The recently enacted 21st Century ROAD to Housing Act removed a construction rule that imposed thousands of dollars in unnecessary costs to manufactured housing since 1974, according to Zillow.
The act removed the requirement that manufactured homes be built on a permanent steel chassis, a change expected to cut $5,000 to $10,000 from the cost of a new home, Zillow said.
The online brokerage said that it is putting a number on how much land is sitting idle for homes like these: 300,242 vacant lots smaller than five acres were listed for sale on the platform in June. That’s enough to close 6.3% of the country’s 4.7 million-home shortage if a single home were built on each one, Zillow noted.
“The lots are available. The homes are not,” said Kara Ng, Senior Economist at Zillow. “Building on every empty lot currently listed for sale could erase 6% of America’s housing shortage. The opportunity is already in front of us, we just need to clear the path to construction.”
Zillow noted that opportunity is concentrated in the places where manufactured housing already makes a lot of financial sense. It said that rural listings are 25.3% vacant land, compared with 13.6% in the suburbs and 9% in cities.
Rural Land Offers Opportunities
Rural land is by far the cheapest, a median of roughly $75,000 per acre versus more than $181,000 in the suburbs and about $500,000 in urban markets, Zillow reported. It said that manufactured homes, which cost roughly half as much per square foot to build as site-built houses, present an affordable and obvious solution to housing.
According to Zillow, land and lower-cost construction alone haven’t closed the gap, however.
It said that many manufactured-home buyers still rely on personal-property loans that carry higher rates than a standard mortgage. Zillow said that lenders also are confronted by barriers such as limitations in federal program eligibility requirements, fixed compliance or administrative costs in the origination process, and other regulatory constraints.
Zillow noted that the new law addresses that directly by creating a four-year pilot that pays lenders a subsidy to originate mortgages under $100,000 and offers borrowers grants for down payments and closing costs.
Zillow said that it is testing a related fix from a different angle.
The brokerage noted that it has spent the summer in a 12-week tech sprint with the U.S. Census Bureau’s Opportunity Project, aimed at reducing small-dollar housing finance hurdles in rural communities. Zillow said it is exploring ways to reduce friction for consumers who are interested in buyign and building on an empty lot.
Zoning Still a Restriction
Zillow said that in the case of manufactured homes, zoning still restricts where they can sit, and a federal chassis rule change doesn’t override a local ordinance. But, the brokerage said, the pieces are moving in the same direction at once: available land, a simpler to construct and less expensive home to put on it, and a tech sprint aimed at helping financing become easier.
“You cannot solve a housing shortage without building more homes, and these empty lots offer a practical place to start,” Ng said. “The land is already available, but too much friction stands between a vacant lot and a finished home. Policies that allow greater density, speed up approvals and broaden financing options can help convert that potential into real housing supply.”
Zillow said that the typical lot it counted is 0.57 acres, often large enough for more than one unit, which means the 6.3% figure likely undersells what’s possible.
