UC Berkeley

Factory-built housing is the largest source of unsubsidized affordable housing in the United States, but the production of homes built in factories has fallen from more than fifty percent of single-family housing starts in the mid-1970s to under ten percent today. This is surprising, given the myriad advantages of factory production -- the economies of scale, increased production capacity, more consistent quality control, and more efficient use of resources -- and given that the US is experiencing what government officials refer to as a "housing affordability crisis" (Maxine Waters 2023). Affordable housing is where factory-built housing has the comparative advantage. Larger, higher-end homes offer site-built developers higher profit margins and the ability to spread fixed costs, but factories can profitably build small. The average factory-built home is around half the size of the average site-built home, and approximately half the price per square foot. The disappearance of homes built in factories hence has a disproportionate effect on low-income homeowners and renters, and an impact on long-term economic growth and inequality.

This dissertation explores the economic and social phenomena that might explain the decades-long stagnation of factory-built housing at ten percent of housing starts, many of which involve finance. Housing and finance are inextricably linked. For all but the wealthiest, buying a home requires financing, and a home is usually the most expensive thing a household owns. Housing is especially important for households in the bottom half of the wealth distribution -- those households most likely to be considering factory-built homes. Real estate constitutes more than half of their aggregate portfolio holdings.

In Chapter 1, I place the starter home, and then the manufactured home in particular, in historical context. I discuss the various rounds of federal involvement in housing finance, and the subsequent dominance of a loan product that is distinctly American: the 30-year, fixed rate mortgage. I survey the relevant research on housing affordability and the construction shortage, and update previous studies to show the growing deficit in entry-level housing supply. I detail the rise and fall of factory-built housing in the US, and the disproportionate effect on renters and low-income homeowners. I review the grocery list of common explanations for the disappearance of manufactured homes; I use new data to refute some arguments, and propose others. I show that Home Mortgage Disclosure Act (HMDA) data are not representative of the universe of manufactured home loans -- that the actual number of manufactured home loans in a given year and state can be over 50 percent greater than the number of reported HMDA loans, with primarily chattel loans going unreported.

In Chapter 2, I focus on inventory financing, and the vertical relationships between manufacturers, lenders, and retailers. Using publicly claimed security interests and the movement reported on oversize trip permits, I follow each manufactured home in Texas from factory to dealership to buyer, as it transforms from finished goods to wholesale collateral to consumer collateral, to show that the restriction in factory-built housing supply is consistent with market foreclosure. Upstream manufacturers extend "floor plan" financing to downstream retailers buying homes for their lots, and restrict output in the downstream market. Floor plan financing acts as the vertical restraint a manufacturer needs, during two decades of a growing housing shortage, to distort competition closer to the inefficient monopoly outcome.

In Chapter 3, I detail the manufactured housing data gathered and merged for this dissertation, and place it within the relevant regulation and wider context. I discuss the potential problems with each data source, and my solutions.