US Government announces financing model for modular housing

US modular home builders may well be in the box seat given a recent announcement by the Biden-Harris Administration.

Boosting access to affordable and quality housing is the focus of the US Government with their recent release of their Housing Supply Action Plan on May 16. It’s designed to ease the burden of housing costs over time, by boosting the supply of quality modular housing for renters and homeowners.

In the United States, fewer new homes were built in the decade following the Great Recession than in any decade since the 1960s, significantly impacting housing supply and failing to keep pace with demand.  This mismatch between housing supply and housing demand grew during the pandemic. While estimates vary, according to a March 2021 Moody’s report, the shortfall in the housing supply is more than 1.5 million homes nationwide.

Under the Plan, the Administration will:

• Reward jurisdictions that have reformed zoning and land-use policies with higher scores in certain federal grant processes, for the first time at scale.
• Deploy new financing mechanisms to build and preserve more housing where financing gaps currently exist: manufactured housing (including with chattel loans that the majority of manufactured housing purchasers rely on), accessory dwelling units (ADUs), 2-4 unit properties, and smaller multifamily buildings.
• Expand and improve existing forms of federal financing, including for affordable multifamily development and preservation. This includes making Construction to Permanent loans (where one loan finances the construction but is also a long-term mortgage) more widely available by exploring the feasibility of Fannie Mae purchase of these loans; promoting the use of state, local, and Tribal government COVID-19 recovery funds to expand affordable housing supply; and announcing reforms to the Low Income Housing Tax Credit (LIHTC), which provides credits to private investors developing affordable rental housing, and the HOME Investment Partnerships Program (HOME), which provides grants to states and localities that communities use to fund a wide range of housing activities.
• Ensure that more government-owned supply of homes and other housing goes to owners who will live in them – or non-profits who will rehab them – not large institutional investors.
• Work with the private sector to address supply chain challenges and improve building techniques to finish construction in 2022 on the most new homes in any year since 2006.

Significantly, they’re supporting the production and availability of modular-built housing, and further seeking to redefine how those modular homes are financed.

The majority of people buying new modular homes rely on personal property financing (chattel lending) rather than conventional mortgages. This type of financing typically costs more than traditional mortgage financing due to higher interest rates and shorter loan terms. Freddie Mac (a federally backed home mortgage company) has announced that it will complete a feasibility assessment for the requirements and processes necessary to support loan purchases of personal property manufactured housing loans. If it’s approved, Freddie Mac will purchase these kinds of loans to assist with product design and support future modular home loan purchases.

Read The White House statement HERE

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