Zoning Reforms to Support Factory-Built Housing

Key Terms and Definitions

Factory-built housing or prefabricated housing refers to homes constructed either fully or partially in a factory and then assembled onsite. This category includes manufactured and modular homes.

Off-site construction is the process of building a home, either fully or partially, in a factory, rather than constructing it entirely on a lot.

Manufactured housing refers to a complete house constructed off-site in a factory to meet HUD Code requirements, allowing it to be transported anywhere in the country. Manufactured homes are built on a permanent chassis which is used to transport them but can be placed on a traditional foundation at their final location.

Mobile homes are manufactured homes built before June 15, 1976, when the HUD Code went into effect. These homes cannot be retroactively brought into compliance with the HUD Code and are therefore considered separate from modern manufactured homes, which meet current HUD requirements.

Modular housing consists of large pieces (or modules) of a home including not only walls, floors, and ceilings, but plumbing, wiring, and interior finishes as well. These modules are built in a factory and then transported to their final location, where they are assembled on a traditional foundation. Modular homes are built to meet local code requirements.

Panelized construction involves fully building the walls of a home, or panels, in a factory and then transporting them to the building site. At the site, the panels are put together and finished similarly to a site-built home, and the structure is placed on a traditional foundation.

Pre-cut construction involves cutting all materials for a home to size in a factory. These materials are then transported to the building site and assembled as they would be in a site-built house.

Factory-built housing is often quicker and less expensive to build than site-built housing. For example, a manufactured home can be 50% cheaper to produce than a site-built home. Freddie Mac estimates that more than one million people would be able to qualify for a mortgage and afford a manufactured home if zoning regulations were relaxed. However, despite their potential to address the housing shortage, only about 7.5% of existing homes and 9% of new homes in the U.S. are manufactured, and the number of modular homes is even lower.

Zoning as a Barrier to Accessing Factory-built Housing

States and localities have their own design requirements for homes and land use regulations. Many jurisdictions have implemented zoning rules such as minimum lot size requirements, aesthetic specifications for roofs and foundations, and special permit conditions that impact where prefabricated homes can be placed. A study evaluating factory-built zoning laws in 825 jurisdictions across 32 states found that 57% of these jurisdictions required lot sizes larger than half an acre. Because land costs can significantly impact the overall cost of a factory-built home, large lot size requirements further limit potential homebuyers who could otherwise afford the home.

Research shows that stricter residential land use regulations in a state are associated with fewer manufactured housing units being shipped to that state and a lower share of manufactured home loans as a percentage of total loans.

Examples of State and Local Government Actions to Reduce Zoning Barriers for Prefabricated Housing

Cities and states across the country are reevaluating existing zoning laws to see if more flexibility could boost housing production. The two jurisdictions highlighted below concluded that land use and zoning reform was necessary to facilitate the construction of a wider variety of housing types.

Jackson, Mississippi: The city of Jackson developed a pilot program to introduce manufactured housing as a viable and sustainable homeownership option. The pilot includes a demonstration of four factory-built homes situated on an underdeveloped lot in West Jackson’s “The Bottoms.” The city chose  manufactured homes because they are cost-effective and affordable for the average Jackson family, with the area’s median household income at $42,193 a year. Jackson will provide $40,000 grants to residents selected for the pilot program. These grants will serve as down payments for the homes, which will have an average cost of $150,000.

Updating the city’s zoning regulations was necessary for the project to proceed. After two years of educating the public and elected officials about different types of prefabricated housing, new definitions were added to the city ordinance to distinguish manufactured and modular housing from the term “mobile home,” which refers to prefabricated homes built before 1976. Mobile homes have been prohibited in the city for years, and until this initiative, the city considered manufactured housing to be mobile homes. While the city council approved the updated ordinance allowing manufactured housing within city limits, a discretionary use permit is still required before placing a manufactured home in Jackson. Manufactured homes must also be less than 10 years old and compatible with neighborhood character.

Maine: Maine saw an unexpected population increase at the beginning of the COVID-19 pandemic, which contributed to rising home prices. Despite this growth, the state will need to attract more workers from other states in the coming years due to its aging labor force. Maine’s current housing deficit is estimated at about 39,000 units, with a potential need for an additional 46,000 by 2030. Combined with a deteriorating housing stock and a slow rate of construction, there is an urgent need to rapidly build new housing across the state.

To increase the supply of affordable housing, Maine’s legislature recently passed a bill amending regulations for manufactured housing (H.P.211 – L.D.337). The bill ensures that manufactured homes are permitted wherever single-family dwellings are allowed and subjects them to the same requirements as site-built homes. Legislators hope that allowing more prefabricated homes in the state will provide residents with another opportunity to build personal wealth through homeownership.

Conclusion 

In many communities, land use and zoning reform will be essential for allowing factory-built homes to become a greater source of affordable housing. To achieve these reforms, some communities have successfully engaged in public education efforts to dispel misconceptions about prefabricated homes. Similar efforts nationwide, along with updating outdated language or requirements in zoning and building codes, will be necessary to ensure greater availability of factory-built housing.

For more related Terwilliger Center resources:

• Read more zoning and land use case studies here
• Read our report with Abt Associates on using off-site construction techniques to produce lower-cost entry-level homes
• Watch a webinar on supporting construction innovations to drive down costs and a panel discussion at our last Housing Summit on increasing affordable housing supply through factory-built housing
• Read blogs on the basics of manufactured housing and on defining key construction terms