial because inconsistent definitions could disrupt personal property lending that finances 42% of manufactured home purchases.
HUD Code update a final rule
HUD’s recent update to the manufactured home building code makes several critical regulatory updates, aligning with Niskanen’s recommendation to increase the cap for multi-unit manufactured homes from three to four units. This update is significant for two reasons. First, allowing more than one unit per structure expands the use cases for efficient factory-built construction methods, helping to narrow the construction cost gap between single-family and small multifamily construction.
Second, by distributing land costs across more units, HUD code construction becomes viable in more places with higher land costs. Additionally, increasing the cap from three to four units enables a double-section manufactured structure to accommodate two units in each section, which can be combined to create four units on a single property. By setting the cap at an even number, HUD facilitates a natural division of units within a traditional two-section manufactured home layout.
HUD has also simplified several regulatory requirements. Special permission or “alternative construction” letters are no longer necessary for multi-unit buildings or for common design practices. Under the previous rules, many design features that have become industry standards required special permission from HUD through a process called an alternate construction letter. These features include ridge roof designs, updated material reference standards, accessibility improvements for showers, modern energy-efficient appliances, and other process efficiencies.
The agency has also issued a blanket alternative construction letter covering practices included in the final rule, making them effective immediately rather than waiting the typical six-month period following their publication in the Federal Register on September 16, 2024. This is expected to save manufacturers hundreds of thousands of dollars annually in reduced administrative and compliance costs, with total net benefits from all rule changes estimated at up to $334 million annually.
Conclusion
In a time when new homes are in short supply and the pipeline for new construction is limited, reforms that enable more efficient building methods offer significant potential. If consumers are provided with the option to build homes faster and with less material waste, it should become an appealing choice. At the congressional level, chassis reform aims to enhance the efficiencies of factory-built housing by removing the permanent chassis requirement for HUD Code homes. Meanwhile, recent administrative changes modernize the building code, expanding the adaptability of manufactured homes to include small multifamily projects and areas with higher land costs. Overall, these modest reforms help address the national housing shortage while optimizing the use of material resources and human capital.