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MANUFACTURED HOUSING IN
NONMETROPOLITAN AREAS: © Housing Assistance Council, 1996 Permission is granted ONLY to nonprofit community-based organizations to reproduce and/or adapt this document, and only for their own use. COSTS OF MANUFACTURED/MOBILE HOMES The opportunity for homeownership is a major attraction of manufactured/mobile homes.29 Most manufactured homes -- especially those placed on rented lots -- are less costly to buy than most conventional homes. In addition, the monthly cost of owning a manufactured home is generally lower than the monthly cost of owning a conventional home. Nevertheless, AHS data also indicates that in nonmetro areas occupants of mobile homes were as likely to be cost-burdened by their housing expenses as were residents of conventional homes. Furthermore, manufactured homes are not necessarily good long-term investments. While some manufactured units do appreciate over time, studies show that appreciation is closely related to location and size, and even those units appreciate less than conventional housing. Overall, AHS data shows that mobile homes may appreciate only slightly, if at all. Typically, those units that appreciated the most were also the most expensive to buy. Therefore, they were the least available to low-income households. Purchase Price In general, manufactured/mobile homes are far less expensive to purchase than conventional homes. In 1993, the median purchase price of a new conventional home in the United States was $108,554 and that of an existing house was $91,648. In contrast, the average purchase price, without land, of a single-wide manufactured home was $21,900 and that of a double-wide unit was $39,600. (See Appendix B for definitions of single-wide and double-wide units.) Single-wide units made up 52 percent of the 242,200 manufactured homes placed for residential use that year.30 While the cost of purchasing land would certainly add significantly to the cost of a manufactured home, a would-be homeowner is likely to be able to rent a site for a monthly cost low enough to yield total monthly payments far less than those for a conventional home. Conventional homes are less expensive in nonmetropolitan places than in metro areas, but even there mobile homes tend to be significantly less costly. The 1993 American Housing Survey found the median purchase price for non-mobile owner-occupied homes in nonmetro areas was $34,201. The median price for owner-occupied nonmetro mobile homes was $15,221, even though more mobile home owners had acquired their units more recently. The median year nonmetro mobile home owners acquired their units was 1988, compared to 1980 for owners of non-mobile homes in nonmetro areas. A more detailed cost comparison was undertaken in a University of Michigan study in 1993 (as part of a wider examination of manufactured housing) that weighed purchase prices and annual costs of manufactured homes against those of other housing options including new and existing single-wide homes in parks, new multi-width manufactured homes in parks or outside, new site-built houses, and apartment rentals. The Michigan results are summarized in Table 7.31 The study found that monthly housing costs were less for manufactured home owners who rented, rather than owned, their lot. It determined that a used single-wide manufactured home was the least expensive option in terms of both initial purchase and annual housing costs. A new single-wide unit was the next least expensive, followed in increasing order by a new multi-wide unit in a park, a rented apartment, a multi-wide manufactured home on a private lot, and a new site-built home. While a used single-wide manufactured home was affordable for a household with an annual income of $18,760, an income of $50,657 was required to afford a new site-built home. The Michigan study was incomplete in some respects. It did not include the purchase of an existing conventional house or townhouse as an option, and it examined only one rental option. In addition, it assumed the off-park price for a lot was $30,000, probably more applicable in suburban locations than in small towns or rural areas, where lot prices often are lower. Finally, while it provides an interesting comparison of purchase prices and costs, it does not consider certain cost-related items (e.g., income tax deductions available to owners paying mortgage interest), changes in value over time, or issues such as safety and durability that may affect the desirability of various types of housing. These factors are addressed below. Table 7. Comparative Costs of Manufactured and Site-Built Homes
Value and Appreciation
Figure 8 illustrates the distribution of home values for nonmetropolitan housing, as identified in the 1993 AHS. Over half of all nonmetro conventional houses had values over $50,000, compared to only 4 percent of nonmetro mobile homes. Some part of this difference is due to the fact that, because many mobile home owners did not own the land on which their homes were located, most of those mobile home values would not include land.
Some studies have specifically examined changes in the value of manufactured housing. In 1988, for example, the HUD Inspector General reported that manufactured housing repossessed by HUD was depreciating at a 23.4 percent annual rate.32 This rate seems very high, even though repossessed housing might well have been
occupied by persons who did not or could not afford to maintain it well (as they did not or could not afford to make monthly payments). In 1993, median monthly housing costs in nonmetro areas, like purchase prices, were lower for manufactured homes than for owner-occupied site-built housing (see Table 9). In addition, the median monthly housing cost of nonmetro mobile homes was less than that for nonmetro renter-occupied housing. While the median total monthly housing cost for all nonmetropolitan households in non-mobile home units was $340, that of households living in mobile homes (including site rental costs) was 14 percent less, or $285.35 Mobile home occupants' costs were 19 percent less than the $353 median cost for all renters.
Table 9. Median Total Monthly Housing Cost
(nonmetropolitan households)
Individual components of monthly housing costs for nonmetro mobile home owners were the same as or lower than those for all nonmetro homeowners, although the differences would have been greater if mobile homes were fully comparable to site-built homes. Cost of utilities, for example, was similar for mobile homes and all other types of housing units but, since the mobile homes were only two-thirds as large, it follows that they were less energy efficient. Similarly, property insurance payments were slightly lower for mobile homes, although property insurance rates were substantially higher for residents of mobile homes. The lower payments, therefore, seem to be attributable only to the fact that the house values were about one-fourth of those for all types of housing. Also, consistent with lower property values, median real estate taxes were lower for mobile homes than for other homes. Taxation of mobile homes varies by state. Some states levy real estate taxes and some apply other property taxes, with variation depending upon ownership of the lot. The trend is toward treating manufactured housing more like other housing for tax purposes. Property taxes on manufactured houses are deductible for federal income tax purposes, but the deduction usually is less because the amount of tax assessed is less. Sales taxes usually apply to the whole unit upon purchase of a manufactured house, but only to the materials of a site-built house. In summary, based on initial investment and recurring out-of-pocket monthly costs, mobile homes seem to provide an attractive alternative to either renting or owning conventional housing. An actual lifetime cost comparison, however, would need to take into account a number of factors not considered here: possible site development costs, inclusion of major appliances in purchase costs, the different life expectancies of manufactured and site-built homes, maintenance/repair costs, and differences in available unit sizes. In addition, as discussed below, the financing generally available for manufactured homes tends to have higher interest rates and shorter terms than mortgage financing for site-built homes. And because most manufactured homes are financed with personal loans rather than mortgage loans, owners of manufactured homes often cannot take advantage of the income tax deductions available for mortgage interest payments. While purchasers or renters of manufactured/mobile homes may be glad to pay less on a monthly basis than they would for other housing, any long-term savings may well be illusory. Furthermore, as noted below, AHS data shows that even the lower monthly costs of occupying mobile homes does not make those homes more affordable in relation to their occupants' incomes than conventional houses. Cost Burden While it can be assumed that many households residing in mobile homes have selected these units because their lower costs seem more compatible with those households' lower incomes, nonmetro mobile homes are no more affordable for their occupants than other types of housing. Housing is considered affordable if the resident household pays no more than 30 percent of income for housing costs (including utilities but not telephone); households paying more than 30 percent of income for housing are considered to be cost-burdened. As shown in Table 10, nonmetro households living in mobile homes experienced cost burden as often as other nonmetro residents. About one-quarter of nonmetro households paid too much for their housing, whether they lived in mobile homes or in conventional units. Nine percent of nonmetro households in mobile homes paid more than half their income for housing. Cost burden rates were slightly higher for households in mobile homes in central cities and suburbs, commensurate with the generally higher housing costs in those areas. Table 10. Cost Burden
** Individual figures shown may not add to totals due to rounding. |
