The Rise of Prefabricated Housing as an Affordable Option

Check out how and why manufactured and modular homes are becoming a popular, affordable option.

Across America, goals of achieving homeownership have not died. But, in 2016, the U.S. Census Bureau announced that U.S. homeownership had declined to 62.9%, which is the lowest rate of homeownership since the U.S. Census Bureau started tracking homeownership.¹

However, prefabricated homes could be the solution to the affordable housing crisis. An estimated 17.7 million people in the United States live in prefabricated homes. According to the U.S. census bureau, mobile homes, which are a type of prefabricated housing, offer the largest source of unsubsidized affordable housing.¹⁶

prefabricated home delivery

What is a prefabricated home?

Prefabricated homes are homes built in sections off-site in a climate controlled home building facility, indoors and away from outside elements such as wind, rain and snow. The home is then moved to a home site and assembled.

There are three different kinds of prefabricated homes: mobile, manufactured and modular. Mobile homes are more of the prefabricated homes of the past whereas updated codes and building methods have created modern manufactured and modular housing.

what is a prefabricated home

Why?

There are multiple factors affecting the low rate of homeownership, including an increase in millennial renters.

Another reason for the low homeownership rate is the steady increase in rent prices. The 11 largest metro areas in the U.S. are oversupplied with high-cost apartments while also lacking in alternative housing for the rising middle and low-income renters in these areas.² 

So, what is the typical cost of renting a home? According to Zillow, the median U.S. rental listing price for single-family residences, condos and co-ops as of December 2017 was $1,471 per month.³

There’s also been an increase in home building costs leading to higher priced homes. The cost of site-built construction has risen 37% in the last 10 years⁴, which is a contributing factor to the high prices of housing. Consider that the average sales price of new homes (including land) in the U.S. in December 2017 was a whopping $398,900.⁵

Here’s a look at the last couple of years⁵:

  • July 2015 - $341,200
  • December 2015 – $352,500
  • July 2016 – $353,000
  • December 2016 - $382,500
  • July 2017 - $372, 400
  • December 2017 - $398,900

There are many housing options in price ranges over what Americans desire to pay and a lack of affordable options. But prefabricated housing is changing that.

Why Prefabricated Homes Could Be the Affordable Housing Solution

According to the United State Census Bureau, manufactured homes account for about 70% of new American homes that cost less than $150,000⁶. And in January 2017, the average sale price for a manufactured home without land was $68,100⁷.

The Urban Institute noted that based on U.S. Census Bureau data, manufactured housing is 35-47% less expensive per square foot than new or existing site-built housing.

In addition to manufactured housing typically being an affordable option, there is a shortage of rental properties in all states for households of lower incomes. The shortage of rental properties and skyrocketing home prices make it harder for families to find an affordable living solution. However, newly built manufactured homes could be the solution for many families in need of a place to live.¹⁶

Because of the affordability of new manufactured homes, there has been significant growth in the prefabricated housing industry in the last couple of years. For example, the shipments of new manufactured homes have steadily increased.

Shipments of New Manufactured Homes⁸

  • 201464,300 new manufactured homes shipped
  • 2015 – 70,500 new manufactured homes shipped
  • 2016 – 81,100 new manufactured homes shipped
  • 2017 – 85,700 new manufactured homes shipped

Across the U.S., manufactured and modular homes are growing as a more affordable housing option for families achieving their dreams of homeownership.

Why is Prefabricated Rising in Popularity?

The affordability of prefabricated housing is a large factor for why they are popular. Manufactured housing is a specific subset of prefabricated housing and the federal government has noticed its significance. The Department of Housing and Urban Development has noticed the key role manufactured housing plays in affordable housing.⁹

Additionally, the Federal Housing Finance Agency (FHFA) has also implemented the Duty to Serve Program, which requires Fannie Mae and Freddie Mac to serve three specific, underserved markets by increasing the liquidity of mortgage financing.¹⁰ One of those underserved markets is manufactured housing.

The U.S. government has figured out that making financing options more available helps increase accessibility to lower-cost homes, and the government has specifically noted that a great, affordable option can be a manufactured home.

Why Prefabricated Construction?

Other factors, such as a smaller industrial labor force, also contribute to the growth of prefab.

From the home building industry side of things, there’s a general lack of skilled construction labor in the entire home building industry. Prefabricated construction requires less manpower, so it’s not just an appealing building method, but a necessary alternative.

Many construction workers left the construction industry during the last recession and never returned.¹¹ This created a need to build homes more efficiently. It made prefabricated home building, which requires fewer workers due to the streamlined building process, the ideal construction solution.

Another reason prefabricated construction is rising in popularity is prefabricated construction’s reach. Think beyond home building and consider how large office buildings, apartments, hospitals and more are constructed.

Buildings such as student housing, hospitals, senior housing and education buildings require building structure patterns, which work great for prefabricated construction.¹¹ When you have repetitive design, prefabricated construction can speed up the building process and lessen costs. At the root of it is the affordability of prefabricated construction.

prefabricated home construction

Why are Prefabricated Homes Less Expensive?

Prefabricated houses are often less expensive than alternative new construction options because of the controlled, off-site building process. This high level of construction control comes from building many homes with a streamlined process indoors.

The process allows for:

  • Avoiding unpredictable weather
  • Keeping building teams intact for increased teamwork efficiencies¹²
  • Consistent, controlled building design and production process

These factors are important because according to the U.S. Bureau of Labor Statistics, “57% of activities in construction are wasteful and non-value adding.”¹²

Streamlining the home building process and allowing teams to work consistently together to maximize their efficiency allows for lower labor costs, which get passed to the home buyer in savings.

In an industry report, 66% of surveyed architecture, engineering and contracting professionals said that their project schedules were decreased due to prefabrication and modularization.¹³ Of the surveyed professionals, 65% reported that project budgets were decreased and 41% of those said budgets were decreased by 6% or more. Shorter schedules and lower budgets mean overall savings for the builders and the customers.

Other factors that make prefabricated homes and buildings less expensive include¹⁴:

  • Reduced material waste
  • Reduced on-site building disturbance
  • Increased safety and security of construction laborers

The Future Rise of Prefabricated Buildings and Homes

A trade group predicts that the shipments of manufactured homes could increase significantly from the 2017 level of 92,500 housing units.¹⁴ If there is indeed a rise in manufactured housing availability, The Urban Institute calls this potential addition a “significant affordable supply to the housing market.”¹³

Even beyond prefabricated housing, the rise of prefabricated building construction will continue to grow. Challenges will arise as prefabricated construction’s integration increases, but its affordability, a lower population of skilled labor and the continued influence of technology on construction are major influences that mean prefabricated construction will only grow. Welcome to the Prefabulous® era.

  1. Sharf, Samantha. "Sorry Trump, The Lowest Homeownership Rate In 51 Years Isn't Tragic But Inventory Woes Might Be." Forbes. August 08, 2016. Accessed January 29, 2018. https://www.forbes.com/sites/samanthasharf/2016/08/08/sorry-trump-the-lowest-homeownership-rate-in-51-years-isnt-tragic-but-inventory-woes-might-be/#5228cc7d7b40.
  2. Ahmed, Saraf. "5 Cities Taking Steps to Improve Affordable Housing Access And Availability." Forbes. June 21, 2017. Accessed February 30, 2018. https://www.forbes.com/sites/bisnow/2017/06/21/5-cities-taking-steps-to-improve-affordable-housing-access-and-availability/#727b4f503f9f.
  3. Rental Listings - Median Rent List Prices. CSV. Zillow Group, January 2018. https://www.zillow.com/research/data/
  4. Ahmed, Saraf. "5 Cities Taking Steps to Improve Affordable Housing Access And Availability." Forbes. June 21, 2017. Accessed February 30, 2018. https://www.forbes.com/sites/bisnow/2017/06/21/5-cities-taking-steps-to-improve-affordable-housing-access-and-availability/#727b4f503f9f.
  5. Median and Average Sales Prices of New Homes Sold in United States. PDF. U.S. Census Bureau, January 2018. https://www.census.gov/construction/nrs/pdf/uspricemon.pdf
  6. Price Indexes of New Single-Family Houses Sold Including Lot Value. PDF, United State Census Bureau. https://www.census.gov/construction/nrs/pdf/price_sold.pdf
  7. "MHS Latest Data." Census.gov. February 01, 2018. Accessed February 22, 2018. https://www.census.gov/data/tables/time-series/econ/mhs/latest-data.html.
  8.  Shipments of New Manufactured Homes: 2014-2017. XLS. U.S. Census Bureau, January 2018. https://www.census.gov/data/tables/time-series/econ/mhs/shipments.html
  9. Goodman, Laurie, Edward Golding, Alanna McCargo, and Bhargavi Ganesh. "Manufactured homes could ease the affordable housing crisis. So why are so few being made?" Urban Institute. January 29, 2018. Accessed February 01, 2018. https://www.urban.org/urban-wire/manufactured-homes-could-ease-affordable-housing-crisis-so-why-are-so-few-being-made .
  10. "FHFA Publishes Fannie Mae's and Freddie Mac's Underserved Markets Plans for Duty to Serve Program." Federal Housing Finance Agency. December 18, 2017. Accessed February 01, 2018. https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Publishes-Fannie-Maes-and-Freddie-Macs-Underserved-Markets-Plans-for-Duty-to-Serve-Program.aspx.
  11. Bunch, Julia. "The Rise Of The Prefabricated Building." Forbes. August 02, 2017. Accessed January 30, 2018. https://www.forbes.com/sites/bisnow/2017/08/02/the-rise-of-the-prefabricated-building/#655bf12b1dd5.
     
  12. Smith, Ryan E. Off-Site and Modular Construction Explained. PDF. National Institute of Building Sciences, 2016. Accessed January 29, 2018. https://c.ymcdn.com/sites/www.nibs.org/resource/resmgr/OSCC/OSMC_Explained.pdf
  13. "Prefabrication and Modularization Increase Productivity." Modular Building Institute. 2011. Accessed February 01, 2018. http://www.modular.org/htmlPage.aspx?name=McGrawHill_Prefabrication.
  14. Smith, Ryan E. Off-Site and Modular Construction Explained. PDF. National Institute of Building Sciences, 2016. Accessed January 29, 2018. https://c.ymcdn.com/sites/www.nibs.org/resource/resmgr/OSCC/OSMC_Explained.pdf
  15. Goodman, Laurie, Edward Golding, Alanna McCargo, and Bhargavi Ganesh. "Manufactured homes could ease the affordable housing crisis. So why are so few being made?" Urban Institute. January 29, 2018. Accessed February 01, 2018. https://www.urban.org/urban-wire/manufactured-homes-could-ease-affordable-housing-crisis-so-why-are-so-few-being-made.
  16. Sydney Bennet, "Are Manufactured Homes a Solution to the Housing Affordability Crisis?" Rentonomics. June 21, 2018. Accessed July 16, 2018. https://www.apartmentlist.com/rentonomics/mobile-homes-affordability-crisis/

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