Resource - Fall 2001 - California Manufactured Housing Institute

200,000 NEW HOMES PER YEAR MANUFACTURED HOUSING'S ROLE IN MEETING THE DEMAND

Based on projections for job and household growth found in the 2001 edition of California Economic Growth, the Center for the Continuing Study of the California Economy (CCSCE), projected demand for new housing to be "near 200,000 units annually" for the decade ending 2010. That's a significant increase over the Construction Industry Research Board estimate of 148,540 new units built in California last year. In response to lagging production, California state planners have increased the annual projection to meet demand to 220,000 new dwelling units.

Growth Potential: Given the current decline in consumer confidence brought on by a slowing economy and California's energy problems, what are the underlying factors that support a projected annual demand for over 200,000 new dwelling units?

Job Growth: Historically, job growth has been the catalyst for population and household growth. Through 2010, the CCSCE has projected that total jobs in California will grow 24.5% (nearly double the U.S. job growth).

Income Gains: California's four million new jobs won't all be low paying service positions. The CCSCE projects that, "total income will grow 3.6% per year faster than the rate of inflation and reach $1.6 trillion."

Population Growth: Nearly forty million Californian's by 2010...a gain of over 6 million residents!

New Household Formations: California's projected job and population growth should yield just under 2 million new households.

It Seems Simple: It seems simple...4 million new jobs, 6 million new residents and 2 million new households should generate opportunity for those in the housing business...an opportunity to meet an annual demand for over 200,000 new housing units. But it's not simple...In response to local government resistance in many areas to new housing developments, a significant reduction in "ready to build" lots and diminished production capacity. The need for new dwelling units has exceeded production for year's resulting in today's short supply.

Affordability...Still An Issue?: After some improvement in the mid 90's, the affordability index, how many families can afford the median priced home, is falling again. Thanks in part to the short supply of new housing, the median price of existing single-family homes in California now exceeds $243,000. Year over year (06/01) the states median price for an entry level home has risen 15% to $138,000...today's entry level median price is greater than the median for all housing in 1986! Yes, affordability is still an issue.

Speed: If we are going to solve our housing crisis, a crisis with the potential to negatively impact California's standard of living and growth potential more severely than any other issue facing our state, speed is the key.

Manufactured Housing's Role: Every year that production significantly lags, housing demand exacerbates the crisis and increases the need for speedy delivery of new dwelling units and its here that factory production of manufactured housing can play a significant role. The manufactured housing industry via its climate controlled manufacturing centers can deliver value and affordability faster than any other form of housing in California.

Product Flexibility: Today's manufactured housing product ranges from personal property homes designed for land-lease communities to single and two-story homes architecturally designed for real property urban and suburban in-fill, rural placement, planned unit developments and subdivisions.

Responsive Financing: The industry's product flexibility is supported with 5% down personal property financing for homes in land-lease communities where the land is not financed to fully conforming mortgages for the industries real property homes.

A Resource: Meeting California's need for new housing requires a joint effort on the part of local and state government and all facets of the housing industry. Manufactured housing can play a significant role in this effort. The California Manufactured Housing Institute is ready to serve as your resource.

NOTE: Copies of the 2001 edition of "California Economic Growth" can be obtained from the Center for Continuing Study of the California Economy - (650)321-8550 Fax - (650)321-5451

Over the past ten years in California, there has been minimal development of manufactured housing land-lease communities (MHLLC's). A MHLLC is loosely defined as a development wherein manufactured homes, either owned or financed as personal property, are sited on leased lots. Developers cite increased land costs, development fees, a cumbersome and expensive permit process and local government resistance among the reasons for the lack of development of this much-needed housing option. While few, if any, new land-lease communities are in the development process, expansion of existing communities is providing a high value option for homebuyers. Recent expansions include 200 lots in Sun City's Sun Meadows, 90 lots at Oak Tree Ranch in Ramona and a planned addition of 122 homesites at Plantation on the Lakes in Calimesa.

FOCUS ON SUN MEADOWS: With the median price of new and existing homes in Riverside County at $184,000 (07/01-up 16.5% over last year) and with the median price for the County's entry level home rapidly approaching $140,000, first-time buyers and seniors have limited options as they search for affordable housing.
In response to the increasing demand for senior housing, Sun Meadows has added 200 lots to its existing 55-plus community. Homes ranging in price from $99,900 to $119,900 are sited at grade in a gated community and include 2-car garages and fenced yards. Long-term transferable leases range from $350.00 to $410.00 per month. Increases are controlled by the Consumer Price Index.

The Sun Meadows community includes full recreational facilities including clubhouse, tennis courts, 9-hole putting green, health club complete with swimming pool, hydrotherapy pool, sauna and exercise room.

Seniors looking to use the equity in their existing homes to fund their retirement find the homes in Sun Meadows to be a high value and affordable option to site built homes in the surrounding area. In addition to the home selling price advantage, personal property manufactured homeowners in gated communities enjoy significant additional savings. The absence of homeowner's association dues, Mello-Roos fees and a lower tax base (in a land-lease community property, taxes are computed on the value of the home only) enhance the affordability of living in a MHLLC.

FUTURE DEVELOPMENT: The expansion of existing MHLLC's represents a welcome addition to the number of California's land-lease lots for manufactured housing. However, what is really needed is the development of new land-lease manufactured housing communities throughout the state.

Industry working with local governments can favorably impact the affordability of housing by permitting and developing new manufactured housing land-lease communities. New communities will help to stabilize lease rates in existing MHLLC's and provide more options for housing California's growing population.

Throughout California, the development of manufactured homes as real property on rural and suburban lots is providing opportunity for families seeking high value yet affordable home ownership in a non-urban environment. These lots have several things in common:

Small and medium sized builders are benefiting from manufactured housing's flexibility and speed in the efforts to hold down costs while quickly responding to market demands. By taking advantage of manufactured housings flexibility, builders are able to deliver high value housing from entry level through the move-up markets...and they can do it faster than any other form of housing in California (approximately 120 days).

HERITAGE DISCOUNT HOMES: Heritage Discount Homes specializes in scattered lot placement of real property manufactured homes in north San Diego County. Heritage's owner Joe Feeney, is currently delivering homes at prices ranging from 15 to 20% lower than comparable site-builts. The homes, manufactured by Skyline Corporation in Hemet, are:

It's a win/win...vacant lots are transferred into income producing properties for local governments and high value housing for home buyers...all in about 120 days!

For purposes of construction standards, installation, occupational licensing, sales requirements, and registration and titling, the name "manufactured home" is defined in Health and Safety Code Section 18007. A manufactured home is a complete single-family home deliverable in one or more transportable sections, constructed to the preemptive standards established by the U.S. Department of Housing and Urban Development (HUD) in the Code of Federal Regulations, Title 24, Part 3280, commencing with section 3280.1. Manufactured homes are most often one-story in height, however in recent years two-story homes have been manufactured for specific high-density locations. A manufactured home is not the same as a recreational vehicle, including a park trailer, as defined in Health and Safety Code sections 18009.3 and 18010, a commercial coach as defined in Health and Safety Code section 18001.8 or a factory-built home as defined in Health and Safety Code section 19971, all of which may look similar from the exterior appearances. A factory-built home most closely resembles a manufactured home, but is constructed to the California Building Standards Code, in CCR, Title 24.

Construction Standards Applicable to Manufactured Homes: Manufactured homes are required to be constructed to the preemptive HUD standards discussed above. No state, city, county or other local jurisdiction may adopt or impose any standard for the construction of a manufactured home. When the HUD standard is silent on a subject, the states may, with HUD concurrence, adopt construction standards. Currently, California has installation standards (25CCR Chapter 2) and fire sprinkler system regulations (see 25CCR Chapter 3, commencing with section 4300), supplementing the HUD standards.

How the HUD Standards are Enforced: The manufactured home manufacturer must obtain approval for plans, specifications, and a quality assurance program from a design approval agency approved by HUD. The manufacturer also must obtain the services of an in-plant inspection agency approved by HUD. All manufactured homes must be constructed to an approved plan inspected and tested by the manufacturer's personnel in accordance with an approved quality assurance manual, and then be inspected by a HUD-approved inspection agency in at least one stage of construction.

Where May Manufactured Homes be Installed?: Government Code sections 65852.3 and 65852.4 require a city, including a charter city, county, or city and county, to permit the installation of a manufactured home manufactured to the HUD standards, on a foundation system on lots zoned for conventional single-family residential dwellings. Local requirements may preclude the installation of a manufactured home when more than 10 years has elapsed between the date of manufacture and the date of application for the permit to install the manufactured home. Local requirements for setback, side and rear yard requirements, standards for enclosures, access, vehicle parking, aesthetic requirements, and minimum square footage may be imposed on the manufactured home provided such requirements are also applied to conventional single-family residential dwellings. Architectural requirements for the area of installation may be imposed on the manufactured home, provided such standards are limited to the overhang, roofing material, and siding material, and do not exceed those which would be required of a conventional single-family dwelling constructed on the same lot.

California Civil Code Section 714.5 prohibits the recordation of any covenants, conditions and restrictions after January 1, 1988, that act to exclude the use of manufactured homes.

In response to a question from Senator Wayne Allard (R-CO) concerning what can be done from an economic perspective to address the issue of affordable housing.

Senator Wayne Allard (R-CO): "From an economic prospective, what can be done to address the issue of affordable housing?"

Allan Greenspan, Federal Reserve Board Chairman: "I think that as technology improves the ability to significantly increase modular and manufactured housing, you also see the economic impact on the ability to own homes improve, especially in the moderate to lower income groups."

"When I was young, a mobile home was something that you dragged along behind a car on a highway, and if necessary lived in. The manufactured home industry has changed very dramatically, as you know, and has constructed many multi-facet types of structures that has enabled the productivity that is embodied in the manufacturing process, and manufacturing generally has been the fastest part of the productivity growth in our country. That has been a significant factor in getting available homes to all levels. Going beyond manufactured housing there is still an awful lot of technology that is going into the improvement of construction capabilities."

"I should think that is by far the best way to create affordable housing. You can subsidize if you want, and that obviously impact the availability of homes. But, there is nothing like American productivity to create lower costs for, in many cases, quite impressive homes at relatively low prices." Source: Federal Reserve Board Chairman Alan Greenspan - Remarks to the U.S. Senate Banking Committee July 24, 2001 Reprinted from Manufactured Housing Developments - September 2001