Modular Housing Defined

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This article is about modular housing and clarifies the use of various terms and legal definitions that often surround modular housing.

There is a great deal of confusion about what modular housing is and is not. Many people ask:

or
  • “Are modular homes the same as prefab homes?”

This article will define the terms used to describe the different types of homes built in a factory and will discuss the differences between each type of home and the benefits of one type of housing over another.

So what’s the difference? Let’s start by looking at some definitions. These are legal definitions which very succinctly define the various types of factory-built housing.


Contents

Overview

Factory-built housing

Factory-built housing is a generic term used to describe any type of home built in a factory. It is not a term of art, a legal term or one which clarifies the differences in the types of homes built in a factory.

The terms “modular housing” and “manufactured housing” are the terms of art or legal terms which are used to distinguish between two different and distinct types of factory-built housing. Both terms are defined in most state laws and generally use the same or similar definition. A good working definition of modular housing is:

Modular Housing - Defined

A structure designed primarily for residential occupancy, designed and constructed to a state or national model code, which is manufactured in one or more sections in a factory for installation on a permanent foundation at its final location. The term does not include manufactured housing as defined by the National Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C.A. §§ 5401-5426).

Manufactured Housing - Defined

A structure, manufactured in one or more sections, which is built on a permanent metal chassis and designed to be used as a dwelling with or without a permanent foundation when connected to utilities and includes plumbing, heating and electrical systems, manufactured in accordance with federal standards under the National Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C.A. §§ 5401-5426).

Modular Housing distinguished:

  • Modular homes are built to the same state building code used by conventional site builders. This is usually a state adopted version of the international residential code or the international building code.
  • Modular homes are installed on a permanent, load bearing, perimeter support foundation, identical to the foundations used by conventional, site-builders, designed not to be moved once it is installed.
  • Modular homes are not required to be built on a permanent metal frame or chassis. The home is designed and constructed using wood floor systems and is transported to the job site using a modular chassis which is then returned to the factory to be used to transport other homes after the home is installed.
  • When the modular home is permanently installed on the foundation, it becomes real property.
  • The modular home is financed using conventional mortgage financing; the same lenders who finance the purchase of conventional site-built homes provide mortgages for modular homes.
  • Modular homes appreciate at the same value as a conventional, site-built home. In fact, the Fannie Mae Appraisal Guidelines for Modular Housing provides that when establishing the value of a modular home, the appraiser may utilize comparable site-built homes in the appraisal.
  • Modular homes are generally permitted in the same residential zones and subdivisions as are conventional site-built homes.

In addition to one story, ranch type home designs, modular homes may be constructed in split and bi-levels, capes, two stories, three stories, townhouses and a variety of traditional and contemporary designs, and may also be built for commercial applications.

Manufactured housing:

The definition used in state law to refer to manufactured housing is:

Definition - Manufactured Housing

A structure, manufactured in one or more sections, which is built on a permanent metal chassis and designed to be used as a dwelling with or without a permanent foundation when connected to utilities and includes plumbing, heating and electrical systems, manufactured in accordance with federal standards under the National Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C.A. §§ 5401-5426).

Manufactured Housing distinguished:

  • Manufactured homes are built to what is referred to as the “HUD Code” a less restricted, federally promulgated, code established under the National Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C.A. §§ 5401-5426), designed for the manufacture of an affordable housing product.
  • Manufactured homes may be installed temporarily or permanently, the installation usually consisting of piers which are placed under the frame with a skirt or non-load bearing wall around the perimeter of the home to hide the piers and frame, which may or may not be relocated.
  • Manufactured housing is built on a permanent steel frame or chassis which is not only used to transport the home to the job site, but is also an integral part of the structure of the home, required by the HUD Code to be part of the manufactured home. When the home is transported to the job site, the axles and wheels are removed from the frame and the frame remains as part of the home.
  • The home may or may not become real property depending on whether the home is:
  • installed permanently or temporarily;
  • on a lot owned by the homeowner; or
  • on a lot leased by the homeowner
  • Generally manufactured homes are not financed by conventional mortgage lenders, but are instead financed by finance companies who lend purchase money at higher interest rates. This is due, in large part, to the fact that the manufactured home depreciates in value and as a result, is in jeopardy of loosing value at a faster rate than the purchase financing can be paid down. In the past, conventional mortgage companies who financed manufactured homes found themselves repossessing homes where the purchaser had defaulted and not being able to recoup the amount of money still owed on the mortgage.
  • The manufactured home generally depreciates in value after it is sold. The Fannie Mae Appraisal Guidelines for Modular Housing establishes that only other manufactured homes may be used as comparables when appraising a manufactured home.
  • Manufactured homes are generally restricted to zones specifically set aside for manufactured homes. Most zoning and deed restrictions prohibit manufactured housing in residential single-family zones.
  • With limited exceptions, manufactured homes generally come in only one story designs and may be one two or more sections in width.

Other Definitions

There are several other definitions that should be distinguished.

“On-frame” modular home

A small number of manufactured housing manufacturers have begun to manufacture what they refer to as an “on-frame” modular home. Essentially, this is a home built in a manufactured housing factory, on the same permanent metal chassis used in the manufactured home. However, instead of designing and building the home to the HUD Code used for manufactured housing, they build the home to the state code used by modular manufacturers and stick builders. These homes tend to be mostly one story and fairly simple homes built as an affordable housing product and often resemble the double-wide manufactured home from the exterior. It is not clear whether these homes appreciate in value over the years. In addition, many local communities have prohibited these so-called on-frame modulars from residential single family neighborhoods.

Mobile Home

Mobile home is the old term used to describe manufactured housing. Today, the industry prefers to use the term manufactured housing rather than mobile homes. The term is still often used to describe a single section manufactured home.

Panelized Homes

Panelized homes are houses built in a factory and shipped as wall and floor panels which are erected on a permanent foundation. They are designed and built to the state code used by modular manufacturers and stick builders.


If you have questions, please feel free to call the Modular Building Systems Association at (717) 238-9130.

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