Market-Rate Housing Affordability


Communities with a variety of housing options are most likely to be able to offer housing to people in a wide range of income levels. Such places also enable people to remain in the community as they age. It can allow them to stay in their homes or move to housing that meets their changing needs.

For example, some communities are promoting construction of “missing middle” housing. These are smaller residences that are interspersed in neighborhoods with single-family detached homes. For instance, they might include attached homes, duplexes, and accessory dwelling units (small residences that share a lot with a larger dwelling). They are considered “missing” because, after World War II, zoning typically allowed only one type of building in a given neighborhood. Many suburban neighborhoods were zoned to allow only single-family homes. Other types of housing were missing.

Reducing regulatory barriers: Today, some communities are embracing missing middle housing by removing regulatory barriers to its construction. For example, they may change zoning to allow buildings of different sizes while maintaining the community’s character. They may also reduce or eliminate off-street parking requirements. This is especially true in transit-rich neighborhoods that include robust public transportation offerings, which reduce the need for private vehicles. Some communities are charging impact fees based on the size of the unit, rather than charging a fixed fee. This can reduce the cost of housing for consumers, as impact fees are typically rolled into the cost of housing. Communities that remove these types of regulatory barriers make it easier to build a variety of housing types. This, in turn, makes it more likely that people of varying income levels will be able to afford to live in a community.

Encouraging innovation: New innovation in construction can bring down the cost of housing. For example, modular housing is constructed off-site using the same materials, codes, and standards as traditional on-site construction. Different “modules” of the home are constructed in a factory. Then they are put together on-site on a traditional foundation. As such, they are considered real property and are subject to local building codes and structural inspection. Buyers receive the same financing options, legal rights, and tax treatment as homes built on-site. Modular housing can reduce the time to build a home by one-third to one-half. This is because construction of the modules occurs at the same time as the foundation. In addition, there are no weather delays in constructing the modules. It is therefore less expensive than site-built housing.

Green construction involves the use of building materials and processes that are energy-efficient. They can lower the costs associated with housing over the long term. For example, energy-efficient windows can reduce the need for heating in the winter and air conditioning in the summer. Likewise, low-flow toilets can reduce water and sewer bills.

Green construction is most helpful when it is integrated into construction up-front because consumers do not have to pay to replace working infrastructure. Sometimes, however, consumers may want to integrate energy-efficient features. For example, those who have drafty windows may seek to weatherize their homes with new energy-efficient windows. The up-front costs of doing so are high. However, they may be made up for with lower energy bills over the life of the home. Households with low and moderate incomes may not be able to afford the up-front costs of doing so. Subsidies and low-cost loans can help these households pay for the up-front costs.

Manufactured housing: Manufactured homes, like modular homes, are built in a factory. Unlike modular homes, they are transported in their own steel frame with attached wheels. Once they get to the site, the wheels are removed, but the frame stays in place. They are not placed in a traditional foundation. Manufactured housing is not subject to local building codes. Rather, they are subject to federal regulation from the Department of Housing and Urban Development. There is no requirement for structural inspection.

Manufactured housing provides a major source of unsubsidized but affordable housing for households with low and moderate incomes. Sixty percent of people age 50 and over living in manufactured homes have low incomes. Typically, they receive no direct housing subsidy.

Manufactured housing plays a critical role in serving the housing needs of older adults. People age 65 and older owned or rented some 1.9 million of these units in 2019. Without this option, many would find it difficult to afford housing. But manufactured homeowners also face challenges. One relates to financing. Lenders typically treat manufactured homes different from site-constructed homes and modular homes. Financing is more expensive in part because manufactured homes tend to decrease in value over time.

Another challenge is that owners of manufactured housing often do not own the underlying land. They may have to move when that land is sold or changes uses. Manufactured homeowners could form resident associations to improve their bargaining power. However, they sometimes fear retaliation from community owners for doing so. Consequences can include eviction. Community owners or landowners have other leverage over unit owners. They can deny a potential buyer the right to keep a home in its location. This lack of protection limits unit owners in their ability to exercise control over their homes. In areas with high-value housing markets, manufactured home developments can be particularly vulnerable to conversion to other uses. This risks the displacement of current residents, who are often challenged to find equally affordable housing elsewhere in the vicinity.

Manufactured homes built before 1976 are generally considered to be substandard and can face both energy efficiency and safety issues. Funds from the Weatherization Assistance Program can be used to improve energy efficiency in manufactured housing (see also Affordability).

Rent control: Some localities have attempted to rein in steep rises in the cost of housing through rent control laws. These limit how much property owners may charge for renting out real estate. Studies show that rent control increases disparities in rent burdens over time and does not offer a long-term solution to affordable housing. Rent control does not effectively solve the affordable housing problem in many parts of the country. But in some cases, it may be desirable for state and local governments to retain existing rent control ordinances for a limited time. This is an appropriate strategy for areas with severe housing shortages. It is also suitable for areas where development pressures result in the significant loss of affordable units.



Removing regulatory barriers

State and local policymakers should encourage the construction of more housing units to ensure that people of all incomes and ability levels can afford to live in a community. They should reform land-use regulations to remove barriers to affordability. They should also increase the use of incentives (such as reduced permitting fees) for building denser multifamily units on smaller lot sizes, particularly in neighborhoods near transit hubs. Among the policies they should consider are:

  • removing height and density restrictions;
  • permitting development on smaller lot sizes;
  • encouraging the development of infill housing;
  • promoting construction of accessory dwelling units and other missing middle housing;
  • utilizing inclusionary zoning to require developers of market-rate housing to set aside a portion of the units for people with low and moderate incomes; and
  • eliminating or reducing parking requirements, especially in areas that are walkable or well-served by public transportation (see also Parking).

Encouraging innovation

State and local policymakers should encourage innovation in housing construction. This includes increased use of modular construction with appropriate consumer protections and safety standards.

Policymakers and the private sector should promote building construction and renovation with materials and technologies that decrease energy and water use (see also Disaster Planning and Recovery and Affordability). They should target such programs to households with low and moderate incomes.

Resident ownership of manufactured housing communities

States should help residents of manufactured home communities purchase their community land. They should also help them establish some form of resident-controlled ownership. This should include codifying the first right of purchase or providing tax incentives for purchase by residents of parks that are for sale.

Manufactured housing as real property: States should pass laws similar to the Uniform Law Commission’s Uniform Manufactured Housing Act to ensure a fair process for considering certain manufactured housing to be real property.

Rent stabilization: States should permit local governments to initiate and enforce rent stabilization programs in manufactured housing communities.

Funding assistance for closures: States should establish funding assistance to help owners of manufactured homes who must relocate due to a manufactured home community’s closure or sale.

Manufactured housing financing

Policymakers should improve financing options for manufactured housing. Options should include allowing manufactured housing to be treated as real estate regardless of land ownership through the greater use of conventional mortgage financing with more competitive rates and consumer protections.

Consumer protections in manufactured housing

Policymakers should ensure consumer protections for all manufactured homeowners.

States should enforce antitrust statutes regarding retailer tie-ins and restraints of trade.

States should license manufacturers (both in- and out-of-state) and establish manufactured home recovery funds to assist with warranty repairs if a manufacturer goes out of business or refuses to provide warranty service.

Replacement of dilapidated homes: Policymakers should establish programs to facilitate the replacement of dilapidated and substandard manufactured homes with new, energy-efficient homes for households with low incomes.

Bankruptcy protection: Congress should pass legislation to protect the owners of manufactured homes who face bankruptcy proceedings because of debt obligations that exceed the current market value of the collateral.

Rent control

If state and local governments end rent controls, they should provide a transition period during which rent increases would be limited. Rent protections for households with low incomes should be continued.

Existing rent controls should frequently be reviewed to evaluate their effectiveness, including the extent to which they create disincentives to affordable housing and maintenance. Such controls should also permit a reasonable return to owners, minimize disparities in rent burdens among households, and prevent exploitation of such controls by those who do not need this assistance.