Lack of Affordable Housing to Support Demand for Prefabricated Housing

Matthew Desmond’s Evicted: Poverty and Profit in the American City won the Pulitzer Prize for Nonfiction in 2017 for its stirring depiction of families seeking to find and maintain a place to live. Readers of the book – and scores of articles that followed in its aftermath – quickly learned that America faces an affordable housing crisis. In many parts of the US, people are unable to buy or rent homes while still being able to afford other necessities. This lack of housing – especially traditional site-built single-family residences – has boosted interest in less expensive prefabricated housing (e.g., manufactured housing, modular housing, precut housing, and panelized housing) as a way to ameliorate the nation’s housing shortage.

Manufactured Housing to Account for the Largest Share of Demand

Manufactured housing – also known as mobile homes or park homes – has always played a role in the US housing market, but shipments of manufactured housing fell precipitously during the Great Recession. While shipments of manufactured housing recovered in the aftermath, the large number of foreclosed site-built residences provided consumers at that time with inexpensive alternatives. Going forward, shipments of manufactured housing are expected to rise at a rate above that of single-family housing completions as US consumers increasingly purchase these residences. Demand for manufacturing housing will be spurred by:

• the low cost of these homes – most units are between one-third and one-half the price of site-built residences
• increasing use of double-section units to create homes that are almost as large as traditional homes
• manufacturers allowing homeowners to customize their units to add features they desire
• producer efforts to add amenities to their residences, such as larger kitchens, master bedroom and bathroom suites, central air conditioning, and LED lighting

Increasing Popularity of Tiny Homes Supports Modular Housing Demand

Modular housing – sections of a home that are shipped nearly complete from the factory to a lot where they are assembled into a residence – has traditionally accounted for a niche share of the US housing market. However, demand for modular homes in the US is anticipated to rise sharply going forward, supported in part by the increasing popularity of “tiny homes.” Also known as accessory dwelling units, or ADUs, these residences:

• only measure between 100 and 500 square feet
• are constructed with high-quality building materials and are designed to meet strict, energy-efficient building codes
• feature micro-appliances, space-saving designs, and double-duty furniture (for instance, a loft bed that can serve as a closet or provide space for furniture)

Tiny homes are much less expensive than site-built homes (sometimes just one-third of the cost) and appeal to a wide range of consumers, such as:

• millennials who are unable to afford site-built homes but wish to own their own residence
• homeowners looking to provide living space for older relatives, as these units can be placed (in some areas) on an existing lot without violating building codes
• those looking to live a simpler life with fewer material goods

For more information about the size and growth of the US prefabricated housing market, check out The Freedonia Group’s new study, Prefabricated Housing.

About the Author:

Matt Zielenski is a Senior Analyst at The Freedonia Group, where he covers trends in the use of building materials and related construction products in the US market.